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Joining the craze is only becoming easier. App like RobinHood and exchanges like CoinBase invest in bitcoins, ether and a dizzying number of other simple digital currencies like point and click. Even banks and intermediaries are cash out.
Although some people get rich, many others do not. This is because cryptocurrencies are so volatile that a chart of their value looks like a copy of ECG. Bitcoin prices rose above 2000% in 2017 to $ 20,000, but had fallen by over 50% in early 2018. For much of September, bitcoin was trading at just over $ 6,000.
The nature of the roller coaster comes from sudden changes in the perceived value of a given cryptocurrency. Although their prices are, like traditional stocks, determined by supply and demand, even the hype plays a role. News coverage can also affect prices. Any mention of someone who has hacked a cryptocurrency trade puts prices in crisis, for example, while even the voice of greater regulation reassures investors and raises prices.
Adding to uncertainty, space is largely unregulated and bad actors abound. While companies face many regulatory barriers before an initial public offering, the launch of a first coin offering is much easier as space is so unregulated. This makes it easy to place unfortunate investments in ill-conceived or dubious companies that have not been subject to control, nor are they required to meet any financial, accounting or ethical standards. This leads some people to argue that nobody really invests in cryptocurrencies, but merely speculates on them.
"Their only value is in the belief that someone will pay more in the future," says Nicholas Weaver, senior researcher at the International Computer Science Institute.
None of this leaves people less eager to bet on bitcoins and their gender. But anyone who thinks to do it should think twice. And maybe think twice again.
Are you still interested in trading? Here are some things you need to know.
So, what is the cryptocurrency, anyway?
Cryptocurrency is essentially digital money exchanged from one person to another through the use of pseudonyms. There are no intermediaries like banks, no supervision or governmental authority and no commission. Cryptocurrency "encryption" refers to the use of cryptography to ensure the security and privacy of every transaction.
The new coins are created through a technique called mining. The process requires powerful computers that solve complex mathematical problems. Each problem should take about 10 minutes to resolve and involves creating a predetermined number of coins. The total number of coins that can be created is fixed: there is a limit of 21 million bitcoins that can be created. The number of coins awarded to solve each problem decreases over time.
Bitcoin was the first and most popular digital currency, but you can choose from over 1,500, including ether, litecoin and even criptokitti. For a while, you saw these currencies only in the darkest corners of the Internet, where people used them for all sorts of questionable, even illegal activities. Drug traffickers liked them because they made transactions almost invisible, while trolls from the Kremlin-supported Internet Research Agency used bitcoins to finance their campaign to influence the 2016 election.
One of the biggest misconceptions about cryptocurrencies is that you need thousands of dollars to invest. It's an easy hiring to make, especially in the case of bitcoin, which has remained below $ 1,000 from 2010 to 2017. But then it took off, surpassing the milestone of thousands of dollars at a pace that seemed faster than the one that we could update the phone.
The staggering value is daunting for many. But unlike most actions, you can buy a fraction of a bitcoin so you do not need thousands to enter the crypto game.
And so is this blockchain I keep talking about?
Blockchain is the basic technology that makes everything work. It is a sort of public and digital book of transactions. An analogy could help.
Think about when people used a checkbook to track purchases and payments. Now he extrapolates that to include countless transactions by millions of people and imagines that copies of the registry are held by thousands of computers. Each computer must verify a transaction before it can be recorded in the registry. Once verified, a transaction is written with permanent ink and can not be deleted. When the log is full, a new checkbook is started and tapped on the first. In the end there is a chain of registers.
This is essentially what is a blockchain. And every transaction is pseudonym, making cryptocurrency an ideal option for people looking to trade privately.
I want to enter. How can I start?
You will need two things to start encrypting: an exchange and a wallet.
An exchange is what you need to convert your local currency, like the US dollar, into a crypt. Think of it as the NYSE, where cash is converted into stocks or other securities. A wallet is where you store your cryptography and it is what allows you to send and receive crypto.
There are two main types of portfolios: software and hardware. Software portfolios are executed on an app or on a device and are useful if you want to operate actively. Hardware portfolios are physical storage devices designed to contain long-term cryptography. It's a bit like a vault. The thing to know about hardware portfolios is that while they are highly secure, they are not ideal for people who try to make quick exchanges as it takes many hours or even days to get encryption from them.
Many companies provide portfolios or exchanges. Some, like Coinbase, the largest encrypted exchange in the United States, offer both. "We think it's the best way to offer a new person in the ecosystem an easy starting point," said Dan Romero, the GM of Coinbase Consumers.
But before considering an important investment, it is important to remember that cryptocurrency is a new technology. To tread lightly "You should not put your life savings", warns Romero.
It is also important to realize that once an exchange is made, it is not possible to cancel it. Be sure to send the person or the right institution. Errors can not be canceled. Oh, and there's no insurance, if someone stole your wallet and stole your bitcoins, bad luck. Some exchanges, like Coinbase, offer insurance against the hacks of the entire company.
Transactions are made using public and private keys. A public key is like an e-mail address and a private key is like the password for that e-mail account. If you have someone's address, you can send them an email, but you can not access their e-mails unless you have their password.
Here's how encryption works: send and receive by distributing or using your public key, but you must protect your private key otherwise anyone can access your encryption.
What could go wrong?
The biggest problem with cryptocurrencies is also what makes them so attractive to some investors: their lack of regulation and decentralized nature provides buyers and sellers with a degree of privacy that they do not get from traditional investments.
Even Goldman Sachs, who had announced the intention of launching a bitcoin bank in May, recently seemed less secure. Its mid-year economic report states that cryptocurrency is neither "a medium of exchange, nor a unit of measurement, nor a store of value". UBS expressed similar concerns, saying that cryptocurrency is too "unstable" to become mainstream.
Investing always involves some risk, but for now the world of cryptocurrency seems more wild West compared to the stock market. Anyone who thinks to do it should think twice. And maybe think twice again.
