Cryptocurrency for Novices
Several thousand bitcoins were used to purchase a pizza in the early days of its introduction in 2009. Since then, the cryptocurrency’s rapid surge to US$65,000 in April 2021, following a heart-stopping 70 percent plunge in mid-2018 to roughly US$6,000, has baffled many people – cryptocurrency investors, traders, or simply the plain inquisitive who missed the boat.
How it all started
Remember that unhappiness with the current banking system prompted the invention of digital currency. Satoshi Nakamoto, a pseudonym presumably used by a developer or group of developers, created this cryptocurrency using blockchain technology.
Notwithstanding the many opinions predicting the death of cryptocurrency, bitcoin’s performance has inspired many other digital currencies, especially in recent years. The success with crowdfunding brought on by the blockchain fever also attracted those out to scam the unsuspecting public and this has come to the attention of regulators.
Beyond bitcoin
Bitcoin has inspired the launching of many other digital currencies, There are currently more than 1,000 versions of digital coins or tokens. Not all of them are the same and their values vary greatly, as do their liquidity.
Coins, altcoins and tokens
It would suffice at this point to say there are fine distinctions between coins, altcoins and tokens. Altcoins or alternative coins generally describes other than the pioneering bitcoin, although altcoins like ethereum, litecoin, ripple, dogecoin and dash are regarded as in the ‘main’ category of coins, meaning they are traded in more cryptocurrency exchanges.
Coins serve as a currency or store of value whereas tokens offer asset or utility uses, an example being a blockchain service for supply chain management to validate and track wine products from winery to the consumer.
A point to note is that tokens or coins with low value offer upside opportunities but do not expect similar meteoric increases like bitcoin. Put simply, the lesser known tokens may be easy to buy but may be difficult to sell.
Before getting into a cryptocurrency, start by studying the value proposition and technological considerations viz-a-viz the commercial strategies outlined in the white paper accompanying each initial coin offering or ICO.
