“Crypto for dummies”: The how, what and why of using virtual currency

If you haven’t heard of crypto, it’s clear that you haven’t been following the news lately. If you’re not sure what cryptography is, or what you need to do, correspondent David Pogue is here to teach you (roughly) everything you need to know about cryptography in nine easy steps:

1. Bitcoin was only the first cryptocurrency.

“Crypto” is the abbreviation for “cryptocurrency”. Bitcoin was the original and is still by far the most popular. But there are more than 10,000 different cryptocurrencies. Anyone can start one!

2. They are purely digital currencies.

If you go to Google Images and type “bitcoin”, you’ll get thousands and thousands of images of physical metal coins. Don’t be fooled! The only place you can I’ll see The cryptocurrency is on the phone or on the computer screen. The only cash register is the Internet.

3. Cryptography is not easy to spend.

This is another reason why bitcoin may not be your normal currency. For now, you will have a very difficult time expense that! Go to a pet store, a winery or a hot dog cart, and it will cost you a lot to buy something with a cryptocurrency.

One of the few stores that accepts bitcoin directly is PJ Bernstein Deli in New York. There, Pogue used his phone to capture a QR code, received a verification code, and clicked “send.” Paid lunch!

4. Banks and governments are not part of the chain.

Crypto needs a reliable way to keep track of all these transactions, and this is what a blockchain is all about. It is a theoretically tamper-proof online public database.

Caitlin Long, CEO and founder of Custody Bank, a digital currency bank, described the blogging chain as “a new kind of ledger, where different parts that are not known – and certainly do not trust each other – can in fact, trust that this shared record is the so-called golden copy of all data “.

All you need to see it is an internet connection. And indeed, on websites like blockchain.com, you can look at real-time transactions, all of which are essentially anonymous.

But if you can’t really buy with cryptocurrency, what’s the point? At this point, it is mostly an investment, speculative, which had a large increase during the pandemic.

5. Today, cryptography is primarily for investors.

“I think it’s probably the biggest bubble of our lives,” said Ryan Payne, president of Payne Capital Management, a wealth management company. “I mean, that could be useless at some point. Very possible.”

Pogue asked, “Do you think it will go to zero?”

“I don’t think there’s any intrinsic value,” Payne said. “Look, we use oil, even gold. While with bitcoin, there’s no real use in society, which, again, in my mind, equals can’t be worth anything.”

But the traditional currency is not based on anything physical either. A dollar bill is only worth it because we are all to believe who does.

Long said: “The good we use as money is a piece of linen, with a picture of a dead president in green ink. For the past 50 years, nothing has supported him substantially, from the United States. and the rest of the world moved away from the gold standard. It’s just an intermediary. That’s all. “

• Most people who know cryptocurrency see it as a risky investment
• Bitcoin has its own 1% that controls much of the wealth
• Cryptocurrency scams have skyrocketed 1,000% since October

6. Buy and sell cryptography on “exchange” websites.

To buy bitcoins worth $ 50 on Coinbase.com, the largest exchange in the United States, the customer enters their email address, is sent a verification email, is asked for their phone number, receive a text authentication code, send the last four digits of your Social Security number, take a picture of your driver’s license, provide your bank PIN and password, tap “But now” and that’s it! For $ 50 in “real” US currency, Pogue has bought 1/1000 of a bitcoin.

7. Most cryptocurrencies are volatile investments.

Pogue bought some bitcoin last May and in six months his money had more than doubled!

And after this week, it has crashed, almost all the way to where it started.

• The fall of Bitcoin eliminates almost all cryptocurrency gains by 2021
• Why Elon Musk’s bitcoin U-turn caused a cryptocurrency shock

8. It will be easier.

Long said, “It’s very confusing. We’re in a very, very early stage. I might compare it to the 1994 Internet.” The future, he said, “will look and feel very similar to your online banking.”

Crypto has other problems to overcome before it is ready for mainstream. There are all kinds of scams; transactions are slow; if you lose your cryptographic password, you may lose your entire investment; and cryptographic transactions can avoid U.S. financial sanctions on Russia.

And there is a terrible environmental cost. The creation of new bitcoins and the confirmation of their transactions require massive computer banks that burn large amounts of energy. According to some estimates, every time you make a Bitcoin transaction, your network emits half a ton of carbon dioxide.

• Will industrial-scale bitcoin mining affect the environment? (“CBS Saturday Morning”)
• The price of Bitcoin is skyrocketing, as is its carbon footprint

Pogue asked Ryan Payne, “Am I trying to figure out how you can look at the same facts as cryptocurrency fans and draw such different conclusions?”

“We love a great story; Bitcoin is a great story; decentralized finance is a great story,” Payne said. “So that’s just human nature, doing what it does over and over again: fooling itself. But we know, based on history, how these things end.”

Caitlin Long couldn’t agree more: “It’s not a perfect system at all. But it will make things better, faster, cheaper, safer and, frankly, transfer the power of the big banks and even the big governments. to the individual. “

9. Cryptography is polarizing.

You can’t believe how many haters and how many fans there are. But in this first stage of the life of cryptography, everyone seems to agree on one thing:

“Certainly, I would never encourage anyone to put more money into it than you can afford to lose,” Long said.

And Payne? “My philosophy is to put money into it that you can afford to lose,” he said.

For more information:

• Custody Bank
• Payne capital management
• Blockchain.com
• Coinbase.com
• PJ Bernstein Deli, New York

Story produced by Amol Mhatre. Editor: Joseph Frandino.

In:
• cryptocurrency
• bitcoin