What Are Bitcoins and Cryptocurrencies?
Everyones talking about it and everyone has an opinion, yet few people really understand it and even fewer are involved.
Do I need a cryptocurrency wallet and what is the best cryptocurrency wallet?
Bitcoin! The crazy online currency that is dominating the financial news and making people rich.
Is it a scam? Is it the money for illegal crime to run on the deep web? Or is it just a speculative bubble that will burst and make all the investors poor?
To be honest, no one can give you a definite answer but I can tell you, it’s not really any of the above.
Here’s my explanation of what Bitcoins are…
I first heard about this infamous coin around 2013/2014 from a friend who asked me if I wanted to mine these coins.
He told me that it’s a virtual currency to use for online purchases and that we could generate them ourselves through our laptops.
Adding another thing to my already busy life, working at J.P. Morgan at the time, would be overkill and mental as well as physical suicide.
I told my friend to go ahead without me because I just couldn’t get involved with that at the time.
Before I go on, as many other people do, and tell you what a fortune I could have made by now if I did mine bitcoins back then, let me just explain the mining a bit further…
Bitcoins are basically a virtual/digital currency, also known as Cryptocurrency, which is created by a group of people that were essentially sick and tired of how fiat money (or the money as we know it) is being controlled.
The founder is said to be an unknown person that goes by the name of Satoshi Nakamoto.
No one really knows if this is his real name, a pseudo name, a man, woman, a group of people or an alien!
For all we know the name behind it is the founder and creator of the Bitcoin.
In order for Bitcoins to exist, they need to be mined. This mining process is basically a computer going through mathematical equations to create and process a coin.
So each time you send one Bitcoin from your wallet to another, or making a transaction to buy something with it, somewhere around the world some computer of a miner will process that.
In reward he gets paid a small commission for his efforts. Fairly simple right?
Another reward these miners get is that every time they mine a block of bitcoins, they basically get a block of lets say 25 Bitcoins for having processed this powerful mathematical equation.
I don’t know how big a block is and what the actual reward is but I know there’s a bitcoin clock that gives you that information.
They can decide to sell these for money or hold them. The more coins are mined, the harder it will get to mine the next block.
What’s more interesting, is that this is not an infinite process. There will and only can be 21 million Bitcoins on this world. This is a fixed rule set by Mr. Nakamoto and cannot be changed.
In order to keep it simple, picture the whole Bitcoin process like gold or diamonds.
In order to get gold or diamonds, you have to go into a gold mine, use physical labor to hack into this mine and look for gold.
Some days you don’t find anything, but you’ll be paid for your hours of digging and looking for it.
The day you do find something, you can sell this gold and get a nice amount of money for it.
Now translate it to Bitcoin and it’s essentially the same thing. You mine these coins and if you’re lucky enough to mine a block, you can sell these coins for a massive reward. If not just continue mining and get paid for transactions.
If you’re thinking of getting involved with mining, don’t bother… That’s my personal opinion. Before you even get involved and understand how to set it all up, you need to live in a great location where electricity is almost free, buy a bunch of hardware and make sure to run your computers efficiently, in order to make a decent income.
Overall I don’t think it’s profitable anymore unless you really know what you’re doing and have enough cash upfront.
Here’s a video of one massive mining grid in Iceland, using almost free energy. They still have an electricity cost of over a million dollars per month.
What’s So Great About Bitcoin?
So now you kind of get where Bitcoins come from, what they are and how they’re created I hope. But what’s so great about them?
Remember when I said that essentially these group of people created to coin to fight against giant banks and corporations that create fiat money? Here’s how Bitcoin aims to do this!
When you want to buy anything these days, usually you’ll either withdraw money from a cash machine or you pay directly with your credit/debit card right?
In both cases you will lose some money through banks. If you withdraw cash, usually you’ll be charged a small fee through that withdrawal, even in ‘free cash withdrawal machines’ as you pay a yearly or monthly fee to own a bank account.
If you pay by credit/debit card, you also pay a small transaction fee to the card company (for example Visa) and tax fees. There’s always some sort of middle men corporation you have to go through.
In worse cases, imagine you live in a small village in Brazil somewhere and you have a small coffee farm that you created all by yourself.
You then decide to grow and sell coffee beans to Europe somewhere and send the small amount of money you earn to your family somewhere else in Brazil.
