Crypto 101 reddit

Having said that, Lisa is absolutely right in saying that businesses, especially small ones, should not hold cryptocurrencies. So there is a smart way to do it and a not-so-smart way. What about the big banks? Do you foresee a day when cryptocurrency is integrated into our financial system? There are certainly big questions around the banks, with different entities offering different services nipping at their heels. As indicated, I see Blockchain networks as a common infrastructure that allow value transfers across a wide spectrum.

At the moment, our financial infrastructure is extremely siloed. The payment network is prohibitively slow: If you send money from a savings account at CIBC to an investment account at TD, it takes at least two days for the funds to arrive. That makes no sense in the modern world, when everything else is instantaneous. Clearly, massive value can come from working on common platforms — as we have seen with the Internet.

With a blockchain, you could trade assets on different platforms. And God forbid if you want to do anything across borders. If a common resource was available for all of these transactions, it would be very valuable. Imagine if all securities could live on a common platform and be pooled. That would be extremely valuable for the functioning of markets. Conceptually, there are huge potential efficiency gains and cost savings if this is deployed properly.

The big question is, If the world moves to an open platform, what will be the role of banks? Bank leaders need to think carefully about this. What new products can they offer and what would become redundant? How can they ensure their relevance and survival? Will we start to see large enterprises hiring talent that specializes in this area? First of all, because new services will emerge.

If we move to decentralized platforms — which I hope we will, because there is value in doing that — then new service providers will emerge to help firms navigate the system. And of course, you will need people in your finance or accounting department who are able to interface with these service providers and understand what is going on.

There are significant opportunities on the horizon that will require lots of learning and re-learning for the organizations that embrace these opportunities. It has been said that China is currently developing its own digital currency. What are the implications of this? Central-bank-issued digital currencies are an emerging issue and a completely different beast from cryptocurrencies. Central-bank issued currencies are digital representations of fiat currencies — government money — and we will definitely see them proliferate in the future.

China is basically developing a digital representation of the yuan that lives on a particular network. Those two apps alone make up 90 per cent of its payments market. They are extremely efficient and user friendly, which will make it difficult for the digital yuan to compete directly with them. As a result, China will likely apply some form of pressure for people to use it or for Tencent and Ant Group to include it in their services. Personally, I am concerned about the power that Tencent and Ant Group can amass with the payments data that they collect.

Currency and Banking Databases also raise a lot of questions about privacy of information and the stability of banks when people move deposits into central bank digital currencies. At the same time, existing electronic bank payments are also very expensive for consumers and merchants. There is a very strong case that people should have an option to participate in the digital economy. All of this is a huge area of interest these days. How is the stream unfolding so far? The Blockchain Stream at CDL Toronto brings together experienced entrepreneurs, economists and active investors to help scale ventures based on technologies underpinned by, or core to the advancement of, blockchain technology.

When it first started, there was a lot of skepticism around blockchain. Nobody is working on Bitcoin or, God forbid, Dogecoin. Our CDL participants are doing serious work to advance the field and they and I! What does a typical start-up look like in this stream? There is such a wide variety. That is a sample of what we have seen so far. But the innovation has just begun.

He recently co-authored a design proposal for a central-bank issued digital currency, commissioned by the Bank of Canada. Deconstructing the Digital Goldrush By Kunal Sawhney Generations of Finance and Economics students have learned about fiat currencies—government-issued currencies that are not backed by a physical commodity such as gold or silver, but rather, by the government that issues them.

There are currently around such currencies in the global marketplace, including the U. But cryptocurrencies are very different—and their proponents believe that this difference is what justifies their utility. Digital currencies are not regulated by any central bank, or for that matter, by any authority whatsoever. They do away with so-called intermediaries—despite the fact that in the real world, it is these very intermediaries that infuse confidence in a currency as a method of payment.

Instead, they can be exchanged on a peer-to-peer network with transactions recorded on blockchain technology. According to the U. Treasury Department, if any country deliberately influences the exchange rate to gain an unfair competitive advantage over other exporters, it amounts to currency manipulation. For example, a government may attempt to keep its currency weaker than the U. In August , the U. If predictions come true and cryptocurrencies become universally accepted in global trade, currency manipulation will become a thing of the past.

