Don’t know what “cryptocurrency” is? Start here for the 100 level intro.

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Firstly “cryptocurrency” is sort of a bad name for this to be introduced to people.

I rather think of it as “blockchain technology”, and what it does is basically automate more stuff than computer code has before, and makes it “decentralized”.

So whereas in 1990 if Grandma wanted to send a check to someone for their birthday she’d mail little Bobby a check. They’d deposit it. Then the bank would call up the other bank and ask “hey does Grandma have $20 to send to little Bobby? She does? Okay take that $20 out and I’m going to write it into little Bobby’s account.” The bank is the central authority that’s making sure everything is working.

Nowaways Grandma could venmo Bobby $20 and Venmo would ask the banks’ computers the same thing. It happens a lot faster nowadays but the bank is still the sole authority figure.

What the blockchain does is take away that authority figure. If Grandma sends $20 of bitcoin to Bob, all the computers on the network say “yup Grandma’s got $20 of bitcoin and now we’re putting it in Bob’s wallet”. This is a vast simplification. But the blockchain pretty much can’t be wrong. It takes out all the human error because it’s just computer code, and thousands of computers are confirming the same information to make sure it’s true.

But society has decided that there’s some value in confirming all these transactions to make sure they’re correct and no one is double spending money. Historically we’ve paid banks to do a great job making sure the information is correct. We pay them as the central authority in fiat (or cash/dollars/whatever currency your central authority government has said works for society).

With the decentralized system, we pay the computers (or the computer owners) who process and confirm the transactions on the blockchain. And we pay them in Bitcoin (or whatever other cryptocurrency, Bitcoin is just the first and most famous) which is a store of value on it’s specific blockchain. And people see that system and say “huh the bitcoin blockchain is doing something that used to be worth fiat… But they call their currency Bitcoin. I’m going to assign a fiat value to Bitcoin!” and then Bitcoin get’s a price per coin. Basically saying that both bitcoin and fiat have value, but obviously it’s not 1:1.

How valuable is the service the blockchain does? If it’s REALLY REALLY valuable, then the Coin currency is going to be worth a lot of fiat currency. If people expect it to be really valuable one day, they will probably buy a lot of it right now with the hope that other people will see the value later and buy it then! (Now is a good time to tell you to google “investor vs speculator.”)

So as a relatively conservative investor (I just want to retire when I’m older, I’m not trying to get rich quick), I see blockchain technology as an exciting investment that makes up a small portion of the money I’m investing with. I expect blockchains to automate a higher level of human economy than computers and the internet have before, and obviously if that’s true then cryptocurrency could be a rather disruptive technology much like the internet, computers, the factory assembly line, the printing press, etc. But in life there’s no guarantees, so perhaps I’m wrong! You should always take into consideration that you might be wrong.

BUT let’s say I’m right, crypto is the next big thing. The same was true in the 90s with internet companies. Tons of websites were being developed and everyone was making money hand over foot buying the stocks of these websites. But even the most promising websites (or cryptocurrencies today) aren’t necessarily winners. For every Facebook or Google, there’s a dozen that were talked about as “THE NEXT BIG THING” but no one even remembers anymore.

So you have to be careful. Research as much as you want, keep learning, but don’t buy into the hype here for the sake of hype. Dogecoin has no “use case”. Shiba Inu has no “use case”. They are worth what they are solely because people will pay that much for them, they aren’t really a technology that you can invest in (unlike say Vechain, a blockchain that exists to automate supply chain and logistics. It’s not sexy but it’s a huge use case and therefore could generate value in a way a lot of the memecoins never could). This subreddit shows time and time again that they don’t really understand what’s going on. But that’s not a bad thing, it’s fun to shoot the breeze and talk about crypto in a passionate way. If you’re lucky enough to talk to really intelligent people with a little more knowledge, they will be very open with the fact that they nor anyone else can successfully predict the future of these coins. Most of the coins will probably be dead in 10 years just like the websites in the 90s. Some of them will be winners. But the technology is just too new to be able to confidently say anything about what’s to come.

And also take this into consideration: when it comes to finances on the internet (especially crypto) assume that EVERYONE is only telling you information that benefits themselves as well. If they tell you to buy a coin, almost surely they bought it and want the price to go up. Pump and dumps can be obvious or they can be insidious.

Only invest money you can afford to lose, and put two factor authentication on everything you own.

submitted by /u/TheBestNarcissist
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