Many people ask me all kinds of questions about the topic of cryptocurrency. In fact, a few weeks ago, I was approached by someone wanting to pay me to promote a cryptocurrency on my YouTube channel.
So today I’m going to talk to you about the topic of cryptocurrency, and I am going to go as deep as I can so that you can have a better understanding of what crypto is. And then you can make your own decision on whether to put all your money into crypto or to stay away as far away as you can from it.
First, let me ask you this, in your own understanding, what is cryptocurrency? I want you to keep your answer to yourself while I tell you exactly what cryptocurrency is.
What is Cryptocurrency?
Cryptocurrency is a digital currency, digital money if you will, that was created initially with the intention of making it global money. A global currency that is not regulated by any single government. Therefore, it is protected from a bad economy or even a recession.
Initially, cryptocurrency was created with the intention of replacing the money that you have, not with the intention of making it an investment property, something like gold.
The main benefit initially was, let me put it simply, if cryptocurrency, Bitcoin, initially replaced the money that you have, replaced the Naira that you currently have, then you will not care if Naira depreciates against Dollar or any other currency, because that doesn’t really matter anymore.
But I think we all know that has never been the real purpose of cryptocurrency.
When It All Start
It all started in 2008 during the Great Recession when the global economy was hit by a recession. A lot of people lost their life savings, some people lost their houses, and a lot of businesses went bankrupt. People were agitated back then. And a lot of people felt unsafe about their financial future.
In the middle of all the uncertainties, people hating their government, the first cryptocurrency, Bitcoin, was created by a person named Satoshi Nakamoto.
It’s important to know that this is an unknown individual. Nobody, at least in the public, knows who Satoshi Nakamoto is. The only thing people know is his digital footprint and nobody really in the public even knows whether Satoshi Nakamoto is one individual or a group of individuals.
This is the name behind the person who created the first cryptocurrency, Bitcoin, and it was promoted initially as a form of global currency that is going to replace the money that people spend on their daily purchases. And it is not regulated by any government so it is protected from bad government that could cause a bad economy. And it is also protected from recession.
And Bitcoin initially has a supply of 21 million. That means there is a 21 million Bitcoin and it cannot be 22 million. This means if 21 million Bitcoins are sold out, you can only buy if someone sold out.
In January of 2009, the value of one Bitcoin was $0.0009, It was until 2011 that the value of one Bitcoin reached $1.
That means at that time, you can buy one Bitcoin at $1. If you have $10 you can buy 10 Bitcoin. Fast forward to 2021, when the value of one Bitcoin reached $68,000, making a lot of people millionaires or even billionaires depending on where you live.
But before 2021, something significant happened that created a huge problem in the cryptocurrency realm, and that was the creation of the second cryptocurrency Ethereum in 2015.
This is an important development in the cryptocurrency realm, and that is what brought us to where we are today with cryptocurrency.
This might get a little too technical but I’m going to try as much as possible to make it very simple. Cryptocurrency uses a technology called Blockchain and that is what allows the transactions to occur using a network of computers.
Bitcoin used its own blockchain and Ethereum also started with its own blockchain. But Ethereum did something that created a loop. They allow the creation of new cryptocurrencies called tokens on their blockchain platform.
This means anyone can create a new cryptocurrency on the Ethereum blockchain platform.
And that is why today we have over 8,000 active cryptocurrency coins.
We have Binance, Dogecoin, Notcoin, Pi Network. The list goes on and all this happens because Ethereum allows the creation of new cryptocurrencies on their blockchain platform. You no longer need to have your own blockchain in order to create a new cryptocurrency.
Now one thing I’m interested in is what exactly is the value of cryptocurrency?
The Value of Cryptocurrency
One of the key factors that determine the value of cryptocurrency is the number of people holding it. Let me give you an example. Let’s say I create a new cryptocurrency called NewCoin. And 20 people decide to buy this new coin and we value it at $1 per coin.
And 20 people buy 20,000 worth of NewCoin collectively, and the value will remain the same until 10 more people decide to put their money into it.
When 10 more people put their money into it, the value will increase to something like $1.2 instead of $1. And if more people decide to put more money into it, the value will increase even higher.
And that is how it’ll keep going until some people decide to take their money out. If in total we reach 20,000 people and 10,000 people decide to take their money out, the value will drop to maybe $0.5 per coin. And if 50% more decide to take their money out, the value will drop even lower.
So, the value of cryptocurrency largely depends on supply and demand. And I’m talking about the actual active cryptocurrencies, not the ones that are nothing more than a Ponzi scheme.
But there is also another scenario. Let’s say I create a new cryptocurrency, I value it at $1 per coin, and five people decide to put their money into it, they buy 10 worth of NewCoin collectively.
I suddenly increase its value to $2 per coin and those people will get excited, two of them will decide to take their money out. And I will use the money from the other investors, other people who put their money into it and pay these two people.
And they have the money in their hand. They are excited, they tell all their friends and they themselves put more money into it. And when they do, I also increase the value again, when I increase the value again, some will take their money out and I will use the money from the ones that left their money to pay the ones that want to take their money out.
And when I do this, the ones that take their money out get more excited. They tell more of their friends and they put more money into it until there is a lot of money on the platform. And I will suddenly shut down the platform and run away with people’s money. This is called Ponzi scheme.
And guess what? There is a cryptocurrency coin called PonziCoin. And you know what is even crazier? This Ponzi coin, they write it on their website. This is a Ponzi scheme like 99 percent of other cryptocurrencies, we are just more transparent about it. And despite all this, this Ponzi coin managed to get over $250,000.
Even though they clearly say it’s a Ponzi scheme. They clearly say it on their websites, they even name it Ponzi scheme. People still put their money into it.
The Dark Side
One thing I want you to keep in mind is, since all this hype started, there were a lot of high-level crypto individuals that went to prison for scams.
Sam Sharma, Sam Bankman who was the wealthiest person under 30 years old, he went to prison. Crypto Queen. Remember Crypto Queen? She ran away with over 4 billion dollars, not to mention the one who started it all, Satoshi Nakamoto, who we already know nothing about, but all his digital footprint disappeared in 2014.
My Final Thought
So what am I saying? Am I saying you shouldn’t buy any cryptocurrency? Well, you certainly can buy any cryptocurrency that you want. You can put all your money into cryptocurrency hold your fingers and pray it doubles in value and make you rich overnight. But there are some side effects that I think you should be aware of.
The most obvious one is of course you can lose all the money that you put into it, but that is not even the worst in my opinion. I believe the worst side effect is that you are going to spend a lot of time, mental energy, and a lot of your money chasing a get-rich-quick scheme that has the least likelihood of making you rich.
There are many ways to make money online, a “get rich” type of money online in a more predictable way and ways that have a higher likelihood of success. But chasing crypto, chasing get rich quick, that is going to stop you from doing that.
Let me ask you this simple question, Would you rather spend something like three hours per day doing something like freelancing, content creation, or online marketing and make money that can gradually make you rich? Or would you rather put all your money into cryptocurrency and hope it doubles in value and makes you rich?
You might say, I can do all the other activities and still buy crypto, but I can almost guarantee you if your mind is on, get rich quick without doing anything, you will not be able to put enough energy and effort into providing value and get money in exchange and gradually make yourself rich.
I personally would rather find ways to provide value and get paid for it. What would you rather do?