Well, turns out we could not go any further without a post exploring the single most OG question of them all: Just what the heck is Cryptocurrency?

As with all questions that ask for definitions and further elaborations, the size of the answer can vary depending on the kind of answer you’re looking for. Because, believe me, we could spend hours detailing the minutia of cryptocurrency, and the technology that sustains it.

Well, you’re in luck. We, the wisemen at the helm of UBERZOOMER have a perfect understanding of what you are here for: To learn how cryptocurrency can help you make money.

And because of that, we have just the right kinds of answers you need.

What Cryptocurrency is NOT

When something new causes an unprecedented amount of disruptiTo a certain extent, it is understandable that many people (i.e. boomers, noobs and outsiders) do not quite get what Cryptocurrency is. And there’s pertinent reasons for that, as there’s a constant of actual misinformation about cryptocurrencies, coming from a sensationalist media and a scared traditional industry.

And because of all of that, it is important to dispel all the fictions surrounding crypto. In that sense, the following consists of what cryptocurrency is not:

• A Ponzi scheme: There is nothing Ponzi about crypto and the blockchain. Cryptocurrency functions like any other asset, and its prices vary according to the basic laws of supply and demand.  
• A get-rich-quick scheme: While there is a seemingly abundant number of stories about people having made considerable amounts of money via crypto, that is related with the inherent volatility of an emerging market.
• Secretive: Cryptocurrency transactions are publicly auditable. That means that law enforcement officials – or anyone else for that matter – are able to view transactional information through the use of blockchain analytics software.

Cryptocurrency in a nutshell (for Boomers)

A cryptocurrency (or “crypto” for short) is a digital-only peer-to-peer currency; a type of “digital money”. And just like real-world money features many currencies (or “coins”) there are also many subsets of currency in the crypto world (also frequently denominated “coins”)

Cryptocurrency is by definition decentralized and uses blockchain technology, thus not requiring for a third party – like a bank or government – to manage them.

Coins – like Bitcoin, Ethereum or Monero – are some of crypto’s currencies. You can use them to buy goods and services in the places those are accepted. Or simply trade them for profit.

Congratulations, you can now watch the news at 8pm without feelings of confusion or disorientation.

Cryptocurrency in a bit more detail (for Nerds)

Cryptocurrency is a technology harnessing cryptographic techniques to make it possible to exchange units of value over the internet without relying on any middlemen whatsoever.

• By using Cryptocurrency, “John Doe” can send 1 unit of value to “Jack Moe” without the interference or supervision of:
  • Banks
  • Payment companies (like PayPal)
  • Authorities (governmental or institutional).
• The integrity of this transfer automatically overseen and secured by an interconnected network of computers dispersed across the globe, which all constantly verify it.
  • No single computer from this network possesses the capability to single-handedly alter the contents of the transfer.

“Wait, is this really all I need to know?”

Of course not lol. There’s a lot you will learn while navigating the lands of cryptocurrency, and enriching your life while at it – in more ways than one.

But the above definition are more than sufficient for you to get a basic grasp about the technology you’re dealing with here. Heck, there are people who have become wealthy while barely knowing the differences between bitcoin and litecoin.

Is there really a need for Cryptocurrency?

But of course there is. The current international financial system we have in place doesn’t work well for everyone. There are many problems with it, and some of its problems stem from it being both too centralized, and too closed off.

It is easy to forget the political nature of crypto when the majority of websites dedicated to covering it are more concerned with micro-fluctuations to the value of crypto assets. And because of that, it may be hard to discern any concrete, well, ideology to crypto. It may seem like it is a directionless project, with no aims and no goals in sight, other than allowing for the people involved in it to make some money.

Well, nothing could be further from the truth. Cryptocurrency is a project with a clear identity and orientation; with an ideology and a history.

But yeah, going back to the topic at hand: Yes, there is a need for cryptocurrency, and yes there are many problems with traditional finance (TradFi).

There are middlemen charging exorbitant fees, legacy technology and processes slowing everything down, you don’t actually control your assets, and you’re often locked into services.

This is where cryptocurrencies come into play.

A brief history of Cryptocurrency

Bitcoin (BTC) was the first cryptocurrency created in 2008 by “Satoshi Nakamoto” — pseudonymous person, or maybe several of them. Since then, the number of cryptocurrencies has exploded.

