In the first few weeks of this year, the US stock markets and the entire financial world were rocked when the stock for US retailer GameStop was shorted.
As buyers flooded the market to snap up those shares, other securities and cryptocurrencies experienced a dramatic increase in share price. Nothing remarkable about that; it was just the law of supply and demand at work.
Ultimately, brokerage firms and, in particular, the app Robinhood had to put a stop to the buying frenzy because they did not have the resources to ensure all of the orders' fulfilments. Inevitably, the event's aftermath saw share values sharply decline, with loss estimates ranging in the billions of dollars.
Such is life at the new financial frontier.
Sensational examples such as GameStop aside, that frontier opens onto a whole new world of wealth, money and security.
At a time when global financial markets appear to be in a precarious state and personal information concerns are at an all-time high, along comes the promise of minimally intrusive, secure investment vehicles: cryptocurrencies.
Glaswegians - smart, informed lot that we are, are completely ready to ride this new wave. We only need to learn how to.
Learn About Cryptocurrency Fundamentals
For some, the prefix 'crypto' has sinister overtones. Did it evolve from the word that describes dank, dark places where the dead are stored - crypts? Might it be of a kind with cryptosporidium, sometimes referred to as crypto (as cryptocurrencies are), a parasite that can cause severe respiratory and intestinal illness in humans?
Crypto, from the Greek word kryptos, means hidden or secret.
Suddenly, calling digital currency crypto makes a whole lot more sense, no? Its 'hidden' nature dictates that those interested in cryptocurrency have to explore the concept.
The first thing to know about these currencies is that there are three different types: digital, virtual, and crypto.
Digital currency represents all digital money-like assets. These assets may be exchanged via the internet or stored on a computer. The Scottish Reserve Bank holds its reserves in digital form; so do the Central Banks of other countries. These digital assets are regulated.
Virtual currency is also a digital currency; the primary difference between the two is that virtual currency is unregulated. Virtual currencies are used within specific virtual communities and are managed by their creator(s) or developers, not by government or finance officials.
Cryptocurrencies are both digital and virtual but they have unique characteristics that set them apart from both of those designations. For one, they are decentralised, meaning that there is no main authority that governs their activity.
That principle alone runs contrary to the standard hierarchy that underpins practically every institution, from financial/governmental to religious. Cryptocurrencies' attraction - even over virtual currencies is that there is no one at the top to influence or dictate how transactions will take place. Indeed, there is no top.
Imagine an accounting house's main ledger, wherein all transactions are recorded. No single person is responsible for making the entries; whenever a transaction takes place, the person executing it enters it in that ledger. There is no oversight; nobody is going to review the entries for accuracy or conduct audits.
The cyberworld's equivalent is called a distributed ledger. Rather than being a massive, centralised storehouse of transaction data, the concept relies on accord and synchronisation of data across multiple websites, institutions and/or countries. The most renowned distributed ledger design is the blockchain.
This decentralized data stream requires a peer-to-peer network as well as an algorithm to ensure consensus across the system's checkpoints, called nodes. By design, human interference is minimal to none.
Did you know that cryptocurrency lessons in London spend a great deal of class time explaining exactly how blockchain works?
How Does Cryptocurrency Work?
If you've ever lent anyone money or paid cash for anything, you have an idea of how cryptocurrency works.
The mention of a peer-to-peer network should have given you a clue that cryptocurrency eliminates the need for any third parties in your cryptocurrency transactions. We're getting ahead of ourselves a bit in pointing that out but it is important to know that you won't have to rely on any apps external to the system when processing crypto transactions.
With that sorted, let's back up a bit.
How cryptocurrency works depends on what you want to do with it.
If you simply want to get in on the ground floor of a lucrative investment opportunity - as my mate in Leeds did after learning about cryptocurrency's potential, direct yourself to a cryptocurrency exchange, open an account, choose how you will fund that account and, once approved, you can start buying.
You don't have to move the crypto - digitally or actually. The blockchain ensures your ownership of however much currency you buy. Simply let it ride the market fluctuations until you're ready to cash in on your investment.
If you wanted to save money for a major purchase - say, a car or a home, you could set up a small contract. That entails investing money in cryptocurrency and programming a date for those funds to be released.
The concept is similar to buying a certificate of deposit (CD) at your bank but you get to set the date of withdrawal and, even better, you get the full benefit of your investment. No institution will use your money to generate profits for themselves.
Finally, as more retailers adapt their systems to accepting cryptocurrencies, you may use your crypto for ordinary purchases. For those transactions, a QR code takes the place of the standard debit or credit card. Simply flash your code at the code reader and the funds are automatically transferred from your crypto wallet to the merchant's.
Keen investors across the UK are taking cryptocurrency classes to learn all about these opportunities.
Learn Cryptocurrency Pros and Cons
So far, we've extolled on the virtues of cryptocurrency, with security and privacy being paramount. Are there more benefits to be had? Are there any downsides?
As this market is relatively new, it is highly volatile - that is both good and bad. As an investment vehicle, it might be risky but, if you play the market judiciously, you're likely to come out ahead. Now, for a few other pros of cryptocurrency:
- As it is decentralised, it is not tied to any sovereign currency. Not only does it make global trade far easier, but its value cannot be inflated or deflated by any government.
- No third party can cash in on your money
- Transactions are swift and difficult to fake; fraudulent activity is nearly impossible
One of the main pros of this system, its privacy, also signals one of its greatest drawbacks. Bad actors prefer to operate in obscurity; moving money around the blockchain allows them to fund their operations with no financial paper trail to track them with. Other negatives include:
- While the blockchain itself is secure, the wallets and other tools related to cryptocurrency may be vulnerable to attack
- note that the blockchain has never been hacked but the entire crypto system is software-based; there are vulnerabilities, at least in theory.
- There is no way for you to recover lost crypto and no way to protect your investment's value. Should your coins be stolen somehow, you will have no recourse and no central authority to appeal to.
- declaring your crypto's value on your taxes can be a tricky affair
Considering that the cryptocurrency system, as it now exists, is less than 20 years old, there's bound to be a few kinks in the system that need to be worked out. What's important when deciding whether cryptocurrency is right for you is whether the benefits outweigh the risks in your particular circumstances.
As one cryptocurrency class in Manchester puts it: don't trust a no-risk proposition and don't be blind to risk.
Cryptocurrency Lessons in Glasgow
As cryptocurrency is a digital affair, the best crypto classes are offered online.
The New Skills Academy offers a comprehensive course that covers everything from the basics of cryptocurrency to how to use and store your crypto cash. Details on how to mine for cryptocurrencies and what the future holds - developing cryptocurrency laws are also covered.
The site Learning Crypto currently offers a free course for those interested in learning about Bitcoin and Altcoins - the name for all cryptocurrencies besides Bitcoin. Their syllabus includes in-depth looks at the theory behind Bitcoin and how wallets work. They also have a lesson dedicated to investing safely. Understanding bull and bear markets is their most interesting study module.
Should you prefer direct interaction with a cryptocurrency master in the Glasgow area, turn to Superprof.
Shahid has been on the cryptocurrency scene for 10 years; he has vast experience with investing, trading and teaching others how to make sense of the crypto world. His courses are conducted one on one via webcam; their format more resembles a seminar than a series of ongoing lessons.
Of course, the whole premise of cryptocurrency is based in the virtual world so, if you wanted a Superprof from any other city - in the UK or around the world, that would certainly be your prerogative... and a good choice, as most Superprofs offer their first lesson at no cost.
Now, find out where Brummies get their crypto education from...