Introduction into bitcoin and Cryptocurrency for my friends and family

in #bitcoin7 years ago (edited)

What if there is a technological advancement so powerful that it transforms the very pillars of our society. a technology which fundamentally influences the way our economy, governance systems and business functions, and change our conceptual understanding of trade, ownership, and trust. This technology already exists, and its called CryptoCurrency

You are here because you have most likely here because you have seen it in the news, you've heard it from friends or family (or me) and have seen the price skyrocket 3000%+ in some years.

Firstly, this is NOT financial investment advice. I am only writing this because i suspect many people will be asking me about this as bitcoin is making headline news, and adoption is growing and the price is rocketing and a astronomical level. After reading this article, i strongly suggest to DYOR (Do your own research) as well as fact check everything before spending money on it. With all new things, there are many scams out there which will try to steal your money.

Before you decide to invest your hard earned money into anything. You should always know what you are investing in, as well as understand the risks involved. So i have prepared a few videos which i have found on youtube to be very informative about Bitcoin and its inner workings. I STRONGLY recommend you watch these to have a basic understanding of what bitcoin is.

This is a very basic guide 3 minute basic guide on how the system works.

This is a more advanced introduction which explains the math/system in laymans terms with great examples.

This video explains bitcoin under the hood in a percise matter.

Ok great, now that you understand what you want to invest in, lets move on.
High-risk-high-reward investing is not necessarily bad, but you have to seriously look at your thought process to make sure that you're not:

  1. Being blinded by dreams of getting rich quickly.

  2. FOMO (Fear of missing out)* which means acting based on panic thinking like, "OMG the price is going to $1 million and I will miss my chance forever if I don't buy right now" or "OMG the price is going to $0.01 and I will miss my chance forever to retain some value if I don't sell right now". This is called *

  3. Investing more than you can afford to lose. Bitcoin is HIGHLY, HIGHLY speculative. No investment advisor would tell you to put all of your life savings into any investment. Treat bitcoin the same.

  4. Bitcoin is experimental, and it is probably imprudent for someone who is not a true believer in the soul of Bitcoin to invest a lot into it. This is why its important to believe in it before investing, because it is very volatile, and if the price goes down, you have the faith in it and wont do no. 2 and panic sell for a loss. (Once again, this is not trading advice, i don't know the future and bitcoin may fall and another currency may reign supreme)

  5. I can nearly guarantee that there will be a large and long-lasting crash/downturn at some point. Maybe it will be $10k to $5k, maybe it will be $50k to $30k, who knows. But if you're thinking for example that the current $5k+ price range is absolutely secure after only existing for a few months, then you're traveling blind through very dangerous territory.

So now that the negatives are out of the way, lets go over some reasons why I believe in a future where cryptocurrencies are the future.

Currently you are using money issued by your countries government to pay for goods and services. This is controlled by them. Weather you are american with the Federal Reserve (which is quite frankly a joke if you do more research into it) or the Commonwealth of Australia.This is called Fiat Money. (Fiat is defined as an official order given by someone who has power i.e. fiat currency means a currency that is forced into circulation by a government)
The technology is known as the Bitcoin blockchain. The "data" transferred is know as bitcoins. Notice I emphasized data because bitcoin is data, with a financial incentive attached to it. Why does it have financial incentive you ask?Because of its perceived worth. It is deflationary (there will only ever be a finite amount produced), decentralised (no governments/banks/people control the system). Bitcoins do not have value as a physical commodity like gold and are not widely accepted as legal tender like dollars. In short, people accept and trade in Bitcoin because other people accept and trade in Bitcoin. We are living in a digital era of technology, so a non-physical entity having value is not so farfetch'd now is it?

Bitcoin is a cryptocurrency, but as it stands it is being traded more like an investment asset than a currency. There are places online to spend bitcoin, as well as some retail stores accepting it as a payment method, but don't be fooled by the trading volume. I speculate less than 1% of bitcoin transactions daily are actual payments for goods and services. This is mainly due to the high transaction fees (approx $5 USD per transaction) every time you want to move bitcoin from one wallet to another.

I hope this has increased your knowledge and encouraged you to learn more about cryptocurrencies.
As you may be aware, bitcoin is only one of the 1000's of cryptocurrencies currently available. It was the first, and is currently one of the only ways to purchase other cryptocurrencies, like a gateway. Personally, i do not believe bitcoin will becoming the future cryptocurrency of trade, but rather a store of wealth or value. Other cryptocurrencies have many different use-case scenarios or are being built for different purposes such as decentralisation of computer applications, internet, files, data. etc. We are living in the golden age of technology right now and the world is about to change as we know it. I'm not going to get into the other cryptocurrencies in this article as there are too many to list with great potential to reshape our society, but i hope you will do your own research into these as you have been introduced to blockchain technology.

