Bitcoin and Cryptocurrency | A Non-Techy’s Guide

Disclaimer: This guide is sponsored by PDAX, a local cryptocurrency exchange platform in the Philippines. All views and opinions expressed in this post, however, are based on my personal understanding of Bitcoin and Cryptocurrency. This post may contain strong opinions that should not be construed as financial advice. If you think something is mistakenly conveyed, don’t hesitate to drop it in the comment section or contact me through email: sheila@pinayteenvestor.com. It will be much appreciated.

Bitcoin. Cryptocurrency. Blockchain. I am sure you have come across these terms already.

Perhaps you’re thinking whether the people sharing these things are either pure retards or just mere humans who are talking alien languages.

Well, you might be right.

Everyone must have heard these things already but only a few took time to do their research and eventually earn from it. And I am one of those. 😉

But if you think this article will give you some free money strategies, then I am afraid this is NOT for you. 

The sole purpose of this post is to educate the general public, especially those who are having difficulties in absorbing the concept of Bitcoin and Cryptocurrency.

I strongly believe that you should never invest in something you do not know. And as someone who advocates financial literacy, I am taking this initiative to help you simplify the complexity of these newborn currencies.

I actually made the same content three years ago, when I was still on hype and stayed for the free money. But now that I get a better understanding of the technology behind, I am sharing this once again.

Before going into technicalities, let me just share how I got to know these things.

My Experience with Bitcoin and Cryptocurrency

I first encountered Bitcoin way back in May 2017. It piqued my interest when someone shared how he made money from it — literally out of nothing. So this curious cat challenged lady luck!

My curiosity eventually led me to MLM (Multi-Level Marketing) and HYIP (High-Yield Investment Program) investments which are using cryptocurrencies as their front end.

And of course, you and I know how they turned out!

S-C-A-M-!-!-! 🚨🚨🚨

But that did not stop me from studying Bitcoin and Cryptocurrency down to their cores. In fact, that scam experience became my anchor to make this website and spread financial awareness.

Until someone introduced me to Steemit.com (now hive.blog), a free crypto blogging platform that lets you earn a cryptocurrency called Steem. To date, I have earned more than $2,000 in that platform without shaving off a single centavo. But that’s another story to tell. Here’s my account by the way.

After that, I ventured cryptocurrency trading and the rest is history.

Now, if you’re thinking of getting moolah out of thin air as much as I and the other lucky ones did in the past, I tell you, it is not as easy as before.

 

And I want you to read this whole thing with the pure interest of learning the technology behind these newborn currencies.

So let’s start!

Is Bitcoin and Cryptocurrency the same thing?

I encountered so many people who interchangeably use these two terms. Bitcoin and Cryptocurrency.

But the short answer is NO. Bitcoin and Cryptocurrency isn’t the same thing. Bitcoin is just one type of cryptocurrency. It happens to be the most popular one, however, since it is the first cryptocurrency ever created. Cryptocurrencies other than Bitcoin are called Altcoins or Alternative Coins like Ethereum, Ripple, and Steem.

If you find it hard to understand, don’t worry. I made a whole section for Bitcoin below. 

Let me first focus on Cryptocurrency. 

But before anything else, let’s take a look at how money has evolved since ancient times. This will help you get a good picture of Bitcoin and Cryptocurrency.

The 7 Stages of Evolution of Money

 

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It is very interesting how money evolved over the centuries, isn’t it? But if you think about it, it all boils down to how people want CONVENIENCE.

Otherwise, you’d still find yourself bringing your smelly goat to the mall in exchange for your favorite milk tea. 🐐

This is why knowing bitcoin and cryptocurrency is very interesting. These currencies were born to bring people convenience more than digital cash ever did!

And you’ll better understand this concept as you read on.

What is Cryptocurrency?

I know. It is quite complicated to understand that word but if you look closely, that is just a combination of two words:

Crypto + Currency = Cryptocurrency

Now, let’s define each:

• Crypto = It is the short term for Cryptography. It simply is the art of writing and solving codes.
  
  
• Currency = It is generally accepted as a mode of payment in exchange for goods and services. In short, it is money! moolah! kaching!
  
