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Is this you?
You’ve probably heard a lot about cryptocurrency over the past few years and wondered what all the buzz is about. If so, you’re not alone. Many people are curious about this relatively new digital asset class. Yet, some are reluctant to venture into investing into cryptocurrency for fear of losing money because it’s a new financial frontier, and they worry it may not be safe and secure. Others are interested in dipping their toe in the bitcoin pond but just don’t know where to start.
Uncharted Territory Can Be Intimidating
It may feel like uncharted territory to people who have invested their savings in more traditional asset classes like stocks and bonds, and real estate. Perhaps, their financial advisors have warned them away from getting involved with bitcoin and other cryptocurrencies, as well. But, in spite of feeling tentative, they don’t want to miss out on opportunities that could further diversify their portfolios or add a new asset class poised for explosive growth. What’s more, as large, venerable financial institutions announce ways to invest in bitcoin through ETFs, their interest is further piqued.
Knowledge is Empowering
If this sounds like you, let’s demystify bitcoin and put your reservations to rest. We suggest building a knowledge foundation so you feel confident making informed decisions about buying bitcoin as an asset class. Here are some ways to get started:
First, check out our CEO Jim Fox’s blog posts. As a keen observer of bitcoin since 2011, following its adoption and development as a popular digital currency, Jim has unique insights into the current events and news on the bitcoin economy. They’re a quick read, conversational in tone, very approachable in non-tech speak, and feature the latest news, events, personalities, and trends in bitcoin.
Check out the links below. Spend a few minutes reading these helpful, curated articles that provide a good foundation for understanding the basics of bitcoin and the blockchain. We'll continually add to this list, so check back often for more updates.
The Cliff Notes
If you’re ready to dive in, but want a quick primer first, start here with a brief overview of bitcoin history and review our Q&A with a glossary of terms used to describe the bitcoin economy.
What is cryptocurrency?
A digital currency in which transactions are verified and records maintained by a decentralized system using cryptography, rather than by a centralized authority. The origin story is from a white paper published by a person or group with the pseudonym of Satoshi Nakomoto. The original white paper can be found here https://bitcoin.org/bitcoin.pdf.
A key aspect of cryptocurrency is a triple ledger system that prevents double-spending. Currently, there are two types of cryptocurrencies: Proof of Work (PoW) and Proof of Stake (PoS)
Proof of Work (PoW) is a decentralized consensus mechanism that requires members of a network to expend effort solving an arbitrary mathematical puzzle to prevent anybody from gaming the system.
With proof-of-stake (PoS), cryptocurrency owners validate block transactions based on the number of coins a validator stakes.
Proof of work is best for storing and transmitting wealth while in some cases proof of stake is better for massive volume in transactions.
What is the blockchain?
A blockchain is a distributed database that is shared among the nodes of a computer network. As a database, a blockchain stores information electronically in digital format. Blockchains are best known for their crucial role in cryptocurrency systems, such as Bitcoin, for maintaining a secure and decentralized record of transactions. The innovation in blockchain is that it guarantees the fidelity and security of a record of data and generates trust without the need for a trusted third party.
One key difference between a typical database and a blockchain is how the data is structured. A blockchain collects information together in groups, known as blocks, that hold sets of information. Blocks have certain storage capacities and, when filled, are closed and linked to the previously filled block, forming a chain of data known as the blockchain. All new information that follows that freshly added block is compiled into a newly formed block that will then also be added to the chain once filled
Why are there so many kinds of cryptocurrency?
Many reasons. As one example some cryptocurrencies are considered better for certain utilities or tasks than others. For example, Bitcoin may be considered best for storing and transferring wealth and as a medium of exchange for certain goods and services. While other crypto currencies such as Ethereum and Solano may be better for smart contract transactions such as those used in NFTs and Defi.
Other crypto currencies are part of an ICO (initial coin offering) which is the cryptocurrency industry's equivalent to an initial public offering (IPO). A company seeking to raise money to create a new coin, app, or service may launch an ICO as a way to raise funds.
What is an exchange?
An exchange is a third-party marketplace where cryptocurrency holders may buy, sell or trade cryptocurrencies or exchange for fiat currency. There are two types of exchanges: central exchanges (most popular) and peer-to-peer exchanges.
In a centralized exchange, the cryptocurrency holder must give custody of the cryptocurrency to the exchange which could be vulnerable to traditional hacker attacks either on the exchange or on a user's device.
In a peer-to-peer exchange, the user maintains custody of the cryptocurrency until the transaction is complete by transferring the custody (sending the cryptocurrency directly). Peer-to-peer exchanges may give an extra level of anonymity and control of cryptocurrency however trade is made in not fully knowing the trustworthiness on the other end of the exchange.
What is a cold wallet?
A cold wallet is offline cryptocurrency storage. Any crypto wallet that's not always connected to the internet is considered cold storage and is referred to as a cold wallet. The most common type of cold wallet is a hardware wallet, which is typically a small device that connects to a computer. Because it's offline, cold storage offers excellent security for Bitcoin and other cryptocurrencies. Even if the cold storage wallet device is lost or stolen a cryptocurrency holder may regain access to his or her cryptocurrency by using a seed phrase to recover custody on the blockchain.
What does self-custody mean?
Self-custody is a means of holding your digital assets by which only you have access to them. This means that you choose not to use a third party, and instead will manage your private key personally.
What is DeFi?
Decentralized finance (DeFi) offers financial instruments without relying on intermediaries such as brokerages, exchanges, or banks by using smart contracts on a blockchain.
What are NFTs?
A non-fungible token is a non-interchangeable unit of data stored on a blockchain, a form of digital ledger, that can be sold and traded. Types of NFT data units may be associated with digital files such as photos, videos, and audio.
Let's dive into a quick history
BTC was launched on the first blockchain called Genesis on January 3, 2009, as a hedge against the great recession when the mortgage securities scam hit financial markets, and there was a growing distrust among consumers of banks. Having been at the forefront as an early pioneer, bitcoin set the bar for thousands of other cryptocurrencies that have followed. Today, bitcoin is the world's most popular cryptocurrency. This exuberant enthusiasm among the bitcoin community is due to the rapid developments that have been made since its inception. The result is a growing optimism among financial experts, individual investors, and businesses for the myriad opportunities BTC holds for the future.