As we had previously discussed, the difference between cryptocurrency and standard fiat money is that it is not issued nor controlled by central banks or government entities. As there is a finite amount in circulation, (and mining new cryptocurrency is a cumbersome and time-consuming process) it acts as a safeguard against hyper-inflation; much like the now-defunct Gold Standard.
Bitcoin- the most commonly used cryptocurrency today- boasts a market cap in excess of $330 Billion and dominates more than half of the $600 Billion crypto market. Bitcoin serves three key functions:
a) Acting as a store of value, any global currency- from the US Dollar to the Chinese Yuan- can convert to Bitcoin and vice versa
b) It also serves to record transactions via digital ledger software, known as blockchain, and cannot be manipulated or changed by fraudsters or criminals- proving it to be a reliable and trusted method of keeping track of inventories and financial transactions.
c) And lastly, it’s a legally and legitimately accepted means of enacting transactions; meaning that Bitcoin can be utilized as a means of payment in exchange for goods and services.
So what should a first-time user who wants to purchase cryptocurrency be aware of?
In order to acquire your own Bitcoin (or other cryptocurrencies) – the first step is to go online and obtain a digital wallet for yourself. Wallets provide each users with a unique public key– which is a string of characters serving as an address that you can use to send or receive Bitcoin- much like the unique characters that comprise our bank accounts. Wallets can be easily signed up for via website and desktop platforms and now even mobile devices running on Android and iOS.
Facebook has announced it will be creating its own wallet software- to be named Calibra– for use with its proposed Libra currency.
Customers can load their wallets up with Bitcoin by paying on their credit cards or other currency platforms like Paypal. Your wallet provides you with a list of accounts that can have multiple keys to store your funds. Some wallets propose generating multiple keys in order to keep transactions separate and mask them- which provides anonymity and obscurity to users- which is very useful in terms of maintaining privacy- especially for high net worth clients to whom privacy is essential- but it also can go the other way and be harmful to society by enabling criminal organizations the ability to carry out financial transactions behind a veil of secrecy- making it far easier for them to avoid detection and prosecution by law enforcement and government agencies. In this sense- it truly is a double-edged sword- used for both legitimate and illegal financial purposes.
Seeing as today the price for a single Bitcoin unit equates to over $13,000 CAD, many users can only afford to own a fraction of a unit of Bitcoin- something like ‘0.0001’. Platforms also include small user and transactional fees- but the fact that any user can get involved and invest- whether they are wealthy or low-income- is the driving force behind the global rise and expansion of Bitcoin- making it truly accessible to users around the world- on an unprecedented scale like we have never before seen.