*Disclaimer: We do not recommend any cryptocurrencies; we do not hold cryptocurrencies at Charles Schwab and Co. institutional through Schenley Capital, Inc.; this is an extremely volatile asset class; at this time there is little to no backing; cryptocurrencies are not for everyone. Let us know if you have additional questions about cryptocurrency.
We have received a ton of questions lately from people asking about Cryptocurrency. What is it? How can I purchase it? If you’re trying to wrap your head around what Bitcoin, Ethereum, and Dogecoin are and how you can get them, don’t worry, you’re not alone. First, I’ll start by explaining what cryptocurrency is, and then get into how to purchase it on the various platforms that are currently available.
Cryptocurrency is an asset that is digital and can be stored on your computer, or any other digital device. These digital assets, or what most people call “coins”, are verified through a process called the blockchain. The blockchain is a process in which there are multiple computers on a network verifying transactions and coin ownership by communicating with each other, making sure that the network is correct and secure. Let me give you an example that is easy to understand.
If you and another person are playing a game like tic tac toe, and you have been keeping score on a scorecard, your opponent could change their scorecard and claim falsely that he/she won. With blockchain, it is as if there are multiple people writing down on their own scorecards what happened; coming to a consensus to verify that you are indeed the winner. If the majority of the scorecards say that you’ve won; however, your opponent is saying you lost, then you know that their scorecard isn’t true. The same can be said about blockchain with cryptocurrency. When people talk about mining Bitcoin, what they are essentially doing is verifying the transactions the same way the people in the example were checking their scorecards.
This process is very secure because there are thousands of people mining and verifying the transactions by the minute. Nobody has been able to counterfeit bitcoin successfully on the bitcoin network. The only way to counterfeit and compromise the network is to take over 51% of the total mining power, which is almost impossible, given the tens of thousands of miners that there are in the world. The network rewards miners with bitcoin for verifying the transactions; thus, incentivizing the miners to continue mining and verifying.
Next, let’s talk about how you can go about buying and storing cryptocurrency. To get started with buying cryptocurrency, the first thing that you need to do is register on a cryptocurrency exchange that buys and sells crypto. Some of the safest crypto exchanges include Binance, Kraken, Coinbase, and Gemini. This is where you can connect your bank account or credit card to buy and sell cryptocurrency.
The next thing is a wallet. There is a unique set of numbers and letters that can be used to send and receive crypto on the networks. Every crypto has its own network and wallet address. You cannot send someone Ethereum to their Bitcoin wallet because the two are on different networks; you are only able to buy and sell Ethereum on its own unique Ethereum address. The exchanges automatically create a wallet for you, and you can easily make a storage wallet on your smart device or hard drive to safely store your crypto assets. Some even put their cryptocurrency into their own wallet because it is a much safer option than keeping it on an exchange, with the potential to be hacked. However, the downside to keeping it on a physical hard drive, or wallet, is that you could lose it or have it stolen.
There are some companies like BlockFi, that offer interest for keeping your crypto in an account. Just make sure to do your research and double-check before you deposit your virtual currency just anywhere, because there is a risk that you could send it to the wrong address or risk that you could be scammed.
Overall, there is still so much potential for cryptocurrencies being used in the real world, either as a better alternative than paper money, or being used as a store of value to hedge against inflation because of its limited supply. If you have any questions or concerns about cryptocurrency, don’t hesitate to reach out to us at Schenley anytime.
Written by Jack McCormack
Schenley Capital, Inc.