Money

What’s Cryptocurrency And Why Should I Care? A Guide For N00bs

Deena Drewis
6 min read
April 16, 2018
What’s Cryptocurrency And Why Should I Care? A Guide For N00bs

It was but a few short years ago that one had to personally know a 4chan user and/or techbro to bear witness to a conversation about Bitcoin. Established in 2009 by a yet-to-be-identified person who reportedly goes by the name of Satoshi Nakamoto, Bitcoin was the first decentralized digital currency to exist on a peer-to-peer network that’s secured by cryptography and recorded in a public ledger called a blockchain.

If that sentence made zero sense to you, here’s another way to put it: Bitcoin is a type of digital currency called “cryptocurrency,” which exists entirely online and outside the constraints of a centralized banking system (and thus largely outside the regulatory reach of the government—at least for the time being).

It’s secured by a virtually impenetrable system of very complex mathematical algorithms called cryptography (hence the “crypto” in “cryptocurrency”), and transactions are validated through “blockchain” technology—a series of virtual checkpoints that require no central oversight from actual people.

If this all strikes you as something anarchists and libertarians would be really into, you would be correct. But in recent years, the cryptocurrency craze has taken a hold of the technologically savvy and noobs alike; nowadays, you can’t get through a kombucha cocktail in hipstery-est of neighborhoods without catching an artsy-type talking enthusiastically about Ethereum, Ripple or one of the other many “alt” coins that are sure to become the next Bitcoin.

“If this all strikes you as something anarchists and libertarians would be really into, you would be correct.”

And the buzz isn’t unwarranted, of course. At its peak on December 17, 2017, Bitcoin was reported to have reached an all-time high of $19,783, with Nakamoto valued at nearly $20 billion and temporarily becoming the 44th richest person in the world. But considering the value of Bitcoin at the time of this writing is a little over $11,000, the drawbacks of cryptocurrency aren’t too difficult to parse out: It’s a wild ride out there.

An even more dramatic example is Ethereum, the second most valuable cryptocurrency, which was established by 21-year-old, Vitalik Buterin in 2015. While it’s currently valued at a little over $1,000, when a false report of Buterin’s death last year surfaced on 4chan, Ethereum was sent into a flail in which it lost $4 billion over the course of a day.

Still, despite the risks that come with investing money into a marketplace in which a new type of cryptocurrency emerges practically on a daily basis, advocates insist that it’s one of the greatest financial opportunities we’ll come across in our lifetimes. And this may be especially true for women.

It’s estimated that only 5 to 7 percent of cryptocurrency users are women, which isn’t all that surprising considering the significant lack of access women experience when it comes to financial education and resources. But because of the anonymous nature of crypto (and hence, a lack of opportunity for gender-based discrimination) and the premise that essentially anyone who wants to participate can, many see this as an unprecedented opportunity for women to close the investment gap.

“Jumping in now gives women a seat at the table and an opportunity to shape what the future of these two industries will look like.”

“Cryptocurrency brings together two predominantly male-dominated industries: finance and tech,” says Amy Karr, co-founder and CEO of cryptocurrency marketing firm Ventus Advisors. “Jumping in now gives women a seat at the table and an opportunity to shape what the future of these two industries will look like. Not since the internet boom has there been such a palpable moment of wealth creation and funding opportunity. And it’s really important that women benefit from that as much as men do.”

OK, but how does it actually work?

“Learning theoretically about cryptocurrency is easy, but in practice, it’s hard,” says Maxine Ryan, co-founder of Bitspark Limited, a crypto financial services provider. “There is a lot of groundwork one has to put in to navigate the ecosystem securely.”

Indeed, while outward appearances might make it seem like randos are simply throwing money at the internet, getting lucky, and reaping massive rewards, there’s more to it than that. For new users, Ryan recommends trying to recontextualize the system and figuring out how it relates to your daily life.

Perianne Boring, founder of crypto advocacy group the Digital Chamber of Commerce and adjust professor on blockchain at Georgetown University, explains it thusly:

You start by signing up for an exchange, i.e. Bitcoin, Ethereum, Ripple and any number of lesser-known coins. From there, she says, “Your public address is your digital wallet. It’s public, meaning anyone can see it, kind of similar to your email address or the physical address to your office or your home.”

“If you receive a letter or an email, someone would have to push that letter or message into your mailbox or your email inbox, or in this case, your Bitcoin wallet. But in order to open up the wallet or the mailbox, you need a private key.”

The key she is referring to is one of the primary distinguishing aspects of cryptocurrency: It’s so secure that if you are to ever lose your key, you’re SOL; there’s virtually no way to retrieve it, which is a great thing in terms of security, and a bad thing if you wrote your key down on a little slip of paper, stuck it in your pocket, and sent those jeans through the wash.

Additionally, as any cryptocurrency skeptic will tell you, because of the boom and its lack of central oversight, separating legit exchanges from the bogus ones can be tricky—especially because many are hosted overseas and conduct business in another language.

There’s then the added complications of choosing to handle transactions on your own, or entrusting a third party to handle your storage for you—all the while keeping in mind that if your password is ever lost, well, so is your money.

But Boring, whose organization is actively addressing policy issues and the ways in which cryptocurrency can and cannot interact with the existing financial systems we have in place, has high hopes and a of measure skepticism when it comes to the naysayers:

“We’re at the very beginning of a brand new asset class that has enormous potential to transfer wealth,” she says. She views much of the criticism and doubt as “coming from those who don’t want to be disrupted or from those who have incumbent systems that can be displaced by distributed ledger technology. Bitcoin’s actually better described as the pin and not the bubble.”

“I highly suggest joining a group like L<3ve Coin or Ladies of Crypto on Facebook.”

Still, advocates stress the importance of education and actively engaging with the community in order to ensure you’re tapping into collective knowledge. “I highly suggest joining a group like L<3ve Coin or Ladies of Crypto on Facebook,” says Karr. “These are great, friendly communities where you can ask questions, learn from others, and follow the latest news.

“It comes down to taking charge of your financial future,” adds Kelsey Matheson-McCord, advisor at new, user-friendly cryptocurrency startup The Divi Project. “We have life insurance, we save for our children’s education, we contribute to a 401(k). So getting involved in cryptocurrency is no different and should be a part of a diversified portfolio.”

But perhaps more importantly, advocates are adamant that there’s a bigger picture beyond whether your Dogecoin takes off or you start really killing it on Cryptokitties.

“A lot of coins coming out have incredible tech behind them that will dramatically impact the lives of people around the world,” says Karr. “There are many outdated, broken and vulnerable systems that our economies rely on, and I think a lot of people aren’t aware of the positive impact these technologies will have on that.”