How "Crypto" Currencies Work – Brief Overview Bitcoin, Ethereum & Ripple

“Crypto” – or “cryptocurrencies” – is a type of software system that provides users with transactional functionality over the Internet. The most important feature of the system is theirs decentralized nature – usually provides blockchain database system.

Blockchain and “cryptocurrencies” have recently become staples of the global zeitgeist; typically as a result of the “price” of bitcoin skyrocketing. This prompted millions of people to participate in the market, with many “Bitcoin exchanges” undergoing massive infrastructure stresses as demand increased.

The most important thing to understand about “crypto” is that while it actually serves a purpose (cross-border online transactions), it does not provide any other financial benefit. In other words, its “intrinsic value” is strictly limited to its ability to transact with other people; NOT in storing / propagating value (which is what most people see).

The most important thing to understand is that “Bitcoin” and the like are payment networks – NOT “currency”. This will be covered in more depth in a second; The most important thing to understand is that “getting rich” with BTC is not a case of giving people a better economic position – it is simply a process of being able to buy “coins” at a low price and sell them at a higher price.

To that end, when looking at “crypto” you must first understand how it actually works and where its “value” actually lies…

Decentralized payment networks…

As mentioned, the key thing to remember about “Crypto” is that it is predominantly a decentralized payment network. Imagine Visa/Mastercard without a central processing system.

This is important because it highlights the real reason why people have really started to look deeper into the “Bitcoin” proposition; gives you the ability to send/receive money from anyone around the world, as long as they have your Bitcoin wallet address.

The reason this assigns a “price” to various “coins” is the misconception that “Bitcoin” will somehow give you the ability to make money by virtue of being a “crypto” asset. It’s not.

The ONLY The way people have made money with Bitcoin is as a result of its price being “raised” – buying “coins” at a low price and selling them at a MUCH higher price. While it has worked well for many, it is actually based on the “bigger fool theory” – basically it says that if you manage to “sell” coins, it is to a “bigger fool” than you.

This means that if you want to get involved in the “crypto” space today, you’re basically looking at buying any of the “coins” (even “alt” coins) that are cheap (or cheap) and using them as the price goes up until later sold out. Since none of the “coins” are backed by real-world assets, there’s no way to gauge when/if/how this will work.

Future growth

For all intents and purposes, “Bitcoin” is spent power.

The epic rally in December 2017 indicated mass adoption, and while its price will likely continue to climb into the $20,000+ range, buying one of the coins today will basically be a big gamble that this will happen.

The smart money is already looking at most of the “alt” coins (Ethereum/Ripple etc) that have a relatively small price tag but are steadily growing in price and adoption. A key thing to look at in the modern “crypto” space is how the various “platform” systems are actually used.

Such is the fast-paced “technological” space; Ethereum & Ripple are looking like the next “Bitcoin” – with a focus on how they are able to give users the ability to actually use “decentralized applications” (DApps) on top of their underlying networks to get the functionality to work.

This means that if you are looking at the next level of “crypto” growth, it will almost certainly come from the various platforms that you can identify out there.