Cryptocurrency 101: The Beginner's Guide to Cryptocurrencies You Need to Read
Joel Kohā
If you are someone looking to dip your toes into cryptocurrencies, crypto exchanges, or someone who knows quite a bit about cryptocurrency but is keen to get more insights and perspectives of the fast-changing world of cryptocurrency.
We got something for you.
Last night (26 Aug 2021), we invited a personal finance expert who got into cryptocurrency, professionals from the cryptocurrency space and cryptocurrency enthusiasts on an episode of SeedlyTV to enlighten us about the basics of cryptocurrency as well as the risks associated with it.
If you do not have time to watch the whole episode which is about an hour long.
We got you!
Here’s a complete recap of the episode and a summary for the important insights provided by our guests that would serve as a great a beginner’s guide to help you navigate the wild world of cryptocurrencies.
Do check it out!
Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. Seedly does not recommend that any cryptocurrency should be bought, sold, or held by you.ā Readers should always do their own due diligence and consider their financial goals before investing in any investment product and consult your financial advisor before making any investment decisions.
What is Cryptocurrency?
Kenneth kicked things off with a quick primer on the history of cryptocurrencies.
On 31 October 2008, the mysterious Satoshi Nakamoto published a White Paper titled Bitcoin: A Peer-Peer Electronic Cash System.
FYI Satoshi Nakamoto is actually just a pseudonym used by the individual or group that created the cryptocurrencyĀ in 2009.
For context, this paper was published in the midst of the 2008 Global Financial Crisis (GFC), a crisis that shattered public confidence and trust in financial institutions.
This paper was just the beginning.
A few months later on 3 January 2009, Satoshi Nakamoto mined the genesis block of bitcoin (block number 0), which gave a reward of 50 bitcoins. With that the Bitcoin network was born.
This was the first implementation of blockchain technology as a public and decentralised ledger for transactions made using Bitcoin.
What is The Blockchain
So you might be wondering, what is the blockchain?
Kenneth used the analogy of a love story between Alice in Singapore and Bob in Paris to help us understand the blockchain.
Traditionally, when someone like Alice wants to send money from Singapore over to Bob in France, there will be at least three to four intermediaries involved in the process.
This makes the transaction costly and inefficient.
But with blockchain technology, the story is different.
When Alice wants to send money over to Bob, the transaction is written onto a block online and is broadcasted to all the computers in the blockchain network.
Once the network has gotten wind of this transaction, it will verify the transaction and approve it.
The transaction is completed when this block is added to the blockchain. This is also why it is called the blockchain as there is a chain of blocks.
Bitcoin vs Ethereum
Kenneth then provided a high-level overview of the differences between Bitcoin and Ethereum, the two most important cryptocurrencies in this space.
At the risk of oversimplifying things, Bitcoin can be described as a store of value due to its limited supply (only 21 million bitcoins can exist) and its perceived value which has led to people describing it as digital gold.
Whereas Ethereum can be described as programmable money as you can build distributed apps, decentralised finance (DeFi) protocols that can replace financial services, and mint non-fungible tokens (NFTs) on the Ethereum blockchain.
But do note that unlike Bitcoin the supply of Ethereum is unlimited even after the implementation of its London Hard Fork upgrade that burns ETH (native cryptocurrency token of the Ethereum blockchain) with each transaction.
Despite the difference in price, you can actually buy a fraction of Bitcoin and Ethereum on many exchanges.
Speaking of Bitcoin, we gave away S$500 worth of BTC before the show and another S$500 worth of BTC during the show.
We have partnered with SingSaver and American Express to launch thisĀ super exclusiveĀ BitcoinĀ campaign for the first time ever in Singapore.
You will receive up toĀ S$365 worth of BitcoinĀ when youĀ successfully apply for a credit card.Ā This offer is ONLY available on Seedly & SingSaver. You will not find it anywhere else.
These rewards will be given out from now until 7 November 2021Ā OR untilĀ S$1 million worth of Bitcoin has been claimed,Ā whichever is earlier.
