POV: Bitcoin beginner overview
Karen Jones, Editor, Citywealth, takes on the crypto market after four years of research
Can you trust it? Will it crash? Volatility. Is everyone who owns Bitcoin rich? Can I get rich with it?
First of all there are two bitcoins. Bitcoin is the blockchain. bitcoin is its coin and Satoshi is its division of bitcoin named after its founder. There are 100,000,000 (100 million sats or satoshis in a bitcoin). bitcoin is THE BRAND of crypto and always will be. It started in 2008. So has been in existence for 13 years. The first iphone 2007.
Blockchain is a software invention. They use of computer generated mathematical encryption in blocks. There is no need to understand the underlying tech of Bitcoin to understand its token or its coin, bitcoin. Ultimately it is a peer 2 peer payment software system. You use a digital wallet, buy a coin, you can save it as an asset hoping for long-term growth, trade it, swop it for other coins (altcoins), buy digital art (NFT) or buy things with it like a currency in the real world. Payment services like Paypal and Visa allow payment for purchases through their network (Coinbase card with Visa spends bitcoin on anything in the world including a gin & tonic at Annabels). I have a Coinbase debit card with an app with my spending statement just like a normal bank card.
In his own words the founder says: “It is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.”
All software companies produce a “whitepaper” which outlines its strategy and usefulness. Here is bitcoins. https://bitcoin.org/bitcoin.pdf The whitepaper is only 9 pages long. Read it but as I say it is unnecessary, however it does make you ahead of most of the population who just want to get rich quick with absolutely no understanding about what it is or how it works.
In my head its an asset and a currency, this is why banks and govts are having so much trouble with it. It can be kept as a safe haven asset for long term, traded or just used in the crypto eco system. Banks don’t know any better than you and you don’t need them to be involved. They have no place in this world except to offer custody (safety of the coins you own or buy) which may be a worthwhile venture to save you a headache if you are buying a large amount but you can do that with a ledger yourself. However having done it, it is not easy. The other area where banks will be useful is ETFs (exchange traded funds) that are professionally run which allow investors to enter the market with professional management. Hedge funds have taken the lead so may be the way through for investors via banks purchasing from them. Canada currently has the lead. The USA has denied all applications for ETFs. The green light for the USA will enable mass adoption which is probably why they are not being allowed. It’s a watch this space moment.
So for private use or to get used to the concept just download a wallet from the Appstore. Crypto.com is good and easy to use, put your credit card on there and purchase your sats or alts (part of a bitcoin or alternative coins). You can earn interest on your bitcoin aswell.
For people wanting to look at it in a portfolio so more of a corporate way then this is a good report: https://www.cfainstitute.org/en/research/foundation/2021/cryptoassets
Ethereum, crypto kitties and other coins ….dogecoin
The next big thing after bitcoin: Ethereum what is it? Dogecoin, BAT, some different coins.
Ethereum network started in 2015. Ethereum was invented by Vitalik Buterin. Its native token or coin is Ether or ETH. Again it is a software system and a peer 2 peer network of sending money or buying assets without a banking network. It however is more advanced that bitcoin and has programmable options to build new concepts on it and those new projects having been built with the same technology can now integrate, build on each other and will be quicker to market with financial or gaming products and services.
Cryptokitties started in 2017 to show use case for the system. Some of the original crypto kitties have sold for $64k. What are they? They are just cats. Made by Dapper Labs, founded 2018, they are available to buy and sell and play games with. They are the OG NFT’s (art or collectibles).
ETH is the second largest coin behind bitcoin. The difference with Ethereum is it is programmable whereas Bitcoin is simply a payment system. All the same applies as above except there are many more services now available on Ethereum which include APY earning interest on your coins if you are just holding (hodling). Art purchasing and NFT collectibles are some of the ways to spend ETH but like art they might increase in value or just be something you love. However with the development of the Ethereum eco system there is now wrapped bitcoin which enables bitcoin holders to cross over onto the Ethereum network to take advantage of the new lending, staking and swopping options.
It is the number two coin behind bitcoin and is expected to rise in value after July when there is an equivalent of a major upgrade to the system. This is not necessary to understand, it is a change to the way the network operates to make it more efficient and to control fee’s which have got out of control.