By the time you receive your money, send it to your family, you will have paid so many fees as well as your family, simply for sending and receiving money, they get barely anything of the original amount.
The money goes from a European account, from Euros into your bank accounts currency (small loss in conversion fees and costs for having received and processed this money), through a transaction to your families account (another fee for sending and receiving money).
With Bitcoin you could get paid in Bitcoins, send it straight to your families wallet in Bitcoin, end of story! Yes you would have paid a small transaction fee but still nothing major and no banker controls your money.
Imagine a crisis like the one that happened in Cyprus and Greece not too long ago! People who worked all their lives to save up and store their money “safely” in banks, were refused to take out the money, that belongs to them, by the banks.
Why? Because if they would take out their money and store it physically in their homes, banks would become worthless and couldn’t gamble with their money anymore for massive profits.
Now many bankers will always bash on cryptocurrencies, simply because they can’t control it and make money from it, in their manipulative way.
If one thing is for sure, Bitcoin is in many ways a lot more secure than traditional money. After there was a hyperinflation in Germany, because they believed that by printing more money they could solve their money problems.
Bitcoin can not exceed 21 million! The government can’t control it, as it’s controlled by the people and you have total access to it, if you store them wisely.
One more thing, as to why I love this currency and any banker who talks negatively about it, can be found in this example: One of the most powerful men in the world and especially in the banking world, Jamie Dimon, continuously tried to bash the currency.
In one of my income reports, I showed examples of his statements on how Bitcoin is used for money laundry and that he would fire anyone in his company that tried to invest or trade Bitocoins.
I also showed that simultaneously he was one of the biggest investors once the coin dropped in value due to his words, so that he could get in for a nice discount.
Here’s what happened a few weeks later… in short, Mr. Dimon who so patriotically wanted all criminals to be coughed and shut down the disgusting world of cryptocurrencies, was fined for money laundering.
Am I surprised? No not at all.
Will he go to jail and face consequences? No of course not because he’s a rich banker!
What does happen, is that J.P. Morgan will have to pay a fine of $4 Billion, which is pocket change considering they made $6.7 Billion profit in 2016 and that their lovely CEO made a X-Mas bonus of $28million that year.
And do you know who does pay the consequences? All the employees that will get fired because they need to make cuts in order to pay these fines in the most profitable way.
That is exactly why I hate the world we live in, where the real criminals get to write a nice fat check at the end of the year, buy a new mansion or yacht and the small fish are replaced like numbers!
Cryptocurrencies are the solution to these crimes.
Is It Too Late To Get Involved?
If you’re looking for the simple answer: No!
Bitcoin and many other cryptocurrencies are still in it’s infancy. Yes, the price has surged up to $10,000 per bitcoin today as I’m writing this post (29th November 2017) but this doesn’t mean it’s too late.
What many people fail to realize, is that you don’t need to have $10,000 to buy Bitcoins. You can buy a fraction of a coin just like you can have a few cents in most currencies.
For instance if you have $5,000 to invest into bitcoin you’ll get 0.5 BTC.
Fair enough the more you have the better but you can still increase your value by owning just a few.
Besides there are more currencies than just Bitcoin, such as Litecoin (LTC), Ethereum (ETH) and Ripple (XRP) just to name a few.
Each coin has a different purpose, value, strategy and more. Read up about them and consider these as well as they’re still very low in price compared to BTC.
If you’ve never invested financially, I completely understand that it’s all super confusing and scary. The major question is probably, “what if I lose all my money?” but there’s a simple solution to this.
First of all, I highly advise not to put all your money into anything to begin with. It would just be stupid and irresponsible. Unless you can deal with the consequences, just be smart and don’t.
(click here if you want to read about a dutch father who sold everything he owned to invest in bitcoin. He’s probably a multimillionaire by now by the way!)
Secondly, once you see the price falling and you really truly believe bitcoin will be worth 0$ you can always sell your coins before it hits rock bottom.
You can download apps to set certain alarms, that warn you once the price falls below a certain price. You can even set certain filters on your exchanges to sell the coins if it reaches that price.
But if you want to keep it easy and stress free, just do what I do. Invest a portion you’re comfortable investing with and you wouldn’t be devastated if you completely lost it and just simply let it sit.
This is the buy and hold (hodl) method and it can’t get easier.
A lot of “gurus” try to tell you how to trade cryptocurrencies and think they know when the currency will reach certain highs and lows.
