A newbie’s guide to cryptocurrency.
By Sophia Onyeabor-Zema
My name is Amaka and I’m an aspiring Fashion designer. My goal last year was to buy the SINGER HD6600 Heavy-Duty Computerized Sewing Machine, which offers 215 stitch applications including 6 automatic 1-step buttonhole styles. This machine is a true workhorse with powerful piercing power for thick fabrics and extra-high sewing speed. It is my goal but it also costs $260.
To achieve my goal of getting this machine, I decided to start a daily contribution of 1000 naira with a cooperative. Sharon, my agent, comes to the shop daily to collect my savings. On this particular day, I was not around but Sharon was waiting for me. I had to make a transfer to Sharon using my UBA bank app. I sent her the receipt to show that the transaction was successful. Sharon left my shop, happy that she collected my allotment for the day.
The next day, Sharon informed me that she had not received any alert and I insisted that I had sent it and it was debited. She used her ATM card to check for her account balance but there was no increase. Left with no other choice, Sharon had to go to her bank for confirmation, she later told me that there was a network problem at the bank so the transaction had not reflected. There was relief on both ends, it cleared her doubt that I wasn’t lying and sent a fake transaction receipt and it cleared my suspicions that she had seen it and lied that she had not.
Of course, this was not the first time that I had a problem with my bank, nor would it be the last.
Why did I just give you all this information about myself that you could otherwise, do without? This was a turning point for me because I was fed up. Like I said it would not be the first or the last time that I had a money transaction problem.
I started to look for a better way to send and receive one. I did not have to look very far as my friend Chad who is a crypto enthusiast was willing to point me in the right direction. I started to read about cryptocurrency, the more I read, the more I wanted to know. This is my knowledge thus far on what cryptocurrency, why it’s important, and why I’m convinced that it is the right path to take
Cryptocurrency is a digital currency that operates on a technology known as the blockchain. With the help of blockchain technology, cryptocurrencies are;
- Immune to counterfeit,
- Decentralized, therefore eliminating the need for a third party like a bank,
- Protected by a strong encryption algorithm known as cryptography.
The Public distributed ledger is a concept of a blockchain that makes it impossible to fake a transaction thereby enabling secure online payments. So, if I faked a transaction to Sharon, I would not only have to tamper with my ledger and hers but millions of ledgers across the network, how possible is that? Not!
Another perk of cryptocurrency is that I do not need a bank or a bank app anymore. I could make transactions to Sharon instantly without any hassle. The decentralized nature of cryptocurrency eliminates the use of third-party intermediaries like a bank and or a bank app.
Cryptography is the algorithm that protects transactions between two parties in a world where everything is made public. It is made of two words, kryptos — meaning hidden and graphy — meaning writing. The basic principle of cryptography is to conceal information or messages and hide their true content so that only a person with permission can access it. In cryptocurrency, the use of public and private key help to interpret a hidden message.
Using a cryptocurrency would have eliminated all of the problems I encountered using a bank app. Cryptocurrency supports direct transactions between two parties without the need for a bank, in my case a bank app. And because there is no need for an intermediary, my transaction would be faster and instant and it would be very secure. Sharon would not question that I sent it because once I initiate a transaction with her, she would have access to the ledger/ database that shows her how much cryptocurrency I have left. In our current system, only banks have access to that ledger.
In the World of thousands of cryptocurrencies, Bitcoin (BTC) is King. It is said that Bitcoin was created by a person (or group of persons) known as Satoshi Nakamoto and introduced to the world through a whitepaper titled Bitcoin: A Peer-to-Peer Electronic Cash System published on the 31st of October, 2008.
The first official documented purchase of goods using Bitcoins was on the 22nd of May, 2010. Lazlo Hanyencz bought two Papa John’s pizzas for 10,000 BTC worth 25 dollars (Bitcoin was 0.0025 cents per coin). 10,000 BTC is now worth 430,356,400 US dollars. I bet Lazlo wishes he had never heard of Papa John’s pizza.
Any cryptocurrency that is not Bitcoin is referred to as an Alternative (ALT) Coin. Ethereum, Cardano, Solana, Avalanche, Dogecoin, SHABA INU, etc. Among the ALT coins, there are stable coins, these coins have USD attached to them like Tether (USDT), USD Coin (USDC), Binance USD (BUSD), etc. Stable coins are worth the equivalent of a dollar and so can be used as a form of payment.
Just like other assets, some cryptocurrencies can be traded on a public exchange. When a company launches on the stock market, it has an Initial Public Offering (IPO), where people can buy stocks cheaper. With cryptocurrency, they have an Initial Coin Offering (ICO). People exchange normal currencies for cryptocurrencies hoping that it would become the next bitcoin. It has paid off with cryptocurrencies like Ethereum, and Binance.
Cryptocurrencies traded on the public exchange are unpredictable, perhaps none more so than Bitcoin. One tweet from Elon Musk criticizing Bitcoin would see it crashing and a good article about it would raise its value again.
That is one of the disadvantages of cryptocurrency. It is highly unpredictable. No one ever promised that this was a get-rich-quick scheme but then again, people have gotten rich from it by taking advantage of the rise and fall in the value of cryptocurrency. So when putting money in Cryptocurrency, you should be thinking of playing the long game.
Another controversy surrounding cryptocurrency is the idea that it is the perfect currency for criminals. The misunderstanding is in thinking cryptocurrencies are anonymous, in reality, they are pseudonymous. So even though your personal information is not stored, your wallet address information is stored on a block every time you make a transaction. This address is a combination of upper/lower case alphabets and numbers. So no one knows who that address belongs to except you divulge that information.
For security purposes, The FBI used chain analysis to decrypt and trace the bitcoin address of the founder of the dark web; Silk Road. They had to make sure though that he was on his computer logged in with that address when he was caught or else he could claim it wasn’t his. Herein, lies another disadvantage of bitcoin, it is not completely anonymous, it uses a pseudonym (an alias).
Why should you choose cryptocurrency over real money? The hype around cryptocurrency like Bitcoin has blocked out the important thing that we should be talking about; the technology behind bitcoins, that is blockchain technology. Blockchain technology is offering more protection and control and is poised to take over every sector of the economy. From Banking, Health Care, Logistics, Agriculture, and many more.
As a Fashion designer, the role that blockchain technology will play in my business is revolutionary. It would put me in direct contact with manufacturers of fabric so I would know exactly what my fabrics are sourced from. I can document my creative process from start to finish so a dress tells a complete story. Transactions directly between my customers and me, thereby eliminating the need for a third party using cryptocurrency. No obstruction to my daily savings to Sharon so I can get my Singer sewing machine, also using cryptocurrency.
How do you put money into Cryptocurrency? It is so easy to buy bitcoin or any other crypto currency. Open an account on Coinbase, Binance, or any other trusted public exchange, fund your account and buy your first crypto to kick start your portfolio.
What is the best cryptocurrency to invest in? Here are three tips to guide your crypto investment
- Research the products, their functions, features, pros and cons.
- What problem is it solving and is its solution sustainable?
- Make sure its technology is up to date,
- Check that it has a credible team before investing.
I’m hoping this helps turn you from a crypto-new to a crypto-expert and encourages you to take that bold step in the world of cryptocurrency. Cheers!