Menu #24: Why everyone’s talking about cryptocurrency and how to understand it

STATS STACK 🥞

12.1 million dollars is what the Celtics will receive after winning the NBA finals last night. They also will receive a bonus for having the league’s best regular-season record, which will amount to $804,000 per player (Source: Fast Company).

87% was the net worth growth for the bottom 50% from 2020 to 2023. Despite starting from a much smaller base, the net worth of the bottom 50% increased significantly, reversing some of the losses from the Great Financial Crisis. This growth indicates a notable improvement in the financial position of the lower half of the wealth spectrum (Source: WSJ).

28 million is the projected number of users in the cryptocurrency market by 2028, with a user penetration rate anticipated from 18.78% in 2024 to 22.20% by 2028. Globally, the crypto market capitalization has surpassed $2.5 trillion, including Bitcoin reaching all-time highs earlier this year. (Source: Tech Report).

DEEP DISH 🍕

Why everyone’s talking about cryptocurrency and how to understand it

This week, we’d like to discuss a topic that's been making waves in the financial world—cryptocurrency. It's a subject that has everyone talking, from seasoned investors to curious newcomers. From Bitcoin to Ethereum, these digital coins have captured the imagination of many. Let’s dive in together, simplify the jargon, and explore why these cryptocurrencies are so fascinating and sometimes a bit daunting.

Understanding cryptocurrency

So, what’s cryptocurrency, you ask? Think of it as digital money. Unlike the cash in your wallet or the balance in your bank account, cryptocurrencies aren’t controlled by any government or bank. They use a technology called cryptography to keep transactions secure and private, making each digital coin unique and tough to fake.

How cryptocurrency works

Cryptocurrencies run on something called blockchain technology. Imagine a giant digital ledger that records every transaction made with these coins. This ledger is spread across a network of computers, making it transparent and secure. No middlemen are needed, so transactions can be direct and often faster.

Blockchain: The backbone

Blockchain is like a public notebook that everyone can see but no one can alter. Every time you make a transaction, it gets recorded in this notebook. This ensures that all transactions are transparent and secure, building trust in the system.

Earning cryptocurrency

There are a couple of ways to get your hands on some cryptocurrency: mining and staking. Mining, which is how Bitcoin is earned, involves solving complex math problems with powerful computers. Staking, used by Ethereum, involves holding onto some of your crypto to help maintain the network and earn rewards in return.

Major cryptocurrencies

Bitcoin: The original and most famous cryptocurrency. It’s like the digital gold of the crypto world.

Ethereum: Known for its smart contracts, it powers many decentralized applications and those cool NFTs everyone’s talking about.

Buying and storing cryptocurrency

You can buy cryptocurrencies on exchanges like Coinbase. After you buy, you’ll need a digital wallet to store your coins safely. Think of this wallet as a secure digital vault for your crypto.

The ups and downs of cryptocurrency

Cryptocurrency has some pretty exciting perks. It’s a global currency, so you can easily make international transactions. Plus, it’s fueling a lot of innovation in the financial world. But, it’s not all sunshine and rainbows. Cryptocurrencies can be very volatile and, since they aren’t regulated like traditional money, they can be targets for theft.

Pros:

• Privacy: Transactions can be quite anonymous.

• Global Reach: Great for sending money across borders quickly.

• Innovation: The crypto space is full of new ideas and technologies.

Cons:

• Volatility: Prices can go up and down like a rollercoaster.

• Security Risks: There’s a risk of hacks, and if your crypto is stolen, it’s tough to get it back.

• Regulatory Uncertainty: Governments are still figuring out how to regulate cryptocurrencies, which can affect their stability.

Cryptocurrency is an exciting and ever-changing, with a mix of big opportunities and risks. If you’re thinking about diving into crypto, make sure to do your homework. Understand the basics and stay updated on the latest news.

SWEET LINKS 🍰
Digital bites we think you’ll like

Pay me in Bitcoin — NFL player Russell Okung made headlines when he chose to receive half of his 2020 salary in Bitcoin, a first for North American sports. This move, which inspired other athletes, stemmed from his belief in the flaws of the fiat currency system. Now, let's see how much Okung's Bitcoin stake could be worth today.

Bitcoin nation — Nayib Bukele's re-election as El Salvador's President, with over 85% of the votes, is a strong endorsement of his leadership and policies, including the adoption of Bitcoin as legal tender. His first term featured bold economic reforms, notably integrating Bitcoin into the national economy despite international skepticism. This victory signals continued support for Bukele's unconventional approach. As he begins his second term, Bukele aims to further establish El Salvador as a leader in Bitcoin adoption.

The future of money? — Digital currency is transforming how we think about money, existing exclusively in electronic form and never becoming physical cash. Bitcoin, Ethereum, and thousands of other cryptocurrencies have prompted global central banks to explore national digital currencies. Unlike electronic currency in bank accounts, digital currency only exists within computer networks and is exchanged digitally. There are three main types of digital currency: cryptocurrency, stablecoins, and central bank digital currencies (CBDCs), with blockchain technology being a common foundation.