Investing in Cryptocurrency: A Beginner's Guide & Risk Considerations

DISCLAIMER: All investment strategies and investments involve risk of loss. Nothing contained in this article should be construed as investment advice. Any reference to an investment's past or potential performance is not, and should not be construed as, a recommendation or as a guarantee of any specific outcome or profit. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Understand How Crypto Works

By definition, “cryptocurrency” is a digital or virtual currency that is secured by cryptography, which makes it almost impossible to counterfeit or double-spend. Almost all cryptocurrencies that currently exist on the market are based on blockchain technology which help it to achieve decentralization, transparency, and immutability.

Cryptocurrency was the inadvertent byproduct of bitcoin, the very first cryptocurrency. Unfortunately, when bitcoin first started to get its name around, it was in a negative light. Ever heard of The Silk Road? This was the “Amazon” for drugs, weapons, anything...on the dark web. And to maintain complete anonymity, Ross Ulbricht, its creator, implemented bitcoin as the payment mechanism. For more information on The Silk Road, we suggest you check out Nick Bolton’s book “American Kingpin”.

A Brief Intro to Bitcoin and Altcoins

Launched in 2009, Bitcoin was created by an individual or group known only by the pseudonym, ‘Satoshi Nakamoto’, and shared a whitepaper explaining the concept on SourceForge.

Now, bitcoin wasn’t the first attempt at creating such a system. But it was the only successful system that persevered. Over the years, closer to a decade, there had been many attempts to create digital money, but they all failed. Previously, all the (failed) systems utilized a Trusted Third Party approach, where the companies behind those systems both verify and facilitate the transaction.

So what made bitcoin different? Satoshi added the element of “decentralization”.

Today, the true identity of Nakamoto remains a mystery, although over the years, individuals have come forward claiming to be the “real” Nakamoto, including Dorian Nakamoto, Craig Wright, and Nick Szabo.

Nakamoto’s vision behind bitcoin was to create a peer-to-peer (P2P) electronic cash system that was completely decentralized. Of course, it was never his/her/their intention to have it used for illicit/illegal purposes (The Silk Road), but welcome to the nature of the beast.
These are every other digital currency that has been created after bitcoin. The most notable examples include, but aren’t limited to Litecoin, Ethereum, Cardano, and the list goes on. As of today, there are over 5,000 altcoins in existence. Let the buyer beware!