September 11 - Stephanie Tan
With crypto mania sweeping the world, governments have struggled to regulate them. What are the major reasons governments tend to loathe cryptocurrencies?
Cryptocurrency exchanges are off the hook these days! In fact, a huge and growing interest in cryptocurrencies have even overwhelmed the websites of some major exchanges recently. It seems they’re finally selling out and going mainstream, just like Matthew McConnaughey in his rom-com period.
Eight years ago, terms like cryptocurrency did what it said on the tin. Remain cryptic! Only those in the shady world of ‘dark web’, buying and selling everything from drugs to assassins, knew what a cryptocurrency is. Now, companies from Lamborghini to Microsoft are starting to accept them. Heck, even granddads are buying cryptocurrencies, like bitcoin, for their pension.
It’s about time you got the lowdown on cryptocurrencies, their exchanges and how the whole shebang works! So let’s start decrypting…
That’s the spirit!
Simply put, a cryptocurrency is a virtual currency that acts the same as any other currency. You can use it to buy and sell stuff. However, the key difference between it and a traditional currency is the fact it uses cryptography for its security, making it decentralised and less susceptible to fraud or hacking.
Interestingly, the birth of cryptocurrencies was a mistake. The first ever cryptocurrency was bitcoin, invented by Satoshi Nakamoto in 2008. His (or their – no one knows whether Satoshi is an individual or a collective) plan was to create a “peer-to-peer electronic cash system”. Its uniqueness was the fact it ran by itself without the need for a central bank like the US Federal Reserve. (You can see why they’re not so keen on the idea!).
If you think about the money in your bank account, it’s basically a database of entries (buying, selling, transferring, etc.) that can only happen under specific conditions like making a transaction. Enter blockchain technology. Blockchain is a method of recording such data and effectively acts as a digital ledger of transactions, contracts, agreements, etc. This is the technology cryptocurrencies, like bitcoin, use.
Basically, all the digital records are put together in one block and then bound together cryptographically using complex mathematical algorithms. Computers mine this data to help balance the books and create more blocks. It doesn’t store any details of transactions but just the fact a transaction happened. The beauty is, it can’t be hacked or tampered with, and it’s shared publicly with everyone on the same network.
Did someone just buy a Lamborghini in those lines?
Bitcoin is by far the leader of the cryptocurrency pack. In fact, if you bought bitcoin seven years ago with just $100, that would now be worth more than $70 million. You can see why other players are entering the market! These other players are known as ‘altcoins’. They market themselves as improved versions of bitcoin but rely on the same blockchain technology.
There are more than 700 altcoins and the pool is growing. The major altcoins trying to catch up with bitcoin include Ethereum, Ripple and Litecoin. As it currently stands, bitcoin leads the pack with a market cap of around $45 billion. However, bitcoin also has the additional benefit of being recognised as an official form of currency in Japan. So it’s quite likely here to stick around but the growing competition makes it that much more volatile to trade.
(Check out All You Need To Know About Bitcoin Trading)
Is this the guy who bought bitcoin at $100?
To buy, sell and transact in cryptocurrencies, like bitcoin, you need to go to a cryptocurrency exchange and open up a bitcoin wallet. Basically, the wallet acts as your bank account and stores all your bitcoins in there. There are quite a few different options depending on the level of security you want, and believe me, you want it to be as secure as possible.
After all, it was only in February 2014 that Mt. Gox, one of the world’s largest bitcoin exchanges in Tokyo that handled over 70% of worldwide transactions, filed for bankruptcy. That’s right, the company announced that 850,000 bitcoins had been stolen. That amounted to $450 million! Ouch.
Whilst the actual blockchain technology is super secure, cryptocurrency exchanges come with their own risks. Just like some hackers can get to your money in your normal high street bank account, the same goes for these cryptocurrency exchanges – so do your homework. But it can still be quite a task to go through the stages of researching the best exchanges, opening up a bitcoin address, getting the right wallet and so on. Is there a far easier and safer way to go about it? HELL YEAH!
Avoid those hackers!
You could own virtual bitcoins in a wallet whose value could implode at any time. But if you don’t have the capital to invest or if you’re afraid to take on the risk, you can always trade bitcoin. And it’s much safer and easier to trade the changes in bitcoin prices through the BUX app.
At least that way, you know your money is kept separate from company assets (so no one gets too excited with after-work drinks on the company card!). And, unlike bitcoin exchanges, at least BUX is regulated by the UK’s Financial Conduct Authority. Of course, trading can be risky anyway, so you should never trade with more than you can afford to lose. (Though with BUX, you’ll never lose more than the amount you’ve invested in a trade.)
Let’s not forget that cryptocurrency exchanges are susceptible to being robbed and hacked, so you stand to lose everything. In the unlikely event that BUX went under, then the British Financial Services Compensation Scheme (FSCS) will cover clients up to £50,000. That’s a decent safety net, right? Learn more about BUX’s Responsible & Safe Trading.
So what are you waiting for? Start a free demo account with BUX now! Nothing cryptic here, just good old-fashioned fun and safe trading.
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