It is high time to talk about cryptocurrency, otherwise known as “crypto,” but where to start? Cryptocurrency is the broad term for digital currency or digital money. Blockchain is a technology that, among other functions, enables the existence of cryptocurrencies. Bitcoin is the best-known form of digital currency, although there are now more than 8,000 different cryptocurrencies many of which have no following or do not trade.
If all of this sounds too complicated for a Friday morning, read on anyway. We are all in this together. The diagram below first appeared in a May 2019 edition of TGIF 2 Minutes to illustrate how payment methods have evolved from Cash (far-left) to newer and often more convenient forms such as credit cards (“CC” in the diagram), then PayPal and Venmo (the “P” and “V”) and now digital forms such as Bitcoin (the “B”, far-right on the diagram). The world has rapidly gone digital in hundreds of ways including social and money.
Why care about crypto? It may or may not be around for the long haul, but if crypto survives even a small amount of knowledge will help. Here is a list of thoughts, and no doubt the situation will rapidly continue to unfold:
- Whereas PayPal and Venmo were created as logical extensions of credit cards for simpler, cheaper, ways of making payments, digital currencies can be thought of as a further extension of cash and at this time are far from the mainstream.
- Cryptocurrencies are bought and sold on unique cryptocurrency exchanges. These “exchanges” can be complicated and intimidating technology interfaces. Coinbase, which is NOT a crypto currency,is one of the best-known cryptocurrency exchanges.
- In order to trade crypto, an account must be established and linked to a payment method.
- There are the thousands of actual cryptocurrencies in existence including,
- Bitcoin, Ethereum, Tether, Binance and Dogecoin (Dogecoin is arguably a made-up crypto but still has a quoted value)
- Crypto is stored in a so-called “crypto wallet” of which there a number of kinds including on a crypto exchange or a “hot” (online) or “cold” (not online) crypto wallet.
- Finally, YES, you can currently use cryptocurrency to buy things including pizza and at various online and other vendors but there are complicated logistics (having an account, wallet) and huge purchase price risk and other risks based on the changing value of the underlying cryptocurrency.
This topic may be exciting and intriguing, or it may make your head spin. A comforting note is that cash – cold, hard cash – is still King. And convenient means such as credit cards and Venmo are not going away anytime soon. Two final notes:
BUYING CRYPTOCURRENCIES IS EXTREMELY VOLATILE AND RISKY.
CRYPTO EXCHANGES AND CRYPTOCURRENCIES ARE **NOT** FDIC INSURED IN ANY WAY.
Please call me with your questions or to share experiences and expertise.