Dogecoin released 2013 by two IBM software engineers. It was always considered a bit like a crypto kitty (not a collectible though) in that it was not really taken seriously but was more a fun part of the industry. Stock tokers have latched on to it and Elon Musk tweeted it – probably because it has not been seen as market manipulation as it would be with any other crypto coins – Elon is the messiah and his every word is followed so if he says buy then everyone does. However, there is a development, Mark Cuban of the Dallas Mavericks now accepts Dogecoin but whether this is really just a PR exercise or an attempt to bring the value of the coin up is hard to know. He is a tech billionaire now Dragons Den style investor so what he touches does tend to turn to gold. Buy some if you want to just have some but the reality is you need to buy a lot to make some money, especially if its only real price is ever $1 dollar a coin. Another point on Mark Cuban is that he is already into NFT’s (lazy.com) so he could be planning something that is not obvious yet.
Most coins are the native token of an actual use case blockchain site. An example is BAT Basic Attention Token used on Brave browser which intends to break the traditional advertising model and looks at the problems we now face with privacy. It is a privacy-focused browser that blocks third party ads and trackers, and measures user attention to reward content publishers. Brave uses BAT (Basic Attention Token), a token that compensates the browser user.
There are also public and private blockchains. So Ripple is a private blockchain to help with faster payments within banks its coin is XRP. Just to add that although it is listed as one of the largest coins, the founders and company are fighting a SEC action currently. https://www.sec.gov/news/press-release/2020-338
Wallets and exchanges
Why are there so many wallets. The differences, the usability, sending coins from one wallet to another.
Metamask, Coinbase, Trust, Bittrex, Binance, Crypto.com
Wallets are apps/ websites on your phone with security and ID verification, just like a digital bank now, they hold your coins and it is like a world of information also about coins and with some educational or engagement programmes like staking to get you to deposit your coins into new projects with yields and APY.
Coinbase pro is maximum £250,000 and the normal Coinbase exchange/ wallet is £7,500 a week so several hundred thousand a year. Coinbase before its IPO was and is considered the safe wallet to use. Coinbase is a good beginner wallet to use with an easy interface almost like Instagram or facebook. What is not said is that many of these products have been built with the USA user in mind which seems to provide complication to the European user. This is in terms of using payment systems to get deposits in. I have found it easier to buy else where and send the bitcoin across. The desktop version has more functionality than the phone. Coinbase has limited coins available.
Binance is more a trading exchange and wallet (app or website) and although it is easy to use it takes time to understand it, it is an app with so many options and things to do that it is complicated for the new user to crypto. However in terms of acceptance of a credit or debit card to onramp or get money into the system it is the wallet that works. It is also very good for staking with large interest APY to earn on crypto that you hold. Its easy to buy here aswell once you know how. Has hundreds of coins if not more. They are thought to be based in Malta but it is not 100%.
Trust wallet is also an easy to use wallet, clear and obvious what you are doing. This has just been bought by Binance. It used to be easier with European credit/ debit cards but its use of Moon pay has made it throw up fraud on your cards.
Crypto.com is very easy to use and I now recommend it, it’s a very good beginner wallet that shows the size of crypto cap to give you a perspective on their size. The menu at the bottom of the app allows you to hop around easily and there is an ability to also ‘earn’ on the site like getting interest on your savings. Easy to use and lots of coins.
Bittrex is an exchange and wallet but it has very good functionality for changing coins that might be giving you trouble then you can send them to another wallet. Probably every coin is on here including new to market. However I would not recommend this for beginners.
Ledger. Is a USB type stick with a unique code (seed) that you set up and is then your own storage wallet held off line so that your crypto cant disappear from hacking or be lost. There are stories now of text messages being sent to phones which might say anything like DHL but they are fake and seeking to access your phone. The answer is don’t click links. Same with emails. This is considered the gold standard for keeping your coins safe. Ledger also has a class action against it after a data breach much like Vodafone. https://www.theblockcrypto.com/post/100860/ledger-shopify-class-action-lawsuit-filed
Metamask is the Ethereum wallet but it also has a browser from consensys. It is tricky to use and takes time to learn it. Once you get it its easy but ALSO I have found that it wont connect when I am on a site and have to copy and paste the URL into the metamask browser in the wallet to get the connect. Being on another site clicking connect to wallet just doesn’t work. Metamask works through the chrome browser so I suspect there are subtleties to how it works depending on the browser. However once you get it, its magical, it is very slick and one click will connect to other sites to join in a whole new world of NFT’s and coins that are launching.
Why are there so many coins?
Cake, Sushi, Pancake. Is it food or crypto?
