December 6, 2023

How “Crypto” Currencies Work: A Short Overview of Bitcoin, Ethereum and Ripple

“Crypto”, or “crypto currencies”, is a type software system that provides transactional functionality through the Internet. Their decentralized nature is the most important aspect of the system – usually provided by the Blockchain data system.

The global zeitgeist has been dominated by blockchain and “crypto currencies”. This is often due to the “price” of Bitcoin’s skyrocketing. As the demand for Bitcoin soared, this has led to millions of people participating in the market. Many of the “Bitcoin Exchanges” have been subjected to massive infrastructure stress.

It is important to understand that “crypto” serves a purpose, namely cross-border transactions via the Internet. However, it does not offer any financial benefits. Its “intrinsic” value is primarily limited to the ability of transacting with other people, and NOT in the storage / dissemination of value (which most people think it is).

It is important to remember that “Bitcoin”, “Bitcoin”, and similar are payment network, not “currencies”. This will be discussed in more detail in the second. The most important thing you need to understand is that “getting wealthy” with BTC does not mean giving people better economic standing. It’s simply buying the “coins at a low price and then selling them higher.

This is why you should first understand “crypto” and its “value”.

Decentralized payment networks…

The key point to remember about Crypto is that it’s primarily a decentralized payments network. Imagine Visa/Mastercard with no central processing system.

This is crucial because it reveals the true reason people are really starting to look into the “Bitcoin” proposition. It allows you to send/receive money anywhere in the world as long as you have your Bitcoin wallet address.

This is due to the belief that “Bitcoin”, a “crypto” currency, will somehow allow you to make money. It doesn’t.

The ONLY method that people have made money with Bitcoin is through the “rise” of its price. This means that they buy the “coins”, and then sell them at a much higher price. While it worked well for many, it was based on the “greater foolish theory”, which basically states that if you “sell” the coins it is to someone “greater than you.”

If you are looking to invest in the “crypto” market today, this means you will be looking to buy any “coin” (even “alt”) and ride their price rises until they are sold off. There is no way to predict when or if any of the “coins”, as none are backed by real assets.

Future growth

For all intents-and-purposes, “Bitcoin” is a spent force.

The December 2017 rally was a sign of mass adoption. While its price is likely to rise into the $20,000+ range, it will be very difficult to buy one of these coins today.

Smart money is already taking a look at most of the “alt” coins (Ethereum/Ripple, etc.) that have a low price but are growing in adoption and price. What is most important in the “crypto” world today is how the different “platform” systems are being used.