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Blockchain, Bitcoin and cryptocurrency 101, plus some jargon too! (this is not financial advice)

Having worked at a bank and as an advisor to organisations on their digital strategy, I am asked about cryptocurrency. People's curiosity has increased recently with; Elon Musk tweeting about bitcoin, El Salvador announcing bitcoin as their official currency, coin values dropping from their 2021 highs, and media reporting about people who have their housing deposit in crypto.

Here is a video of Warren Buffet sounding the alarm on crypto, he something similar regarding the technology industry.

if you don’t know much about cryptocurrency here is some high-level information;

  • Satoshi Nakamoto is the name used by the presumed pseudonymous person or persons who developed bitcoin and devised the first blockchain database in 2009.

  • Blockchain is a system that records transactions made in bitcoin or another cryptocurrency that is maintained across several computers in a peer to peer network. Bitcoin is a type of cryptocurrency. These terms are used interchangeably by some people.

  • There are no physical bitcoins; only balances kept on a public ledger that everyone has transparent access to. This decentralised structure allows them to exist outside the control of governments and central authorities.

  • The word "cryptocurrency" is derived from the encryption techniques which are used to secure the network.

  • The most popular option for direct purchase is through a dedicated cryptocurrency exchange. The security and efficiency of exchanges continue to improve. Many exchanges now allow the purchase of cryptocurrencies through simple debit card transactions.

  • Anything online is vulnerable to hacking, so there is an offline storage option known as cold storage. Cold storage (aka cold wallets) involves generating and storing private keys in an offline environment away from the internet. You can transfer coins between exchanges and cold wallets.

  • Ten countries have banned digital currency, including Bangladesh, Bolivia, China, Ecuador, Iceland, India, Russia, Sweden, Thailand, and Vietnam.

  • Canada approved a Bitcoin ETF in February 2021. The US SEC is reviewing several bitcoin ETFs. An SEC decision was expected on April 28, but hours before the deadline, the agency delayed the decision to June. It is now expected to be delayed again.

  • The Australian Tax Office indicates cryptocurrencies are subject to capital gains tax treatment as well as ordinary income, depending on the circumstances of your crypto transactions.

  • Cryptocurrency is volatile, bitcoin was valued (USD) at $19,783 in December 2017, $5,000 in Mar 2020, $19,850 in November 2020, $60,000 in April 2021 and was $38,000 in May 2021.

Crypto has it's own language too.

  • 'Going to the moon' means that the price of a particular coin is rising off the charts. Similarly, a coin can also be described as 'mooning' – which means that its price has hit a peak.

  • HODL stands for "hold on for dear life." The term is used to discourage selling when crypto prices fall, and to ride it out until they return to growth.

  • "When Lambo" translates to "when will you buy a Lamborghini?" Which is to say, when will you get ridiculously rich off crypto?

  • FUD (facts you dislike) can mean a number of other things; the practice of hyping up your own a cryptocurrency to drive its price higher; sowing discord among owners of another coin so you can drive the price down and buy it cheaply.

  • "The Flippening" describes a future turning point where bitcoin's reign as the most valuable cryptocurrency market ends and is replaced by another coin like ethereum.

So do I have some crypto? I have tinkered in the past out of interest in the technology and am probably about to do more due to the recent drop in coin values. Nothing dramatic though and it will not be significant dollars; although it will be an amount requiring regular attention.

If you want to learn more, read "The Crypto Trader" by Glen Goodman.


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