#BounceExclusive: 4 Things To Know About Investing In Cryptocurrencies
The world is going digital and so is money.
Unlike the naira, dollar, euro and pounds that you and I know, there is another type of money becoming more popular - cryptocurrency.
What is Cryptocurrency?
“It is a digital currency (money) designed as a means of exchange but uses secure communication to protect the money and to control how much money is printed,” said a cryptocurrency trader, Kehinde Adebayo in a chat with Bounce News.
All over the world, cryptocurrency is garnering a lot of attention.
Financial experts believe so much in its potential that a Professor of Finance at the New York University Stern School of Business, Aswath Damodaran told CNBC this week that cryptocurrency will soon replace gold.
Strangely, this seemingly obscure form of currency trading is also becoming quite popular in Nigeria.
Kehinde told Bounce News that "the most popular in Nigeria is BitCoin and another supposed crypto called TBC."
So, in this article will explore cryptocurrencies - identifying the pros, the cons and how to invest.
4 things you need to know about cryptocurrencies.
1. The First Cryptocurrency – Bitcoin Launched In 2009.
Bitcoin introduced the idea of using cryptography to create a highly secure way of trading purely digital funds on the internet.
It has a system that limits the number of Bitcoins that can ultimately exist, thereby circumventing inflation in a way not possible with other forms of currencies.
So, with BitCoin, you are assured that inflation will not consume the value of your money.
But since 2009, other forms of cryptocurrencies have arrived. These include: TBC, Ethereum, Monero, Ripples, LiteCoin, INNCoin, IndependenceCoin, Peercoin, Darkcoin and Namecoin.
But even with these newcomers, Bitcoin remains king (at least for now).
2. You Can Actually Use Them to Buy Lots of Things: Like real naira and dollar, you can spend BitCoin to buy select items from shops.
“Apart from some places like Iceland and China, cryptocurrencies are legal all over the world. But not surprisingly, businesses that accept cryptocurrencies tend to be businesses with strong ties to the internet,” writes Jordan Minor in Paste Magazine.
These include companies such as Amazon, eBay, PayPal, WordPress, and even Apple’s App Store and online travel giant, Expedia.
In fact, computer hardware maker, Dell announced 2 years ago that they would be accepting Bitcoin, making them the largest company to tow the adventure.
However, in Nigeria, the Central Bank of Nigeria has warned Nigerians and commercial banks to stay away from BitCoin and other digital currencies.
In a circular to commercial banks this year, the apex bank said such digital currencies are susceptible to abuse since it has unknown origin and could be used for money laundering or to finance terrorism.
3. Cryptocurrencies Are Still Kind of Unstable: Naira, Dollar, Pounds, they all crash. And so, does BitCoin.
Initially people thought it could not but it did.
Although it is free from central bank controls and interventions, it is not free from global market forces. That is why its value fluctuates.
So, it is still subject to risks of volatility that bedevils the foreign exchange market – a very important factor to consider when investing.
4. No One Knows For Sure Who Made Bitcoin:
Bitcoin was first proposed in a 2008 research paper by someone named Satoshi Nakamoto.
By 2009, it has come into prominence as a medium of exchange. However, no one has yet been able to track down and fully confirm whether or not Nakamoto is even a real person.
And as Bitcoin’s fame rises, its mysterious creator has become something like an internet folk legend.
Are you still interested in investing?