Fair enough many people might be good at it, but why stress about it when you can just buy and hold and come back a few years later and cash out?
You’ll also find a lot of financial advisors and speculators saying that the coin is a massive bubble about to burst any day.
But they’re been saying that for years and it makes almost no sense in my eyes. The more people get involved and start accepting and investing into the Bitcoin and alts, the more power and demand there will be.
For instance China has banned the currency, which makes it really hard for Chinese residents to invest in the coin. But once the ban is lifted (which it almost surely will be very soon), another influx of millions of people will get involved and invest into the currency.
What do you think will happen to the price of it? Go up “to the moon” as they say! Therefore I definitely believe there is still plenty of room to get involved.
Where To Start
Now if you’re really interested in getting involved, you should definitely only use money you don’t mind losing. I can’t stress that enough.
I repeat myself, because I’ve seen it over and over again with people…
For some reason, we become very picky when we buy groceries and try to budget the smallest items, like for examples with tomatoes and make a fuss when they increase in price by a few cents.
But when it comes to going out, gambling or investing, we suddenly have a different sense of the value of our money and spend it like it grew on trees.
Having said that, once you have a certain budget, inform yourself.
Luckily you landed here first because many people still don’t know about the item I will talk about below.
Most people that invest in cryptocurrencies, leave their cryptos on their wallets, which are very vulnerable.
Now although most places on which you can store your wallets online have a two factor identification process (basically asking you to login with two different methods) which may seem very secure.
But I encourage you to watch this presentation by John Mcafee (founder of Mcafee anti virus program) who explains why a hard wallet is the only secure way to store your coins.
A wallet is either on your computer drive, a cloud or your smartphone/tablet. But many of these are so easily hacked you can’t even imagine.
Basically the best way to store your cryptocurrencies, are through hardwallets. Unless someone physically steals that wallet, knows all your passwords and transfers out all your coins before you notice, they can’t be stolen or hacked.
The best cryptocurrency wallet in my opinion is the Ledger Nano S.
Why do I say this? Not only do I own one myself, it’s also the most recommended one out there. There are a couple of others, which quite frankly you are free to research yourself, but ever since I was told about this device, I was over sold.
There are other models by the same company, you can find here but really you don’t need more than the one displayed above.
Once you’ve purchased this wallet, you can feel very safe owning your cryptos.
Next you need to find an exchange on which you can upload your money, and buy cryptocurrencies.
There are tons of exchanges, but again please be wary and read up about them before jumping into them.
If you’re curious to know which one I personally use, it’s bitstamp.com simply because I live in Luxembourg any not many exchanges let you trade or invest from here.
However, they are also very neat, fast and overall I can’t complain with the security measures they take and quick responses I’ve seen by them.
Here’s a small list of other exchanges I know of:
You may want to sign up to several if you’re interested in investing into ICO’s (initial coin offerings) and newer, lesser known cryptocurrencies.
But again, I’d say keep it simple in the beginning and watch out with ICO’s as there’s a bunch of pump and dumps happening in that world.
Always do your research before jumping into anything.
What To Do Next?
What’s next is up to you!
Hopefully by now you’ve purchased the Ledger Nano S wallet, signed up to one of the above mentioned exchanges, transferred some money onto your account and purchased some Bitcoins.
Once you’ve gotten your first coin, transfer them over to your wallet and watch the price go up and down.
Other tools you might want to get as well are certain apps for your smartphone.
I recommend Blockfolio and IQ Option.
Blockfolio let’s you type in your trades and follow your current value, meaning you can see how much profit or loss you’re making.
That’s obviously a cool feature especially if you’re going to invest into several different coins and want to keep track on your entire portfolio.
IQ option I personally only use for graphs and looking at a detailed graph while I’m on the go.
Finally, I would like to say that I am by no means a financial adviser and I don’t want you to take my word on how to trade or invest into the extremely volatile world of cryptocurrencies. I simply want to help those out that are interested.
My opinion is and always will be just MY opinion. You should read up on the currencies and strategies you want to implement and invest in and not take anyones word (not even mine) about the next big hit!
However if you do feel like this guide was somewhat helpful, please feel free to share the post and comment below if anything wasn’t clear or need some advice. If you’re in a giving mood, I’m always open to direct donations onto my Bitcoin wallet as well 🙂
I also want to leave you with this great article that actually explains the whole concept fairly easily to understand and ads a pinch of humor to it.