Cryptocurrency: What Is It?

Big, big, big disclaimer here. What follows is not a recommendation to buy cryptocurrency. But we’re happy to give you an overview.

The big player in this market is called Bitcoin. Established back in 2008 by Satoshi Nakamoto it is currently worth $40,000. For a single coin.

The eth-something? That’s called Ethereum.

Both Bitcoin and Ethereum are what are known as 'crypto currencies'. They are digital currencies as opposed to ’normal’ currencies (or Fiat money) like the sterling, dollar, euro etc. (which in turn are also referred to by the crypto community as ‘fiat’ money).

Bitcoin is the giant crypto and currently trades in the $50k+ territory for one unit.

In terms of value the entire currency is valued at close $1tn. (Yes, trillion). This is known as ‘market capitalisation’ and that figure means few companies are worth more. The exceptions being the likes of Google, Microsoft, Amazon, Facebook etc. Bitcoin is firmly in the top 10 most valuable assets in the world.

A cryptocurrency basically means that to transfer payment there is no need for a bank as an intermediary and transactions are knowns as ‘peer-to-peer’ eg. you can send to your contact and they can send to you. Transactions happen in a decentralised blockchain-based network and your Bitcoin is stored on an electronic wallet.

How do they make Bitcoin? They mine it, actually, generating a new Bitcoin every 10 minutes.

Only 21 million bitcoins will ever be issued meaning it has finite supply.

How big can Bitcoin go? The truth is we don’t know. You have to factor in that governments around the world might get/might be tetchy about this new currency and try to limit or control it; but that’s hard precisely because it’s as we said peer-to-peer. Is it impossible for them? No. There is risk.

Having said that, Bitcoin is huge. It stands around 6% value of the US dollar’s size.

Back in late December last year, US sports icon Russell Okung demanded his team the Seattle Seahawks ‘Pay me in Bitcoin’. He opted to get half his $13m a year payment in Bitcoin. That’s worked out nicely for him because give or take Bitcoin has gone up significantly in the interim.

And major financial instructions like Morgan Stanley and JP Morgan are now engaging with Bitcoin, about to add or adding Bitcoin to the portfolios they offer clients.

Oh. And Paris Hilton is now a big fan and adopter, should that mean anything at all to you. You can tell because if you look at Twitter (who doesn’t?) then Bitcoin fans identify themselves with laser eyes on their pic profile.

Dangers to Bitcoin and other cryptocurrencies? Legislation. The possibility of being outlawed as legitimate currencies remains.

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