What is Crypto?
Crypto – encrypted currency – is simply a different kind of money. It’s not owned by the government but by you.
The money we use now is issued and controlled by our governments and held in a bank who we pay in one way or another for the privilege.
In contrast we buy crypto coins or tokens from someone else on an ‘exchange’ and hold them in our own personal ‘wallet’.
We use crypto just like we use money – to pay for things, to get paid for things, to ‘invest’ or save and so on. Crypto also has many other uses but more about that later.
In a way we’re going back in time, to before governments and banks got involved and took control. Back to a time when towns and organisations issued their own money for their citizens or members. ‘Finance’ was ‘decentralised’.
Money in the form of crypto is also ‘decentralised’ instead of being under the control of governments and their central banks.
‘Crypto’ is simply an alternative to having our wealth – or money – under control of a central organisation and taking control of it ourselves.
Is Crypto a ‘Scam’?
The simple answer is crypto itself is not a scam, but like any other form of money it can be used in one. A scam is just another word for fraud which has been going on long before crypto came on the scene.
There are lots of stories about crypto scams.
The most frequent is when someone suggests you open an account where they will buy crypto for you and trade with it to make you a (huge) profit – but there are also people who do that with stocks and shares and other things. Most of the time you will never get back the money you put in although sometimes you’ll get part of the trading profit along with requests for more money or that you plough the profits back in. It’s extremely difficult to get out of these schemes.
Another fraud is the ‘pump and dump’ scam where you are induced by seductive marketing to buy something which has ‘huge potential’ and then once the value has reached its target the perpetrators simply take the money and run, stop promoting the ‘opportunity’ and disappear. The value crashes and you lose. Again, this doesn’t only happen with crypto.
Without someone you trust to guide you it’s essential to research any ‘money making’ opportunity or ‘get rich overnight’ scheme before you commit any funds.
“I Lost all my Crypto”
There are other ways people have ‘lost’ crypto and it’s to do with how it’s stored – the wallets. Originally your crypto records were stored in a physical ‘offline’ wallet in the form of a small USB drive for which you’d have an extremely complex ‘key’ or password to get into it. Only you had the key and the physical wallet. Obviously if you lost either of them, as many people did, you lost your money and there was no way of retrieving it!
Now we have new ways to store crypto online in individual ‘soft’ wallets to prevent these types of loss, and although we call them ‘online’ they’re not directly connected to the internet so can’t be hacked. It’s much safer and more secure.
We access crypto via an ‘exchange’ where it can be bought, sold, and stored. We have a personal wallet for each type of coin and can transfer money, as coins, to someone else’s wallet direct or move it out into ‘fiat’ or government money in our bank account. Sometimes, but not always there are fees for doing these things but compared with the fees we pay banks and credit cards they are extremely small.
We will soon be able to use our crypto funds to buy almost anything through direct transfer or via places like PayPal, Amazon, Visa and Mastercard who are all introducing facilities for payment using crypto.
Using an Exchange
If you look at the market leading exchanges like Coinbase or Binance you’ll find them very complex and not at all user friendly. Most exchanges are designed not for the retail market (people like us) but for traders who want to buy and sell several times a day to make a profit. Generally, they ‘know what they are doing’ so there is little or no customer support.
Now, there is a ‘new breed’ of exchange who focus on ‘wealth building’ by retail customers and these are led by one called Dacxi, more of which later.
What’s in it for you?
Why should you move into crypto? There are several reasons.
You’ve seen how crypto performs better than other asset classes and you’ve read how you can regain control of your financial assets.
At the moment (but maybe not for long) crypto is not seen by the authorities as ‘money’ itself but as an asset like a work of art or property on which tax can only be levied when it is bought or sold and there is no VAT (sales and purchase tax) payable when we buy or sell crypto.
Crypto gives us the opportunity to easily create a portfolio of assets (different types of crypto) without the need for a fund manager as we might have with stocks and shares and alongside this various companies are developing different types of pension plan based on crypto instead of cash or the stock market.
Crypto is the ‘money of the future’ and the not too distant future at that.
Key Things You Need to Know
- What is the internet security rating of the exchange you are dealing with?
- Does the exchange have a licence to trade issued by the appropriate authority?
- Does the exchange have sufficient and appropriate insurance cover?
- What are the credentials of the people who operate the exchange?
- What level of customer support and service can you expect?
- Can you easily withdraw your funds?
- How easy is the exchange to use?
- What information does the exchange provide?