Now, lastly, how do you invest in bitcoin you ask? You can buy it from other people directly, or through an exchange which is a company who facilitate trades between people for a fee, or simply buy the bitcoin themselves to sell at a premium.

Buying from a person directly for a agreed upon price is the best way to buy as there are no fees (only the transaction fee for moving the bitcoin from there wallet to yours). Of course this is not easy, and it involved having trust in both parties. Which as we have learned, is what bitcoin is trying to solve (trustless transactions). Currently there is a site called localbitcoins.com which facilities peer to peer trades with escrow. Escrow refers to having a 3rd party member helping facilitate the trade where that escrow agent receives the money from both parties, will only release it to the respected party. If one member fails to send the agreed upon amount, the other party loses what they sent. the site is localbitcoins.com. Only recommended for large purchases, but always check the exchange rate to see if buying it from an exchange is actually cheaper.

Using an exchange is a much simpler, user-friendly option to obtaining bitcoin and other cryptocurrencies. The most important thing to understand when using an exchange is it is centralised! So when you buy bitcoin from them, they create a wallet for you which they have control over. You own the bitcoin, but it is on there system, so if they get hacked or decide to go bankrupt. You lose your bitcoins You can prevent this buy buying bitcoin on an exchange, then immediately moving it to a wallet which is in your control. Just bare in mind the transaction fees.

Never leave a large sum of cryptocurrencies on an exchange, because you are risking your money if something were to happen to that exchange.

One of the wallets i recommend for new users is Exodus. It is user-friendly and easy to use. It also has a feature built-in which will allow you to trade directly within the app for other coins such as DASH, Litecoin, EOS, etc.
http://www.exodus.io/

For us Australians, there are afew exchanges i can recommend. Full disclosure, some of these links are affiliate links, where i will receive a small portion of the fees you accumulate for using there service. It would be great if you could use this links for my hard efforts in writing up this little guide.

Coinspot: https://www.coinspot.com.au?affiliate=E1K21
Coinspot is a great exchange which has a various amount of coins which you can buy directly with AUD. They allow bpay and poli deposits, and you can also sell your coins directly on there as well. They have higher fees than most for the convenience though. I wpuld recommend using them for smaller purchases or if you want to try buying some alternative coins.

Coinbase: https://www.coinbase.com/join/57cce42be8686524bd5577f6
Coinbase is an american-based company which allow you to purchase Bitcoin / Ethereum / Litecoin currently at the time of posting. They take credit card payments with a small fee. What is great about coinbase is they have an option for automatic regular purchases such as daily, weekly, or monthly. You can then Dollar Average your investment instead of spending all your money in one go, which i highly recommend for people getting into the scene. You can't sell your bitcoin here as an Australian yet, so you will have to send it to coinspot or another exchange, or sell it to someone looking to buy privately.

Binance: https://www.binance.com/?ref=10050358
This is a purely crypto exchange and doesn't allow you buy bitcoin. Rather you send your bitcoin (or other coins for that matter) to this exchange, then you can trade for all the other coins that they have available. This is a better option than buying a altcoin (alternative coin) directly from coinspot since the fees at coinspot are high. This is very advanced and will take a few hours/days to learn how to use, its a traditional market trading system with buy and sell orders. Not too complicated but definately a learning curve if you have never traded stocks/assets/commodities before.

There are too many exchanges to list, http://blockcoin.com.au/ is a great resource which shows you the current trading price on all the australian exchanges for BTC/AUD. I highly recommend joining at least 3 different exchanges and everytime you want to make a purchase, see which exchange is giving you a better rate.

Never leave a large sum of cryptocurrencies on an exchange, because you are risking your money if something were to happen to that exchange.

I am repeating this because this is very important. Bitcoin prices plummeted a few years ago when a large exchange called Mt.Gox was hacked and millions of customers bitcoins were stolen. Exodus is a great user-friendly wallet i highly recommend for keeping long term.

Thanks for reading. Let me quickly write some TLDR Pointers (To long didn't read)

  1. Bitcoin is a speculative investment.
  2. The only way you can lose it, is if you are careless and give out your private key (password), leave it on an exchange which gets hacked, or send it to a incorrect address, or literally lose your private key because you didn't write it down somewhere safe and your computer broke, etc.
  3. Never invest more than you are willing to lose.
  4. Be aware of scams (anything offering to invest your money for you generally is a scam)
  5. DYOR (Do your own research)

Any questions feel free to message me on facebook. Or better yet, you can sign up for an account here.
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