Crypto and Bitcoin for Dummies 😲

With everyone on the Internet talking about Bitcoin, cryptocurrencies, and their lucrative opportunities, it can be hard to completely ignore them, kan?

For those new to the crypto space, this post might help enlighten you on what crypto is and why it was created. 

Cryptocurrency – The Origin 🧑🏼‍💻

Once upon a time, Satoshi Nakamoto dreamt of an online peer-to-peer (P2P) trade system that does not depend on any central financial institutions. This idea came after the Great Financial Crisis in 2008, when he (she or they, nobody knows Nakamoto’s real identity) realised that people depend too much on banks as the intermediaries for all of our financial transactions. So when the banks collapsed, people were pretty much screwed. 😵

Satoshi Natakmoto, hologram of Princess Leia, hologram of woman

Even now, when we make payment on Shopee 🛒, for example, we don’t pay directly to the seller, right? We have to fill in our card details 💳 or authorise a transaction first. Only then will the bank transfer our money to the seller’s account. The entity that controls this transaction is the bank. The bank can also control the production of money and impose fees on our transactions. We put trust in the banks to help ‘jaga’ our money. 

So in 2009, when Nakamoto figured out a solution that could make all transactions easier, faster and cheaper, without any middlemen, he shared it with the world. It was a ✨revelation✨. 

Bitcoin vs altcoin, cryptocurrency fight

Bitcoin – The Birth of Digital Gold 👑

Nakamoto created Bitcoin – a new type of digital currency that kinda works like gold . Similar to gold, which has no value at first, Bitcoin is valuable because people are willing to accept it as a currency. 

Just like gold, you also have to ‘mine’ Bitcoin. However, instead of using pickaxes ⛏ , miners will have to use their computers 🖥 to solve complex mathematical equations before they can introduce new Bitcoins.  

Man having so much thought in his brain, man thinking

There is a limit to how many Bitcoins are available in the world, though—exactly 21 million. As of December 2020, around 18.65 million had already been mined (Coindesk). It is this scarcity that makes the digital currency even more valuable. Once the planet is exhausted of Bitcoins, you cannot create it anymore 😔. 

Gold and Bitcoins aren’t all the same. Gold as a physical item can be hard to store and transport as they are heavy. On the other hand, Bitcoin transactions can be made across the world with a private digital key 🔐 and a single click . All of this is made possible by a technology called ‘blockchain’.

Blockchain – The Revolutionary Database 🧱⛓

Blockchain, in simple terms, is a general ledger 📒 used to record all Bitcoins transactions. Each time a Bitcoin is successfully mined or transferred from one person to another, the data will be stored in a ‘block’ form. Then they are ‘chained’ together in chronological order. Hence, the name LOL. 😏

Remember how Nakamoto wanted the system to be decentralised earlier? Well, with blockchain, all information in the ledger will be duplicated and distributed across an extensive network of computers i.e. the miners. These miners will confirm, verify and record any changes made in all entries, making it almost impossible to tamper with the data. So, yep, don’t try. 

Man cannot think, Jimmy Fallon cannot compute

Plus, because miners are working 24/7⏱, our transactions can be verified quicker than going through the traditional banks. If your transaction takes place on a public holiday or after 4pm on a weekday, you won’t even need to wait for the next working day. #syukur

Altcoins – The Other Crypto Options 

After Bitcoin, more people started seeing the future of blockchain, so more cryptocurrencies were designed. In fact, as of March 2021, there are around 9,000 types of digital currencies in the market! That’s a lot, right? 🤯

Whether they hold the same value as bitcoin or not, that’s… a whole different story.

Bitcoin choking altcoins

In Malaysia, there are five digital currencies that are approved by the Securities Commission of Malaysia (SC). They are Ethereum (ETH), Ripple (XRP), Bitcoin (BTC), Bitcoin Cash (BCH), and Litecoin (LTC). 

If you read Elon Musk’s tweet on Dogecoin and want to invest in some, you can. However, you would not be able to obtain them from any of the digital asset exchanges (DAX) authorised by the SC. This also means, if anything bad were to happen to your investments *touchwood*, there’s nothing you can do about it. That’s why it is super important to make sure that you only buy your coins from an authorised DAX like Luno. 

The future of crypto

To be honest, it’s pretty tricky to predict what will become of cryptocurrencies and blockchain. While sceptics argue that Bitcoin and the likes are just money scams, others believe that the system can make an impactful change to the world of finance. So which side are you on? 🤔