Cryptocurrency for beginners
In the early days of its launch in 2009, several thousand bitcoins were used to buy a pizza. Since then, the cryptocurrency’s meteoric rise to US$65, 000 in April 2021, after its heart-stopping drop in mid-2018 by about 70 percent to around US$6, 000, boggles the mind of many people – uniswap cyptocurrency investors, traders or just the plain curious who missed the boat.
How it all began
Bear in mind that dissatisfaction with the current financial system gave rise to the development of the digital currency. The development of this cryptocurrency is based on blockchain technology by Satoshi Nakamoto, a pseudonym apparently used by a developer or group of developers.
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.
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.
For those familiar with stocks and shares, it is not unlike initial public offering or IPO. However, IPOs are issued by companies with tangible assets and a business track record. It is all done within a regulated environment. On the other hand, an ICO is based purely on an idea proposed in a white paper by a business – yet to be in operation and without assets – that is looking for funds to start up.