More complex information technology mixed with the finance jargon
Crypto currency took the world by storm in 2017/18, with promises of financial freedom, security, self reliance and the new type of money which will destroy by demolition fiat money (paper money). Well to some extent that has happened, free flow of money and a cheaper way of transferring funds globally with literately no physical office. It’s become the biggest bank in the world.
This was led by Bitcoin. It all starts with the term block chain technology backed by Cryptography (complex math equations and formulas representing money or value). This block chain allows a ledger of all the transactions of Crypto currencies to be stored on different computers spread out by the users. That’s where the magic happens with decentralized records (ledger) in different servers (storage), providing higher security and more privacy.
Well in terms of an investment, we think it’s still the same as most financial instruments with prices going up and down. Its pivotal that one should research and invest with caution. Speculation will never end in the financial industry, this was evident when the Bitcoin bubble busted from $20,000.00 to $3,500.00 through 2018, it was too overvalued. This intuitive gambling game will never go away as human’s greed for higher profits will always be widespread. Our focus will be comparing the similarities in these financial instruments we use as a store of value (wealth) and plan to use as money.
The Analogy
Backed by hope and belief – The proverbial illusion of money!
Both forms of payment seem to be backed by nothing, crypto currency and fiat money are not backed by anything, except of course our belief that it has value and can be accepted as payment. Fiat money used to be backed by gold but the Richard Nixon administration removed the gold standard. The dollar is backed by U.S economy which is full of public debt and credit.
Used for Criminal Activities?
Fiat money has been used for corruption, bribery and to purchase goods and services on the black market. Well that stands true also with crypto currencies been used on the “Dark Web”. Crypto currency can be traced to some extent but that’s not the same for fiat money doesn’t leave a trace.
Highly transferable
Both fiat money and crypto currencies can be easily transferable with “Cryptos” having an upper hand. Fiat money is highly regulated so it takes a little more time. Both can be represented in digital forms e.g. code, formulas.
Tips for investing in crypto currency
Never invest money you are not willing to lose. It does some like something Warren Buffet would say. Cliché! However it is important to do your research, know and understand what you are investing in. In addition, you need to understand how fast you can sell your crypto currency for readily available cash. But most importantly seek advice for a financial expert( Preferably Financial insight Zambia) 🙂