During recessionary phases, countries print money to infuse liquidity into the market. The fact that no one authority regulates cryptocurrencies makes them invulnerable to manipulation — but it also means that if the global economy falls into a recession, crypto cannot be printed or in this case, mined to infuse liquidity in an economy, nor can it be purchased or sold to support any other currency.

Following are some other reasons to be cautious about cryptocurrency. Whereas a 15 to 20 per cent rise or fall in prices has become the new normal in the crypto space, such fluctuations would signal a market crash or a record bull run in the stock market space. Figure One above depicts the volatility of Bitcoin in recent months. These ETFs invest directly in physically settled digital currencies instead of futures or derivatives.

When currencies were introduced in the days of kingdoms with rulers, there were no central banks to exercise oversight. Questions arose as to how much money should be minted or printed? Will the same minted coin be acceptable tomorrow in case the kingdom sees a change of sovereignty? Which authority will be answerable for any disturbances? The doubts never allowed those copper and gold coins to become sustainable.

Checks and balances were not a want; they were a need. The world, torn after devastating wars, needed economic, financial, legal, political and social stability. Oversight authorities bring transparency and predictability to any field. Thanks to them, one knows where to report a theft, where to report financial fraud, or where to report misguiding statements in an IPO prospectus. But at least for now, such checks and balances are non-existent in the crypto world.

Factories produce goods that have or can have demand in the market. This demand is a product of the utility of that good. Price is a factor of the cost of production and demand and supply forces. More demand and less supply results in a price increase. This statement holds some value in the case of cryptocurrencies, too. From multibillionaires to large portfolio investors, the demand for cryptocurrencies is relatively high.

Start small. Safely Store Your Private Keys in a Wallet Once you buy some crypto, your next decision is how to store your private keys. To quickly recap, hot and cold wallets live on and offline, respectively. A hot wallet lets you access and trade your crypto with ease, and security measures protecting them are better than ever. But hackers are getting bolder, which is why some crypto traders, and especially long-term holders, choose to save their private key to a cold wallet — a USB or hard drive that they keep in a safe.

You can also look into cryptocurrency savings accounts that pay you interest on your crypto as a storage option. The only way to do this step incorrectly is to buy crypto and completely forget about it. You avoid crypto investment missteps by: Adding your crypto to your main investing dashboard so you can monitor its performance over time. Since crypto trading is still the Wild West, check headlines regularly to monitor regulatory scrutiny of your chosen exchange.

Immerse yourself in crypto communities. Visit the crypto subreddit , then sort by new and hot topics. Consider also joining a crypto community via your preferred social media platform, or even attending in-person crypto conferences or meetups. Monitor which governments are banning crypto or, conversely, blessing it as legal tender and building a Bitcoin city on a volcano.

Continue to self-educate on new cryptos and blockchain implementation — and even get paid in crypto for it on Coinbase Learn. Here are some other, lower-risk methods to consider. I wrote a guide on how how to start mining Bitcoin in 60 seconds. You can also invest in the crypto industry by purchasing shares of companies that are heavily focused on or invested in the future of cryptocurrency.

Invest in the Blockchain One final method of investing in crypto without buying crypto is to invest in the technology supporting it: blockchain. Today, that number is It may tank, or it may continue its skyward trajectory. Support an emerging technology: Blockchain technology is touching nearly every sector — public, fintech, medical— and your investment in crypto is supporting those sectors.

Most victims of the Mt. Gox hack, where , Bitcoin were stolen, has yet to see a single coin returned. Being paid in crypto or by airdrop. Should You Invest in Cryptocurrency? You believe in the mission of crypto and blockchain: Maybe you believe in the positive aspects of crypto and blockchain technology, and perceive it as a form of ESG investing. If that gives you more anxiety than excitement, it may not be a fit for your portfolio. Want free crypto? The Bottom Line Cryptocurrency has never been easier to buy and invest in.

Crypto is still the Wild West in many ways. It's a frenetic gold rush with a lack of regulatory oversight — although President Biden's crypto executive order could soon change that. If you do choose to invest in crypto, be sure to self-educate on the risks, best practices and keep an eye on the industry.

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