With the ever growing conversation surrounding cryptocurrencies and DeFi (Decentralized Finance), it could be overwhelming to jump right into the mayhem. Besides, why should I care? It's not like I'm being benefited from knowing all of this information. That's probably what most people are thinking right now. The amount of information is daunting, for sure, but if you're reading this I'm assuming you want to understand what the fuss is all about.
This blog post won't be explaining the nitty-gritty and the technical side of cryptocurrencies. Although, if you want that, there are many resources available online for that. Instead, I want to write this blog post with the intention of informing you of what's possible. Without further ado, let's jump into it.
The Why: The Flaws of Money, And How Bitcoin Aims To Fix It
To understand the what, you must first understand the why. Mainly, why it was made in the first place. For that we have to look at human history. At first, humans are all bound by a system called bartering. While it is good, they soon realize that it's very inconvenient to barter all the time. Not only that, it's also hard to set a value of something. Since it's all relative to how important the thing traded is. Say if you really need herbs to cure your sick daughter, and you go to me and I see that you have 2 cows.
Of course it leads a room for me to make use of your dire situation and make you trade your cows for a herb. Since you're in dire need for herbs for your sick daughter. So then came gold. It was shiny, it was small, and more importantly it has a value that everyone could agree on. But as time progress, people realize that it's inconvenient to carry gold everywhere to make purchases. Since it's heavy, it proves to be bothersome too for merchants to go across kingdoms carrying gold.
Not to mention, back then, time isn't as peaceful and regulated as now. With the prominent grow of bandits, it is risky for people to carry gold for trades if they are not rich enough to hire henchmen. Then came paper money made by the Chinese. On paper (no pun intended), it sounded good. It's light, easy to carry, has a set value that people agree upon. But it has one flaw, while it has a value that society of said country or kingdom can agree upon, those value are inflationary. Simply because, you can print more of them.
Unlimited supply means that the value of money will gradually decrease over time. And I don't need to tell you that it's a bad thing. In 2020 alone, the US printed 1/5th of their federal reserve that year alone. It's insane. Money seems to be getting more and more worthless as time goes on.
The How: How Cryptocurrency Can Be Your Life Raft
To explain the different types of cryptocurrencies here could prove to be difficult. As there are too many of them. Some have great potential value, and some are just... let's just say for the lack of a better word, they're called shitcoins for a reason. And for that, let's focus on Bitcoin, the thing that everyone is talking about these days. Seems like you can't go on social media these days without seeing at least one person talking about Bitcoin.
So what makes Bitcoin oh so special? It's deflationary. Because of it's limited value (21 million coin, to be exact) circulating on planet earth, Bitcoin becomes more and more scares as the day passes. Making the value of Bitcoin shoots up. You simply cannot print another Bitcoin. Now I would like to explain about the blockchain and how the decentralized finance actually work on a technical scale, but that's for another day. For now, let's focus on what's important: Bitcoin and cryptocurrencies can be your life raft amidst this chaos that is inflation.
Do you want to join the raft and get saved, or do you want to sink with the ship? Your call.
The What: What Should You Do With This Knowledge?
I kinda have to preface this with the fact that this is not financial advice. I'm not your mom, do what you think is best for you.
But if you were to ask me, I'll just say I'll HODL (Hold On for Dear Life) Bitcoins. It's simple really, just hold it for the next 10 years or so, and if you're feeling a little bit more adventurous, you can invest in other Altcoins. Remember, do your own research. Due diligence is important. Why? Well because if you don't know what you're investing at, then even the tiniest drops in price will tempt you to sell. And that's not how the way to go.
Remember, this is still the early phase of cryptocurrencies. Expect a huge amounts of volatility. Like, huge. Well, it won't be as volatile as 2011, but it's still very much dang volatile. And be wary of scam coins out there. Stick to the top 20. If you're feeling a bit bold, top 100.
Remember, not financial advice tho. YOLO all your money for all I care.
Conclusion? Relax
We're still early on this, just sit back and enjoy the ride. Be patient. Rome wasn't built in a day.
