The Layman’s Guide to Cryptocurrency

If you work in finance, banking, or investment, you must have heard the words ‘cryptocurrency’ and ‘Bitcoin’ flying around. In fact, as we stand today, there are more than 10,000 cryptocurrencies in the world with a value of $919 billion. With this ever-increasing pace of adoption, you might be wondering, ‘are cryptocurrencies right for my organization?’ or ‘shall we start investing in Bitcoin?’. If these questions are crossing your mind, we have the answers for you.

In this article, we’ll introduce you to cryptocurrencies, how you can get them, and whether they are a good investment.

What are Cryptocurrencies?

Cryptocurrencies are digital currencies that are exchanged on a decentralized ledger called a blockchain that facilitates all kinds of financial transactions.

When using a blockchain, there is no centralized bank or government mediating the financial transactions between parties. Instead, the blockchain automatically mediates all transactions by storing every set of transaction information in a block that is highly secured with cryptography. This ensures the safe and tamper-free recording of all transactions. It also enables the automatic verification and authorization of parties, so financial transactions take place with ease, speed, safety, and more cost-effectiveness.



The Pros of Cryptocurrencies

Owing to their reliance on blockchain technology as well as their removal of all intermediaries in transactions, cryptocurrencies present users with a huge set of advantages. Here are some of the many benefits of using cryptocurrencies.

1. They are global currencies
Cryptocurrencies are not tied to any particular jurisdiction. As such, they can be used anywhere and transferred freely from one country to another. In fact, due to the ease by which they facilitate international transfers, they are expected to play a growing role in the remittance economy.

2. They are exchangeable with fiat currencies
Fiat currencies are currencies legally issued by a jurisdiction such as the USD or GBP. Some people fear that cryptocurrencies can only be used in the ‘digital’ world. However, they actually can be exchanged in crypto exchanges for fiat currencies which you can use in the ‘real’ world. This exchangeability makes cryptocurrencies highly valuable as you don’t need to wait for wider adoption in order to start using them.

3. They are highly secure
As the prefix implies, cryptocurrencies are highly cryptographed currencies. In other words, they are secured by sophisticated cryptography which makes it impossible to change any historical records on the blockchain. Not only that but blockchains also use a two-factor authentication process to allow transactions. This makes cryptocurrency transactions one of the most secure financial transactions out there.

4. Crypto transactions are faster and more cost-effective
Since exchanging cryptocurrencies for products, services, or fiat currencies on the blockchain is an automated decentralized transaction, all intermediaries are eliminated. Such elimination significantly reduces the cost of transactions for every purchase or sale you make. It also significantly enhances the speed. In fact, according to a recent study, ‘Bitcoin transactions take an average of 10 min to settle…In severe situations, this might last for several hours or even days……but it’s an average of three days of bank transactions processing.’ This is a very luring feature to consider if you’re considering adding cryptocurrencies to your organization’s treasury.

5. Cryptocurrencies are market-based
You may see this as a pro or a con, but the point here is that the value of a cryptocurrency is only dependent on the changes in supply and demand. No government interventions could falsely increase or decrease its value. As such, cryptocurrencies are extremely transparent currencies.

6. They are growing in adoption
Although blockchain technology appeared in 2008, the first cryptocurrency ever, Bitcoin, was introduced in 2009. Despite their promising benefits, cryptocurrencies’ adoption did not grow as fast as anticipated. That being said, their usage has still been growing steadily since the inception of cryptocurrency. In fact, now some major companies such as, AT&T, Microsoft, Overstock, Shopify, Rakuten, Home Depot, and Rolex are already accepting them as valid modes of payment for their products and services.

How to Obtain Cryptocurrencies?

One of the most pressing questions that people interested in crypto have is ‘how to get it?’ and ‘where to keep it?’. In the section of the article, we’ll provide you with simple non-techy answers to these questions.

Buy a Cryptocurrency

The first thing you need to do is to obtain cryptocurrencies.

You may have heard of ‘mining’ as a way of obtaining cryptocurrencies. However, as easy as ‘mining’ sounds, it is actually almost impossible for individuals to ‘mine’ cryptocurrencies. Why? Because although technically speaking, all you need to mine is a computer and an internet connection, the amount of energy your computer will need to mine can be the equivalent of an entire country’s consumption. As a result, only big organizations in actuality have the resources to mine cryptocurrencies. In fact, a recent study by MIT shows that 10% of miners account for 90% of the cryptocurrencies’ mining capacity.


So what can you do?

There are much easier ways for you to obtain cryptocurrencies. In fact, it is just as simple as buying fiat currency. All you need to do is select a broker or a cryptocurrency exchange platform to buy cryptocurrencies. You’ll find many options for exchange platforms. Review their fees and features well before you make the choice.

Once you have selected your broker or platform, you’ll need to fund your account with fiat currency in exchange for the crypto ones. Now, you will have cryptocurrencies in your account and you will be free to make ‘buy’ or ‘sell’ orders using your broker or exchange platform’s website or mobile application.

Where to Store Cryptocurrencies?

Cryptocurrencies are digital non-tangible assets that you can only access using a private key. So it is important that you store this digital key in a safe and secure place to prevent unauthorized access to it and your cryptos. Most crypto exchange platforms will provide you with crypto wallets to store your private key safely. However, depending on the platform, you may be offered a ‘hot’ or ‘cold’ wallet.

● Hot Wallet– These wallets are digital. They provide you with online software that you can use to securely store your key.
● Cold Wallet– These wallets are physical. They provide you with an offline electronic device that you can use to securely store your key.

Wallets also use high-security practices to ensure the safety of your key and, thereby, your assets. However, it is worth noting that they are not as secure as the blockchain itself and that, in fact, many cryptocurrency breaches happen through crypto wallets and not the blockchain.

Proceed Wisely

As promising as cryptocurrency is, it is still a currency in its infancy and it is still highly unregulated and unprotected by law. Therefore, as an intelligent banker, investor, or financier, weigh the returns against the risks; the benefits against the costs, and proceed wisely.

How Can XpertLearning Help?

This has been our introduction to cryptocurrency. If you are interested in knowing more about fintech, artificial intelligence applications in finance, cryptocurrencies, and potential tech-induced disruptions in finance, check out our banking and finance courses. These courses are presented by our partner, Intuition, a leading global knowledge solutions company helping financial professionals develop the skills and expertise they need to unlock their potential.



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