How to Be Your Own Bank: Cryptocurrency Trading for Beginners

You may think cryptocurrency trading for beginners is not something that need concern you. However, if freeing your money from the often corrupt middleman sounds intriguing, read on to know why to invest in cryptocurrency.

I have a few confessions to make:

  • I don’t have a fax machine.
  • My checkbooks rarely leave their special drawer.
  • On average I carry less than $10 cash in my wallet.

Well… maybe those aren’t the juiciest confessions.

Technology has made fax machines almost obsolete. Checkbooks only show up in the hands of the person in front of you express lane when you’re in a hurry. Cash has been replaced by the 1’s and 0’s of credit and debit card transactions.

Though there have been many changes to how we store and send value over the last century, the advances in this decade have been revolutionary.

Peer-to-Peer digital cash and programmable money have emerged to disrupt the financial world, bringing equity to the unbanked, and monetary freedom to all who seek it.

How to Be Your Own Bank: Cryptocurrency Trading for Beginners

The Revolution of Cryptocurrency

This short guide to the cryptocurrency revolution provides an overview of the technology and covers a vast history that suggests a future where cryptocurrencies and their underlying blockchain technology will play a significant role.

While cryptocurrencies are a rather recent development, the history leading to their creation spans five decades. Databases began their rise to prominence in our lives beginning in the 1970s, and today we are surrounded by databases. We don’t always see them, but they’re there, masked in a beautiful facade.

Once combined with the networking power of the internet, databases are often tasked with working together, and a comedy of errors ensues. Except no one laughs, because beyond a temporary glitch on Facebook, the errors occur in the realms of banking, healthcare, utilities, and other crucial sectors.

Perhaps you’ve experienced something like a simple insurance request taking eons. What you might not know is that the hangup wasn’t necessarily because of incompetent customer service, but was perhaps caused by databases differing in units, naming convention, programming language, or any other seemingly minute detail. The consequences of these differences go beyond inconvenience and require significant funds to fix.

Why the Blockchain is Better

Blockchain, the underlying technology of cryptocurrencies, introduces a system that relies on a consensus among the computers, or nodes, on the network to store and share information. There’s no need to place trust in a middleman that maintains the up-to-date truths transacted on the network – it’s all handled within a trust-less system.

Despite banks demonstrating over and over again that they don’t deserve our trust, they are currently a pillar of our monetary system. (Mike Maloney has some great videos on the basics of the monetary system – hidden secrets – that everyone should know, but many do not.)  

Instead of trusting governments to issue currencies in ways that don’t cause undesired levels of inflation, cryptocurrencies are often decentralized and increase the monetary supply through planned, programmed rewards to miners (computers) that are working to support the network. These decentralized cryptocurrency networks are functionally the biggest supercomputers in existence.

Cryptocurrency for Beginners – Where did it come from?

The most well-known cryptocurrency, Bitcoin, was introduced following the financial crash of 2008 – the crash where ethically-bankrupt banks were yet again bailed out at everyone else’s expense. While there were many predecessors to Bitcoin that held a piece of the puzzle, Satoshi Nakamoto submitted the plans and helped get Bitcoin up and running.

Who is Satoshi? No one knows. Satoshi Nakamoto is likely a pseudonym. After fellow Bitcoin developer Gavin Andresen said he was going to cooperate with federal agents who were curious about Bitcoin and its applications, Satoshi disappeared into the ether.

Because Bitcoin programming is open-source, other developers were able to begin making adjustments to the cryptocurrency and they began launching their own blockchains.

2015 saw the launch of Ethereum, a cryptocurrency focused on smart contracts, (think programmable money with applications limited only by coding language and the imagination) and currently the second largest cryptocurrency by market cap. Vinay Gupta casts a vision for the future of cryptocurrency like few can, which is definitely worth checking out.

Cryptocurrency Cons & Cautions

The early days of crypto have been described as the “Wild West.” The U.S. government didn’t provide any guidance on cryptocurrencies until 2014 when the Internal Revenue Service deemed that crypto would be treated like property. Four years later, a number of federal agencies are trying to regulate cryptocurrencies, but policies remain quite disjointed globally.

While governments may move slowly on cryptocurrency, the crypto space has moved at a lightning pace.

Technological development, whether from small groups, companies, universities, or collaborations amongst them, is pushing the boundaries all around the world. Crypto markets operate 24 hours a day, 365 days a year.

Price cycles, while stabilizing to an extent, have been condensed and incredibly volatile. Some weeks in the crypto space can feel like months or even a year with so much news coming out.

Crypto exchanges have been at the center of that news cycle for some time, taking center stage beginning with Mt. Gox and the issues it had that peaked in 2014 with a hack that devastated Bitcoin holders with lost bitcoin and a massive crash in the price. You can find updated information on the top cryptocurrency exchanges here.

To this day, exchanges are a potential weak link in the security of cryptocurrencies, which themselves are very safe for the most part. Exchanges are “honeypots” (attractive targets for hackers) because of all the money stored there in cryptocurrency form.

Because of this, exchanges are typically the last place recommended to store one’s hard-earned crypto. Rather, crypto should be stored in a wallet, which can come in the form of web-browser applications, desktop computer wallets, mobile wallets on smartphones, paper wallets which don’t require any kind of electric device, or hardware wallets designed specifically for cryptocurrency. The choice is up to you, and we have other resources here on the site to help you make an informed one.

Cryptocurrency Benefits – You don’t need a middleman for your money…

Following a release of sensitive information by Wikileaks in 2010, the U.S. government pressured payment processors like VISA, Mastercard, and PayPal, into not processing donations to Wikileaks. After initially not accepting bitcoin at Nakamoto’s request (to allow for further development in a less scrutinized environment), in 2011 Wikileaks began to survive, and eventually thrive on bitcoin donations.

This moment demonstrated that we don’t need a middleman to facilitate transactions as they see fit, telling us what we can and cannot do with our money. If you hold cryptocurrency, you are your own bank. You don’t need permission to use your money. Now the technology exists where you can instantly, and often inexpensively, send money to anyone anywhere in the world.

While cryptocurrency may seem like the domain of tech-savvy individuals with money to burn, in so many cases it is a money by the people, for the people. It is not a fiat government currency based on principles that benefit bankers and governments.

Venezuelans are some of the most excited individuals in cryptocurrency right now. While their government continues to print currency, causing hyperinflation measured in the thousands of percent, many Venezuelans take solace in the finite supply of bitcoin, knowing that no more than 21 million bitcoin will ever exist. Even Venezuelans that bought bitcoin at its all-time high in late 2017 are up in terms of their native currency!

Money has taken many forms throughout human history. Seashells, sticks, precious metals, IOU’s:  they’ve all served their purpose for a time, some better than others. Technology has advanced in so many areas of our life. Now it’s turning finance on its head.

I hope this little guide to cryptocurrency has been helpful. Cryptocurrency is here and it’s not going away. While it still has a lot of growing, and growing pains, to go through, it’s disrupting the business and finance world at a breakneck pace.

No longer do you need to place your trust in those who repeatedly betray you. No longer do you need to ask permission to use your money as you see fit.

The future of cryptocurrency is bright, which is making the future of finance much brighter for all of us.

About the communicator

Matt

In addition to contributing to The Epoch, Matt is currently the host of the Evolving Parent Podcast and he coaches any youth sport his kids will play. He's a former US Marine journalist and public affairs specialist who has worked as a contractor in the tech sector for numerous companies. He recently earned a BS in Freshwater Science and Sustainability, but continues learning in multiple fields every day. www.evolvingparent.com


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