Also, theĀ first 2,000 eligible applicantsĀ will receive anĀ additional S$100 worth of BitcoinĀ so get to it!
If you were wondering, these rewards will also be given out to your Gemini account as they are our exclusive cryptocurrency wallet partner for this campaign.
How to Apply:
- Apply for your favourite credit card.
- Receive up toĀ S$265Ā (S$265Ā for new customers andĀ S$50Ā for existing customers) worth of Bitcoin after you fulfil the eligibility requirements.)
- SpendĀ S$500Ā on the card within theĀ first 30 daysĀ of card approval.
- Be one of theĀ first 2,000 eligible applicantsĀ to receive up toĀ an additional S$100 worth of Bitcoin.
Eligible Cards: American Express in Singapore
Here are the cards you can apply for with this campaign:
More details about the cards can be found on the landing page. And of course, terms and conditions apply.
Disclaimer: Seedly and Singsaver will never ask you for your crypto wallet address nor instruct you to transfer any crypto to us throughout any of the campaigns.
Now that you are caught up let’s dive into why you should even care about cryptocurrencies.
Why Should You Care About Cryptocurrency?
Shaun from CoinMarketCap likened the current state of cryptocurrency to the early days of the internet, describing it as the new internet to friends and family.
He added that the innovations coming out of the cryptocurrency space is developing so rapidly that it would be hard to define cryptocurrency with one sentence.
Rohith from the Hyphen Group then compared cryptocurrency to early innovations like electricity and the internet, describing how people would think that these transformative innovations were crazy and speculative when they just came out.
Although there was much speculation, busts and bubbles with the internet, trillion-dollar technology companies like Apple, Google, Facebook, Netflix and PayPal have emerged and shaped the internet as we know it today.
Rohith added that we should care about cryptocurrency as although the internet could digitise everything that was physical, it could not transfer the information and value in a decentralised manner. This is what cryptocurrency is trying to achieve.
In the future, the economy will become increasingly digital and cryptocurrency would play a big part in it.
What Are The Biggest Risks of Cryptocurrency?
He Ruiming of The Wokesalaryman talked about the threat of government regulation and crackdowns on cryptocurrency. Although, there is a small chance of that happening Ruming’s opinion is that we cannot rule it out completely.
He added that another big risk you have to be aware of are the common cryptocurrency scams going around. More specifically talked about pump and dump schemes/rug pulls perpetuated by cryptocurrency influencers.
Eugene of Gemini pointed out that having a Fear of Missing Out (FOMO) is dangerous for cryptocurrency investors. If you FOMO and invest in cryptocurrencies based on just emotions alone, it will likely not end well for you.
Instead, you should do your own due diligence on cryptocurrencies and base your investment decisions on logic, sound fundamentals and conviction arising from your research.
Eugene also talked about how you should be patient and hold on to your cryptocurrency for the long term and not sell them to chase after any flavour of the month s***coins that go up spectacularly and crash.
He added that although Governmental regulation of cryptocurrencies may pose a short term risk, he actually embraces regulation as it makes things clearer and safer for investors in the long term.
Rohith added that behavioural risk is something you need to be aware of and regulate when investing in cryptocurrencies as they are still a very volatile asset class. This makes it dangerous for those who chase returns blindly and panic sell when there is a big drop.
There are also more than 11,000 cryptocurrencies out there and all of them are not created equal. Rohith urged us to do our due diligence and understand them before investing.
Who is Cryptocurrency For (Or Not For)
When quizzed about who should invest in cryptocurrencies, Ruming pointed out that cryptocurrencies are still speculative and volatile investments that fluctuate wildly from day to day. He added that those who tend to be more emotional with their investments should reconsider their exposure to cryptocurrencies
His approach to investing in cryptocurrencies is to buy and HODL (hold on to dear life) them for five to 10 years or more.
He is not too bothered if the price goes up by 50 per cent one day or falls 50 per cent or more the next day due to his long investment horizon and conviction about the cryptocurrencies he bought.
Rohith added that those who cannot stomach the volatility of cryptocurrencies and would be kept awake at night worrying about their investments should stay away.
