A Tale of Two Monies

Key Takeaways

  • In 2009, a new form of currency called cryptocurrency was created, and Bitcoin was the first of its kind.
  • Cryptocurrency is a digital asset medium of exchange that is private, decentralized, and controlled by the number of units that are created.
  • Unlike traditional forms of currency, cryptocurrency works like a commodity in that it is very volatile and you can make a lot of money one day, and lose a lot the next.

You’ve probably played Monopoly before. You roll the dice, land on a piece of real estate, take your money and buy it. Maybe you run out of money and then you leverage it, then buy even more and hopefully you make it through and win. But you could go bankrupt, or you can make a lot of money. It’s funny money and it’s fun to play with because there’s no harm in it!

Up until 2009, we really only had one kind of currency to deal with and it was issued by governments as centralized currency like the dollar. Now we have cryptocurrency, and the first one of its kind that was issued was Bitcoin.

What’s cryptocurrency? It’s a digital asset medium of exchange. It’s private, decentralized, and there are secure transactions in a thing called blockchain. It can be controlled by the number of units that are created online for that particular cryptocurrency, and now there are hundreds of them available to work from.

What’s the difference between cryptocurrency and traditional forms of currency? When we look at the US dollar as an example, that’s governed, it’s centralized by our government with the Federal Reserve System, and it’s controlled and remains fairly stable. It can get a little volatile over time, but not anywhere near what you see with cryptocurrencies. Of course, there’s other governments who issue other currencies like the British pound, the euro, and so forth, and they also tend to be fairly stable.

There’s an allure with Bitcoin because it’s private and decentralized, no big brother watching over you. However, that currency has gone up and down in value like a commodity. One week, it’s up over 100%, and the next, it’s dropped by 50%. So you can get really hurt, or you can make a lot of money because it works like a precious metal and it’s subject to the whims and changes of those who are trading that money for goods and services.

Is cryptocurrency going to be here in the long term? We’ll see, we don’t know which one’s going to make it. Will it become more stable? It depends on how that medium develops over time, but at present, it’s a very volatile way of going about transacting business. If you are holding Bitcoins, you can make or lose a lot of money in a very short period of time because of that high volatility level.

Until next time, enjoy!

Please note: I reserve the right to delete comments that are offensive or off-topic.

Leave a Reply

Your email address will not be published. Required fields are marked *