This guest article is written by our Gents Place car expert Brett Hatfield. You can find more of his writing
What are Cryptocurrencies?
You've heard it in the news, at the water cooler, and even from us here at The Gents Blog. Earlier this year we talked to you about the difference between Ethereum and Bitcoin, and way back in November 2014 we first told you about Bitcoin and even encouraged you to purchase $20 worth for yourself and learn more about the platform. That was when BTC, one of the cryptocurrencies, was trading between $300-$500 per bitcoin. So, had you taken our encouragement back then, you might be sitting on some handsome gains now. That said, it's not "too late" to get involved in this new development in technology and currency, but before you go out and buy $20 of any cryptocurrency (yes, there are others other than Bitcoin), it's important to take a moment and revisit what the fuss is all about.
So what is cryptocurrency?
Most people will willingly acknowledge that in the last 15 years, cash and even checks have been used less and less in favor of online bill pay, credit and debit cards, and most recently, systems like Apple Pay. One component of the discussion is payments. Another is money itself. Cryptocurrency is disrupting both payments and money.
In today's world, both payments and money are very centralized. Digital payments have major players like Visa, Mastercard, American Express, etc. and the barrier to entry into this market is impossibly high. Money is also usually backed by governments themselves, which are themselves centralized, often within a central bank. So, the world as we have it today is coherent and understandable to many - there are a few entities we use to make payments, and many currencies we could use to make those payments.
The question that cryptocurrency is posing is: does it only have to be this way? Why not introduce a bit (or a lot) of competition - not just in currency as a medium of exchange, but as an investment? In fact, one of the big discussions happening between those who are promoting cryptocurrencies as a digital alternative to cash and those who also consider it a store of value, akin to gold. The long-term answer may be both (or unforeseen third and fourth possibilities), but those who are taking the time to educate themselves about the trends will have the opportunities to capitalize on the opportunities.
If you can understand that Uber decentralized traditional taxis and Airbnb decentralized hotel stays, you can understand that the players in the currency game, not simply taxi drivers or hotel magnates, but giants like Visa, JP Morgan, and the United States, for example, are not going to go quietly into the night while competitors move in on what has been the only game in town for a long time. It's still very much early days in this new development in currency and payments.
Now that you hopefully have a better sense of what cryptocurrencies are in the big-picture sense, in a future article we will discuss how they work and how they can be acquired, traded, and held.
Do you have any cryptocurrencies you are long on? Share them with us in the comments below.
About Ben Davis
A serial entrepreneur, Ben Davis is founder of The Gents Place and a leading investor in gentlemen's refinement and confidence.
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