It also boils down to your personal financial situation, financial goals investment horizon and risk appetite as well. When you are clear about these factors, there are suitable cryptocurrency investments that can fit into your investment portfolio and help you meet your financial goals.
Where Is the Easiest Place To Get Some Cryptocurrency?
Shaun started this segment off with the disclaimer that CoinMarketCap is owned by cryptocurrency exchange Binance which is a good place to trade cryptocurrencies.
But with cryptocurrencies being so peer to peer and decentralised, he suggested that you could ask your friends who are into cryptocurrencies and buy some cryptocurrencies from them get a feel of what the experience is like.
He also advised that you should not be getting into cryptocurrencies just for the sake of it. Instead, you should do your own research and understand what you are getting into before buying cryptocurrencies on the exchanges or asking your friends for help.
Rohith added that the easiest way to buy cryptocurrency is via centralised cryptocurrency exchanges with built-in exchange wallets and a whole suite of product features.
Eugene wrapped things up by talking about the factors that people should consider when choosing a cryptocurrency exchange:
- Safety,
- The number of cryptocurrencies available.
- The ability to move money in and out of the exchange to your bank.
In addition, we had a commenter on Facebook ask what is the bare minimum amount of due diligence an average investor needs to do before owning some cryptocurrency.
Shaun talked about the similarities between buying cryptocurrencies and stocks and how you could evaluate a cryptocurrency project with some of the methods you use to evaluate stocks.
More specifically, you should evaluate the:
- The capability of the management team.
- Utility of the blockchain project and technology involved.
- Tokenomics of the cryptocurrency project to ensure that the majority of the tokens are not held with just a few people as the price of that cryptocurrency might crash if a person holding a large percentage of the tokens decides to dump it.
Rohith talked about how he would spend hours and hours researching the use case of the blockchain project and what problems it is trying to solve. He also urged viewers to objectively evaluate the blockchain project behind it by looking at both sides of the argument during your research.
When investing in a cryptocurrency, Rohith added that you should just put small amounts first and invest more when your conviction in it grows.
Kenneth added that you should stick to the larger more established cryptocurrencies and understand Bitcoin and Ethreum first before investing.
Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. Seedly does not recommend that any cryptocurrency should be bought, sold, or held by you.ā Readers should always do their own due diligence and consider their financial goals before investing in any investment product and consult your financial advisor before making any investment decisions.
When Should You Buy? Dollar-Cost Average vs Lump Sum
Eugene added that you should treat cryptocurrency like any other investment and invest in a similar way.
In his opinion, the best way to invest in cryptocurrencies is to dollar cost average (DCA) as no one can reliably time the market. This method is also good for cryptocurrencies as you can use it to tame the volatility.
FYI: Dollar-cost averaging (DCA) is an investment technique of investing a fixed amount of money into a particular investment on a regular schedule to smooth out the impact of volatility on your overall investment.
If you have done your due diligence and are convicted about your cryptocurrency investment, you should buy and HODL the cryptocurrencies for the long term ( 5~10 years or more) to reap the benefits.
How to Get Deeper Into Cryptocurrency
If you would like to dive deeper into the rabbit hole of cryptocurrency, our guests suggested you check out resources like:
- Start with the White Paper and Ethereum White Paper.
- CoinMarketCap’s CMC Alexandria: content about cryptocurrency written by CMC’s own researchers and employees, as well as articles by some of the best minds in the cryptocurrency space today.
- CoinDesk and CoinTelegraph for news.
- Cryptocurrency books.
- Cryptocurrency podcasts.
- Chain Debrief for a local viewpoint.
- Gemini’s Cryptopedia: a Wikipedia for cryptocurrencies.
Eugene urged viewers to exercise caution about what content they are consuming as everyone has an agenda and their own biases.
If you researched about a cryptocurrency and are very convinced by it, you should also use the token or the blockchain project’s product or service and yourself if it will make a big difference to the cryptocurrency ecosystem (E.g. blockchain games like Axie Infinity) before diving in.
