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Cryptocurrency for the Uninitiated

Financial Products: Key Benefits – Helping you Understand Your Money

You may have heard a lot about cryptocurrency, probably from cold callers intent on parting you from your hard-earned cash. Is it a panacea for all ills or a tool to exploit the naïve. In this post, I will endeavour to give you the basic in straight forward language, not setting out to bamboozle you.

What is Cryptocurrency?

Cryptocurrency is a virtual currency that’s security is based on advanced cryptography. Like a hard currency it can be used for financial transaction, even some small traders now deal in cryptocurrency. It is fundamentally secure money developed for the internet.

What is “crypto mining”?

A bit of a misnomer. Crypto mining is primarily using your resources, electricity, computer power etc. to provide the power behind the bookkeeping services required for crypto coin transaction. As a reward for this, you receive a fraction of coins every so often. The volatility of the market in say bitcoins causes dramatic swings in its value if it is up, you can make a lot of money, but it can also plummet.

It is an expensive hobby frequently the cost of electricity outweighs the income generated. Since the release of Bitcoin around 6000 cryptocurrencies have been release as people try to speculate in this area.

Who is in control?

These are decentralised, so no one and everyone is in control.

Why would I want t use it?

Cryptocurrency comes into its own for online secure, anonymous financial transactions. Due to is security and lack of oversight is has become famous for tax evasion, money laundering, holding illicit assets as well as its legitimate uses.

Who are the players?

There have been over six thousand cryptocurrencies since Bitcoin started the ball rolling, here are some of the key players:-

Bitcoin

Invented in 2008 by someone using the name “Satoshi Nakamoto” a year later the source code for the currency was released on an open-source basis so that anyone could use it. It is the first and most successful of the new cryptocurrencies.

Learn a little more: https://bitcoin.org/

Ethereum

This cryptocurrency was released six years after bitcoin in summer 2015. Currently, it is the second-largest cryptocurrency after bitcoin. Unlike bitcoin, Ethereum is programmable so developers can produce innovative new financial apps. It is used globally for many financial transactions, to hold assets or as collateral.

Learn a little more: https://ethereum.org/

Ripple

Released in 2012 this cryptocurrency was developed by Chris Larsen and Jeb McCaleb. It is a combination of a financial payment gateway and cryptocurrency. Currently, it lies in the third position after Bitcoin and Ethereum. Its US is that it enables transfers of money in any form, USD, Bitcoin, Sterling etc.

Litecoin

Almost a homage to bitcoin this cryptocurrency is what the name implies a “lite” version of bitcoin. It was established in October 2011

Learn a bit more: https://litecoin-foundation.org/

Monero

Launched in 2014 this is another private, untraceable cryptocurrency. Their principal aim is privacy and unlike other cryptocurrencies, fully anonymous transaction.

Why don’t Governments like them?

For many years governments around the world through their central banks have used money, itself just a complex concept, to control several financial indicators principally inflation/ deflation through both money supply control and interest rates, i.e. the money available and the cost of borrowing money. This power gives governments individually, and in concert, great power over the lives of their citizen’s, cryptocurrencies threaten the lever of control.

In the UK a gradual encroachment on the individuals right to privacy has been supplemented by an increase in oversite of money into and out of bank accounts. It is argued that this is simply a way of uncovering illegal use of cash and helps in the fight against crime and particularly terrorism. It is particularly useful in assisting tax evasion.

All in all, the loss of control or influence over the money markets hampers governments ability to control the population, what politician would want that?

The Roundup

Cryptocurrency may if Governments allow it to develop, be the future of money. It has a lot of benefits security, anonymity, ease of use etc. However, governments are cracking down on them, on the face of it, as control of criminal activity but more likely to retain the levers of power that currency control gives.

The “cold call hype” is offering two ways to cash in on the phenomenon of investment in currency to speculate on its future value and secondly mining, which is prohibitively expensive for the traditional currencies. It would be unfair to say there is no possibility of making money people have. It is merely another high-risk venture and with many cold calling companies only a scam to part you from your hard-earned money.