Crypto currency vs crypto assets

Cryptocurrency vs crypto assets

Cryptocurrency can be said to also be a crypto asset or a sub-class of crypto assets, but not all crypto assets are cryptocurrencies. Previously we created a reference to understand Blockchain, now let’s talk about cryptocurrency vs crypto assets.

In short, a cryptocurrency is a store of value and way to transfer that value among users of the currency. It doesn’t do much more than that.

Think of it like money, you can save by accumulating money as a store of your wealth and you can pay people with money for goods and services thus it’s a means of transferring value.

What you can’t do with it, is live in it or drive it for example. It’s doesn’t perform an actual function. That job is for assets such as your house or car.

Crypto assets usually have many of the same features of a cryptocurrency in that there will be a token that serves as a store of value with the ability to transfer that value but there is usually a second layer of functionality added in that the technology/ network enables certain functions to be performed.

The most well-known example of this is Ethereum. This is a crypto asset network where the token used as a currency is Ether. The network also enables the building of smart contracts that allow conditions to be set for what happens when a certain trigger event takes place.

These other non-bitcoin assets and currencies are collectively referred to as Altcoins.

What you need to know about bitcoin

Bitcoin is the original and first successful implementation of a crypto asset/currency and was created in 2008, by a developer who used the synonym Satoshi Nakamoto with the purpose of providing an alternative to conventional financial infrastructure.

No-one knows who Satoshi Nakamoto really is although many have claimed to be him. In a sense, it is like conventional currency in that it can be used to buy things electronically.

In a nutshell, Bitcoin is a form of digital currency that is held electronically.

What sets it apart and makes it stand out from conventional currency is the fact that it is decentralised. This means that the bitcoin network is not controlled by a bank or a single institution which is appealing to many people simply because no one controls their money.

Advantages of bitcoin

Bitcoin possesses a handful of characteristics that make it unique in the face of government-backed currencies. Here are 5 main reasons bitcoin has gained the wide-spread popularity it has;

1. Anonymity
2. Easy to set up
3. Offers financial freedom
4. Timeous
5. Decentralised

Anonymity

In a bank, all transactions are monitored and tracked. With Bitcoin comes a higher level of privacy in that bitcoin transactions cannot be easily identified. The only information disclosed is the addresses of bitcoin in which the payment has been sent/received.

Although it is not impossible to determine who a bitcoin address belongs to. There have been other Altcoins developed specifically with more privacy in mind.

Easy to set up

Unlike banks, setting up a bitcoin account is fast and requires no additional charges. There is also no need to worry about certain limitations or creditworthiness when transferring money.

Note however that most online exchanges will now make clients go through the same KYC (Know Your Client) / FICA (SA Legislation) requirements when opening an account or making an investment. This is not the case, however, to get a wallet to be able to send and receive bitcoin or other Altcoins.

Offers financial freedom

Bitcoin makes it possible to send and get money at any given time, anywhere in the world. The added advantage of this freedom is that you are not limited by currency, in the sense that you are able to move value around the world freely and easily.

Some countries are starting to try to regulate cryptocurrency to try to prevent the circumvention of exchange control, but it will be unlikely that they will ever be able to completely plug the holes since they can regulate online exchanges operating in their country, but they are unlikely to ever stop direct peer to peer transactions.

Timeous

In comparison to ordinary banking channels, bitcoin transactions are relatively fast. The Bitcoin network has started becoming slower as the volume of transactions has been increasing.

This has been one of the main reasons for the forks (different versions of bitcoin coming into existence) that recently took place on the network since the community couldn’t agree on how exactly to solve the problem. Certain Altcoins have therefore been designed specifically with transaction speed in mind.

Decentralised

There is no one central authority that controls the bitcoin network. Within the system of mining bitcoin and making transactions, the machines responsible for such work together. This means that no central authority controls the issue and movement of bitcoins.

With all the advantages of bitcoin it is important to know the good vs the bad so make sure you ask your certified financial planner to explain the known disadvantages of the cryptocurrency to make an informed decision.