Bitcoin and the other (1000+) Cryptocurrencies
“Virtual currencies, perhaps most notably Bitcoin, have captured the imagination of some, struck fear among others, and confused the heck out of the rest of us.” – Thomas Carper, US-Senator
I am a blogger not a financial writer (well sometimes I am see example from Sanlam’s website). But here I am a blogger. The terminology mentioned is by no means a comprehensive list. I have not tried to write a Dummy’s guide to Bitcoin but in explaining the terminology I try to assist you in smiling at the attempted humour in the message following the terminology (should you find the message bland and boring, the terminology will help you to understand Bitcoin). A win-win situation my mother called it…
Fiat currency – It is created by governments to represent value in order to trade using currencies like the dollar and rand (the money we are used to). A central bank regulates the amount of currency available and influences it’s value.
Cryptocurrencies – a digital virtual currency (i.e. Bitcoin) existing in cyberspace. If computer networks should vanish crypto currencies vanishes – it cannot exist outside a computer network. Encryption techniques are used to regulate the generation of units or “coins” and to verify the transfer of funds. It operates independently of a central bank and is therefore decentralized. Its value is determined by the community based on supply and demand. Crypto and Fiat currency is in competition with each other.
Cryptology – Cryptology is the mathematics, such as number theory, and the application of formulas and algorithms, that underpin cryptography, while cryptography is both the practice and study of the techniques used to communicate and/or store information or data privately and securely, without being intercepted by third parties. Also known as encryption.
Kryptonite – Kryptonite is a material from Superman’s home planet of Krypton and is harmful to and can even kill Superman (what is this doing here?).
Blockchain – This is the heart of cryptocurrencies. A blockchain is a public ledger of all cryptocurrency transactions that have ever been executed. It is constantly growing as completed blocks are added to it with a new set of recordings. Each node (owner’s computer) gets a copy of the blockchain, which gets downloaded automatically upon joining the Bitcoin network. The blockchain has complete information about the addresses and their balances right from the first block to the most recently completed block. It is therefore claimed that fraud cannot be committed as the blockchain cannot be altered as it exists on multiple computers
Cryptocurrency wallet and address – Cryptocurrency wallets are software programs that store your public and private keys and interface with various blockchains so users can monitor their balance, send money and conduct other operations. No coins are actually stored in the wallet. It is a merely an access to show you the amount of currency you own and to transact. If hackers hack into your wallet and find your address they can however withdraw your coins. Thus it is important to store it offline. Mega millions have been stolen by hacking into wallets. While transactions can be traced via the blockchain these transactions are anonymous. You know how much currency is in a wallet but you do not know whose money it is. This has pro’s (and many cons).
Ether – has various meanings and in the message I apply this meaning: a light volatile flammable liquid especially used formerly as an anesthetic. However, the second biggest cryptocurrency – Ethereum uses the word as it’s core but in the crypto world it has altogether a different meaning
Mining – Bitcoins (or any cryptocurrency) are not printed out like traditional money, they are mined out of the system (literally created from nothing). A miner is just a person with a computer that runs a mining program on it. But miners don’t just generate new Bitcoins. They also use their computers to verify transactions and prevent fraud. Cryptocurrency was not created for the miners but without miners cryptocurrency (and Snow White) cannot exist.
Those who know me also know I do not write fiction. Similarly The Message is based on actual events in so far that I did send my friend the Afrikaans version more than a year ago. If the content of the message really happened, you be the judge; let’s just say I applied allegory, irony and parody liberally as it all rhymes with currency. The message followed a vigorous discussion during a hike.
I went to dig further in order to get a grasp of all of this. Unfortunately my wallet fell into the mine. Using a blockchain I lowered myself deeper into the mine searching for the wallet. At a certain level I could smell ether and I started seeing weird posters against the tunnel walls: “Created by the most brilliant minds from around the world” , “Derivatives are delusional – cryptocurreny is real” and “Go crypto or end up in a pauper’s crypt” Suddenly I saw people digging with their laptops in the ground. They stared at me if I’m crazy because I was not doing the same. I started wondering if I’m not mad and missing out on something. A bit crazy to coin a phrase. Or is it the effect of the ether that influenced my thinking. I heard a loud bang. Some miners out of frustration were kicking a Fiat car behind me??? As if the car did something wrong!
I became dizzy and stumbled. To keep my balance I pulled hard on the chain, but the blockchain tumbled down, and with that I am deprived of a place where things make sense, I cannot climb back. My world started spinning and I wondered if I’ll be caught in hashes and nodes and decentralized and centralized platforms that compete algorithmic-ally forever. With everything in a haze (or is that hash) I fortunately lost my consciousness.
I awoke up in the arms of a man with the sensation that I am flying and realize that I’ve completely lost it. I’m relieved to to see that the person’s mother dressed him funny in realizing that it is Superman – he saved me! Still under the influence of what happened, I say gratefully: “Superman you’re my crypto knight”. It was a mistake – he heard kryptonite, got a fright and let go as I fell back into the mine …
Yes it ís one of those – you have have to think up your own ending. Did I ever get out of the mine; I honestly don’t know… But there is a lesson: I am scared that cryptocurrency will turn into Kryptonite and kill me financially. You cannot do a due diligence of a cryptocurrency’s value. Regarding a share you can look at the company’s PE ratio (price earning ratio) and at the management and sector it is in and make certain deductions. The value of a cryptocurrency is speculative – it cannot be objectively determined. Having said that if I invested 6 years ago when the price was under a Dollar… Even if I bought it n April last year instead of sending the message to a friend who have bought years ago)… But the time is right to write: recently Toortsie took the lead and wrote about it.
The fact that brilliant people created it, is not a guarantee of its success. Today it fell 5.9% – the start of a bubble? I simply cannot understand how the values can increase like this for something which only real practical use is to hold and transfer money. I will rather admit it that I do not see. The following may sound familiar (it is about clothing)…
They pointed to the empty looms, and the poor old minister stared as hard as he dared. He couldn’t see anything, because there was nothing to see. “Heaven have mercy,” he thought. “Can it be that I’m a fool? I’d have never guessed it, and not a soul must know. Am I unfit to be the minister? It would never do to let on that I can’t see the cloth.”
No earthly currency, crypto or fiat, can sustain you once it becomes necessary for a crypt.
For you know that it was not with perishable things such as silver or gold that you were redeemed from the empty way of life handed down to you from your ancestors, but with the precious blood of Christ 1 Pet 1:18