FX trading on Binance.
As Ethereum has improved new financial service have been launched which allow more usage of the crypto as in the normal financial world like staking, earning interest and loans (these are usually given against a 100% match of assets held). CZ who is the founder of Binance is quick to market and offering many of these products on Binance. Cake is the coin and pancake swap the exchange (are on Binance smart chain which allows interaction on Ethereum, farming, staking, and lottery programmes). Fundamentally it’s a way to maximise crypto value and earn from them but is also a way to get people more involved in new projects to support them. However there is a rumour that the Binance smart chain is just a copy of the Ethereum network like a fake handbag. It looks like Chanel but it isn’t. However, rumours are just rumours and Binance are very smart at community engagement so whether this matters or not is hard to assess. Many think code copy and pasting is part of the eco system, its what happens in the ongoing future that matters.
Sushiswap exchange is a community platform running on the Ethereum network run by its users and Sushi is its coin. Many think this is a copy of Uniswap.
Ultimately these are new advancements as the programmability and use of the networks grow. It is called Defi. Decentralised finance. Its digital finance that replicates traditional offerings in financial services.
Hodl, obsession, shit coins, NFTs, Elon Musk
The market moves at the pace of a F1 driver. General thoughts. Elon Musk and bitcoin.
Community is very important in the crypto world which is born of the gaming world and word of mouth over Reddit, Telegram, Discord and Twitter is a real time way to find out what is going on a bit like watching Bloomberg to understand the traditional financial markets. The industry is full of hodlers – people who buy coins and sit on them til the right moment. Obsession is a thing. The FOMO as coins pump in price causes a bull as does JOMO as bad news hits the sector. In my experience I have found the USA markets and messaging can have a big impact on confidence of coin prices. The exchanges have very good incentive programmes to lure people in with offers and competitions. My advice is: yes sometimes you will miss out and kick yourself (hashmasks is a personal pain point) however the amount of projects that rise up and become FOMO is astounding. It is easier to realise that the market will always have another wunderkind that you can spend your money on. So essentially don’t worry if you miss out. Shit coins are just dodgy coins that will tank or coins that are sitting on a project that seems to have no underlying purpose. You really should read every white paper and decide for yourself. I have read a few and many of them are just payment networks with a variable or two so you aren’t missing too much. NFT’s are the latest obsession that is splitting the community. Many are super excited at the possibility of monetising art for the masses who go unappreciated. Others thinks its another run at the ICO scams of 2017. Again pick your sites like Nifty Gateway owned by the Winklevoss twins, famous from their litigation with Mark Zuckerburg, or sites like Opensea Cryptopunks are massive and validated. Yes they can re sell on the digital art markets for more but many art projects or pieces of art may be worth nothing. However this is not stopping companies like Christies getting involved. So therein crypto NFT turns up in real life.
Elon Musk is the tech messiah and everyone in crypto follows his every word. Why? I have a number of conclusions: 1. He is big in tech and crypto is a tech world. 2. He is big on start ups – making stuff happen where it seems impossible – this is very crypto. 3. He is cool and tweets quite obtuse messages that the crypto industry uses so he has the lingo.
Usability of crypto apps on the phone has changed just like the iphone itself. I am sure the original iphone looks and operates like a donkey now compared to the sophistication of our current phone. This is exactly like crypto. It has moved on. The things that went wrong in the past like Mt Gox which operated from 2010-2014 are just that, old versions of the software that are in the past. The software then and requirements for users identity didn’t exist in the same way. The infrastructure is stronger, faster and more safe. The Coinbase IPO is testament to that.
However lets not forget the popular ‘Cryptoqueen’ available on Spotify as a podcast. A crypto evangelist who went missing and who started Onecoin in 2014 to 2017 based in Bulgaria which turned out to be a ponzi scheme. So, what that underlines is stick to the safe wallets, DYOR – do your own research and don’t FOMO unless you have done some basic research. A lot of the crypto community is part of a tech start up, there is a lot of competition and staff and founders do leave which causes ups and downs.
There is also continuing whale risk, of big movements of coins that were bought or earned a long time ago that sit waiting to cash out. This can bring crashes as people panic sell. It really is a trading industry and community at heart and moves in a similar way.
Whatever your thoughts: remember crypto is fun and full of memes – here is a crypto meme that is used when the market is pumping (going up) https://www.youtube.com/watch?v=NUYvbT6vTPs