“Crypto” – or “cryptocurrencies” – are a type of software system that provides transactional functionality to users via the Internet. The most important feature of the system is their decentralized nature – usually provided by blockchain database system.
Blockchain and “crypto-currencies” have recently become staples of the global zeitgeist; usually as a result of the “price” of Bitcoin skyrocketing. This caused millions of people to participate in the market, with many of the “Bitcoin exchanges” experiencing massive infrastructure stress as demand soared.
The most important point to understand about “crypto” is that although it actually serves a purpose (cross-border transactions over the Internet), it does not provide any other financial benefit. In other words, its “intrinsic value” is firmly limited to the ability to transact with other people; NOT in storing/distributing value (as most people see it).
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The most important thing to realize is that “Bitcoin” and the like are payment networks – NOT “currencies”. This will be covered in more depth in a second; the most important thing to realize is that getting “rich” with BTC is not a case of making people better off economically – it’s simply the process of being able to buy “coins” at a low price and sell them higher.
To that end, when looking at “crypto” you must first understand how it actually works and where its “value” really lies…
Decentralized Payment Networks…
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As mentioned, the key thing to remember about “Crypto” is that it is mostly a decentralized payment network. Think Visa/Mastercard without the central processing system.
This is important because it highlights the real reason why people have really started to look more deeply at the Bitcoin proposition; gives you the ability to send/receive money from anyone in the world as long as they have your bitcoin wallet address.
The reason this assigns a “price” to the various “coins” is because of the misconception that “Bitcoin” will somehow enable you to make money by virtue of being a “crypto” asset. It doesn’t work.
The ONLY The way people make money with Bitcoin is because of “spiking” its price – buying the “coins” at a low price and selling them at a MUCH higher price. While it worked out well for a lot of people, it was actually based on the “bigger fool theory” – essentially stating that if you manage to “sell” the coins, it’s to a “bigger fool” than you.
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This means that if you’re looking to get into the “crypto” space today, you’re basically looking to buy any of the “coins” (even “alt” coins) that are cheap (or cheap) and run them as the price goes up. until you sell them off later. Since none of the “coins” are backed by real-world assets, there’s no way to tell when/if/how this will work.
For all intents and purposes “Bitcoin” is spent power.
The epic rally of December 2017 showed mass acceptance, and while its price will likely continue to rise to the $20,000+ range, buying one of the coins today will basically be a big risk that this will happen.
The smart money is already looking at the majority of “alt” coins (Ethereum/Ripple, etc.) which have a relatively low cost but are constantly growing in price and adoption. The key thing to look at in the modern “crypto” space is how the various “platform” systems are actually used.
Such is the rapidly evolving “tech” space; Ethereum & Ripple look like the next “Bitcoin” – with a focus on how they are able to provide users with the ability to actually use “decentralized applications” (DApps) on their main networks to get functionality to work.
This means that if you’re looking for the next level of “crypto” growth, it will almost certainly come from the various platforms you can identify out there.
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