The value preservation agenda is becoming increasingly difficult in this volatile climate and it appears that the hunt for assets that can at least beat inflation is on. We have witnessed reports of people flocking to obvious pyramid schemes to ‘invest’ in unknown assets. While desperate times do call for desperate measures, one of the key reasons why pyramid schemes have gained so much traction in Zimbabwe has to do with financial illiteracy. Most people simply do not know what is available to them in terms of investment opportunities. Cryptocurrencies such as Bitcoin and Ethereum are one such option that many have no appreciation or understanding of. This article aims to break down the basics of cryptocurrency trading through a simple step by step guide on what a cryptocurrency is, where to get it, and what to use it for.
What is a Cryptocurrency?
In simple terms, a cryptocurrency is digital money which has no physical form but can be used for peer to peer transactions on a form of a technology called a blockchain. This blockchain is a secure network or ledger in which these transactions are recorded and kept. It cannot be altered, and its program code cannot be edited which makes it very difficult for hackers to manipulate. There are many cryptocurrencies available including Bitcoin, Ethereum, Bitcoin Cash, Ripple, Monero and Dash
Who owns it?
Much like the internet, no one owns the blockchain; it is owned by its users. It operates outside the traditional financial instruments and regulatory framework or purview of monetary authorities. The system is designed to protect value in the event of central failure.
Who runs it?
The beauty of the blockchain system on which cryptocurrencies run is that there is no central data storage and no administration. It is stored on servers all over the world. No one person has full access or control over the system since there is no central authority.
How is the pricing of cryptocurrencies determined?
Each cryptocurrency has its own pricing dynamics that are determined by supply and demand. Bitcoin currently leads the pack in terms of price followed by Ethereum. However, it should be noted that cryptocurrencies are very volatile given that the adoption rates for most them is still relatively low.
What is Bitcoin Mining?
To verify transactions on the blockchain and create more chains, people solve complicated equations on computers. This process is what is called mining.
What can I use a cryptocurrency for?
In the same way as one can foreign currencies, so too one can one trade cryptocurrencies.
With cryptocurrencies, one can send money within seconds even across borders with minimal transaction charges and no middleman. There are no delays. Some cryptocurrencies even allow the receiver to receive fiat (real) currency
Paying for goods and services
A growing number of both internet and brick and mortar outlets are accepting cryptocurrencies as payment. From buying pizza to furniture, cryptocurrencies can be used as a medium of exchange.
Where can one get cryptocurrencies?
One can buy cryptocurrencies on exchanges such as eToro, Coinbase, Coinmama and Luno. It is however recommended to carry out a thorough due diligence before committing to use a particular exchange.
In conclusion, as with any investment, there is a downside risk, investors must do a thorough risk assessment and consult before diving into the world of online money.
Learn more about trading and investing in cryptocurrencies, shares and forex by being part of the Green Piggy Bank on your Cell-phone Campaign;
piggybankadvisor.com is an educational platform that empowers individuals, households and small businesses through educational and insightful articles and blogs. Topics covered include economics, stocks, budgeting, retirement & risk planning, wealth management tips and financial product reviews.