In late 2008 that same Satoshi Nakamoto published the Bitcoin whitepaper. It proposed a digital currency, Bitcoin, that would bypass traditional financial institutions and let any two people exchange value online.

This was a radical departure from the existing system, where gatekeepers and custodians were absolutely vital to finance. While this worked well, in some countries for some of the time, there were significant downsides such as people being excluded from the financial system and intermediaries driving up costs. The massive power of some institutions introduced huge risks to the economy, as was shown in the financial crisis of 2008. Highlighting this, the first Bitcoin transaction included the message: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks“.

Bitcoin made the dream of a “digital currency” a reality, and soon the idea took off around the world. From a technical perspective, what made Bitcoin possible was blockchain. In short, a blockchain is a distributed network without a central point of failure (for a fuller explanation see here). This means, in other words, it’s decentralized. This is where the ‘De’ of DeFi comes in. So where did the ‘Fi’ come from?

Some cryptocurrencies, like Bitcoin and Ether (ETH), are fungible, meaning that they are fully replaceable by another of their currency. This is how traditional money works: $1 is as good as another $1. There are also non-fungible currencies (NFTs), where each token is unique. For example, a Beeple picture.

Sometimes, cryptocurrencies get referred to as ‘tokens‘. A token is not a cryptocurrency, but they are similar. The difference is that a token is an asset built on an existing blockchain like Ethereum.

How do cryptocurrencies work?

Cryptocurrencies remove the need for a centralized server by using blockchain technology. Blockchain uses a decentralized and distributed network to confirm and validate transactions.

Each blockchain is different, but they all have a consensus mechanism. A consensus mechanism is how the blockchain comes to an agreement about its activity.

There are two main types of consensus mechanisms. The first is Proof of Work (PoW), which most cryptocurrencies use, including Bitcoin. The second is Proof of Stake (PoS) which fewer blockchains use. Ethereum is currently upgrading from PoW to PoS, and this upgrade is known as Ethereum 2.0.

Let’s explain how they work:

Proof-of-Work

Computers known as ‘miners’ solve complicated cryptographic problems pass blocks. The miner that first solves the problem will share the solution with the other miners to confirm their answer is correct. If the answer is right, a new block gets added to the blockchain. For their effort, the successful miner gets rewarded in cryptocurrency, and the fees for the previous block.

We have a more in-depth article on Proof-of-Work you can check.

Proof of Stake

This is an attempt to solve some of the issues of Proof of Work, like scaling and energy consumption. Proof of Stake replaces miners with ‘validators.’ A validator is a user that locks up the native cryptocurrency, and they are randomly selected to produce and approve blocks. If a validator acts maliciously, they lose a percentage of their cryptocurrency.

We have a more in-depth article on Proof-of-Stake you can check.

What can you use cryptocurrencies for?

There is a wide range of use cases that cryptocurrencies can be used for. Here are just a few beneficial applications for society:

• Direct digital payments: Many people are excluded from the current banking system. This prevents them from getting a job or make and receive payments. As cryptocurrency is peer-to-peer, they solve this issue. Anyone can create a wallet and start making transactions.
• Store of value: Cryptocurrencies are easier to store than gold. And some cryptocurrencies, like Bitcoin, have a fixed supply making them ideal for being an inflation hedge.
• Fighting corruption: In the current banking system, corrupt countries will close activist bank accounts. This prevents them from funding and fighting their cause. With cryptocurrency, activists can raise funds without needing to go through a bank.

What are the most popular cryptocurrencies?

You can find cryptocurrencies in order of market cap on most cryptocurrency data websites such as CoinGecko, CoinMarketCap, and FTX (formerly Blockfolio). We’ve already mentioned the two most popular cryptocurrencies, Bitcoin and Ethereum. But there’s more out there, like Solana (SOL) and Cosmos (ATOM).

Where can you buy cryptocurrencies?

You can buy cryptocurrencies with your local currency by using a centralized exchange (CEX) like Coinbase or Binance. But, If you decide to keep your funds on the exchange, you’re taking a risk. That’s because you’re trusting that the exchange will keep your crypto safe.

In the past, exchanges have lost users’ funds, like in 2014 with Mt Gox. At the time, they handled an estimated 70% of Bitcoin transactions. More recently, Binance has had regulatory issues, leading to some of their customers’ unable to cash out their funds.

That’s why you should self-custody your funds by using a crypto wallet, like Argent. A wallet gives only you access and control of your crypto. The way it should be.