The concept of ‘cryptography’ has been around since World War II, yet, it wasn’t until last year that the global phenomena of digital investing and trading attracted the attention spans of young adults and millennials. In part one of the series, let’s decode the history behind cryptocurrency and what millennials should know before investing in the market.

  1. What Is ‘Cryptocurrency’ And Where Did It Come From? In its barest form, cryptocurrency is a digital medium of exchange, designed to be purchased, exchanged, and utilized for a variety of services, ranging from investment and purchasing to selling products and services. It is an intangible form of currency, having no physical attributes other than the computer network or smartphone it sits on, connected to thousands of computers globally. Dating back to World War II, the need for secure communication and exchanges was essential. Thus, ‘cryptography’ was born—the process of converting legible information into an enigmatic code, transferring messages securely to and from various, unknown sources. Cryptography has since evolved, finding itself in a digital age, where information is now exchanged through the simple click of a mouse or touch of a keystroke. Now, take that concept and toss in money, mathematical theory, and computer science and we have something to talk about. Politely speaking, concepts I should have a heart for, but don’t care for. Oh yeah, tack on the Internet and we’re gold…no pun intended. It wasn’t until 2009 that cryptocurrency first entered ‘pop culture’ under the alias of Bitcoin. While the goal was never to create a currency, Satoshi Nakamoto, described it in his white paper as a peer-to-peer electronic cash system. Think of cryptocurrency as a P2P program like NapsterLimewireor some other file-sharing program, all sharing one common trait: lack of government regulation. In this world, the users control the transactions, providing for more transparency and efficiency. However, they differ in one major way—tangibility. Crypto lacks physical form, existing solely in our digital wallets.   2. How Does It Work? Encryption. No transactions between a buyer or seller are the same. Avoiding the potential issue of “double spending,” the purpose of crypto aims to remove the potential for multiple, identical transactions, equating to fraud or similar. Each transaction contains a private key, held by the seller, and a public key, transmitted to the buyer. The private key is the last step in authorizing a transaction currently being executed. You lose the key, you’re screwed. It’s that secure, at least for now. Storage. Most coins that are purchased are stored in a secure digital wallet, called a ‘cryptocurrency wallet.’ In order to store, send, and receive crypto, you will need to have one of these wallets. Commonly used wallets like Bitcoin Core Wallet or universal wallets like HolyTransaction are often used; however, there are various third-party wallets that can be used. Paper Trail. All transactions are recorded in a public ledger, or “blockchain.” Like a checkbook, crypto also has its own digital log of transactions by the amount and destination. Anonymity. Subject to debate, one advantage is the protection of the parties to the transaction—they remain completely anonymous. Regulation (Lack Of). Unlike the centralized currency in the U.S., cryptocurrency is decentralized. In this world, there is no central governing entity; it’s as strong as its weakest buyer. The more users purchase, the more attractive and potentially valuable it becomes. 3. What Can You Do With It? Congratulations, you’re officially on the crypto-bandwagon. Now what? Well, it sits in your digital wallet, online, and waits for your next move:
  • Watch the value grow and/or decrease
  • Invest in other cryptocurrencies
  • Sell your currency
  • Purchase good and services (limited market, but evergrowing)
  • Trade with other parties (a more efficient PayPal and Venmo)
  • Join into other interesting conversations about crypto!
4. Rumor Has It… You’re not just investing in the currency. You’re investing in the industry. The fluctuation, the speculation, and the uncertainty. However, that comes with both advantages and disadvantages. Millennials have been groomed to want bigger, better, and faster products/services. In order to tread in these waters, you need to understand its waves. EfficiencyLike PayPal or Venmo, platforms for investing and trading in crypto are made to be efficient and with the least amount of stress. When Bitcoin was born in 2009, it presented the idea that if we carry less green and less plastic, we become a more efficient society. But, to each their own. It also provides for our economy to enter into a digitally savvy state. VolatilityThe risk of investing right now is that the market is extremely volatile. It’s up one day and down the next. The cause behind this is highly attributed to public speculation. Since the currency isn’t stabilized nor regulated, parties assign a value to the currency through investment and speculation. The value changes as people invest in and withdraw monies. It is a bubble expanding until it hits the point of “popping.” Banks. Banks hate it. Last week, JP Morgan, Bank of America, Citigroup, Capital One, and Discover banned their customers from using their credit cards to purchase cryptocurrency. In efforts to protect younger investors who may not fully appreciate the volatility of this market, these policies are meant to mitigate what could result in a significant financial loss, or worse, fraud and identity theft. InvestorsInvestors like Shark Tank investor and tech billionaire, Mark Cuban, believe it to be a good incentive for keeping customers happy, but cautions millennials to “do their homework” before investing. At the end of the day, “you have to be able to afford to lose it,” emphasized Cuban. The Mavericks owner announced a few weeks back that he intends for the Dallas Mavericks to soon accept payments in Bitcoin and other currencies as soon as the 2018-2019 NBA season. HollywoodEven classic rock artists like Matt Sorum think crypto is “rockin.” In a recent interview, Sorum lent his support for the market, as he is currently exploring the market for his own ventures. He indicated that this presents another market for younger artists and musicians to look into in terms of promoting themselves and marketing themselves to followers and recording companies. Like Cuban, Sorum also cautions younger investors when investing in this market, as he believes that we are still a few years out from having something stable. 5. Do Your Homework. At the end of the day, investing in cryptocurrency is a gamble. It’s as if you were to walk into a Las Vegas casino and put a dollar in the machine—you’re either going to profit off it or lose it altogether. Welcome to the world of crypto. You’re in for an exciting, but bumpy ride. Like the casino, learn the game before you play. Do your homework.