  

Now, have these two terms combined and you’ll understand that a cryptocurrency is just a form of money that is written in codes. You can’t physically touch it since it is purely electronic!

Let’s apply that to real life.

What is Cryptocurrency in simple words?

Have you tried online banking? Putting your money in the bank, and in return, the bank will reflect it to your online bank account?

Have you tried using your reflected digital money in order to pay bills, transfer funds, or even shop online without the hassle of going to the bank to encash your funds?

In that case, your money still has a value but it is already in a digitalized form. The money on your phone is just the digital representation of the money you have in the bank. 

Another example is the money you have in mobile wallet apps like GCash and Paymaya in which it is converted to digital cash. But still, it’s cash.

Cryptocurrency is just like digital currency. You are simply having a virtual or digital representation of your actual money online. Most geeks call cryptocurrency “The Money on the Internet”.

But what is the very difference between a digital currency and a cryptocurrency?

Digital Currency vs Cryptocurrency

Though digitalized, online banking and mobile wallets are still under the provision of centralized entities such as banks and governments.

Admit it. Online banking and mobile wallets have made our life much much easier than before! The problem though is the limitations that go with these digital wallets such as follows:

• You can’t transfer money easily from one bank to another. (It could be possible with fees though).
  
• It may take days to verify the transaction of your digital cash.
  
• Bill payments are limited.
  
• You can’t easily transfer digital cash to recipients from other countries.
  
• Transaction fees are quite high.
  
  

Those are just some of the examples of currencies which are held by centralized entities. And this is what cryptocurrencies are for. To resolve the limitations of the digital cash you currently know.

A cryptocurrency simply makes your digital cash transactions limitless.

Also, a cryptocurrency is not controlled by any centralized or controlling body. That is why this is called a decentralized asset. Unlike digital currency, it has no physical banknote counterparts like the USD, Yen, or Peso, etc. Cryptocurrency exists only in electronic or digital form.

You can use it anywhere, send it anytime to anyone in the world without having to go through remittances and banks. 

As long as your recipient accepts cryptocurrency transfers, all you need is your phone with an internet connection. Plus, the transaction fees are very minimal compared to the centralized digital cash!

At this point, haven’t you asked yourself how you’ll be able to store a cryptocurrency if it is all-digital?

If your digital cash can be stored in online/mobile banking apps or e-wallets, your cryptocurrency can also be stored in a cryptocurrency wallet.

Huh? Cryptocurrency waaaa….ttt?

What is a Cryptocurrency Wallet?

This part actually relates to the 7 Stages of Money Evolution infographic I presented above.

But this time, it’s about the 7 Stages of Money Storage’s Evolution as follows:

1. Commodity – basket, sack
   
2. Metal – treasure chest, box
   
3. Metal Coins – purse, sack
   
4. Paper Money – empty bottle of Jhonson’s baby power, purse, wallet
   
5. Plastic Card – wallet, plastic card organizer
   
6. Digital Cash – online bank, mobile wallet or e-wallet
   
7. Cryptocurrency – cryptocurrency wallet
   
   

Basically, a cryptocurrency wallet is just a software app/program where you can send, receive, exchange one cryptocurrency to another, and monitor their balance and current value.

Top cryptocurrency wallets include Coinbase, Trezor, and Jaxx.

One of the distinct characteristics of a cryptocurrency wallet is the wallet address. 

A wallet address is a unique identification to send or receive cryptocurrencies. It is just like a bank account number or your physical address, but a wallet address typically looks like this:

3R1aZKdAXKwEzqzoCFJZuke7R8QWDReo7R

Or like this:

Those are my bitcoin wallet addresses actually, so feel free to drop some TIP. 😉

You don’t have to know the name of your receiver except for their wallet address or QR wallet code. 

In return, you can just ask someone to transfer cryptocurrencies to you without providing your identity except your wallet address or QR code. Nothing more, nothing less. So yes, you can just remain anonymous.

Now, you may be overloaded with information about cryptocurrencies without knowing where you can apply it exactly.

So to break the ice, let me give one example.

Example use case of a cryptocurrency

If you have an amount of Peso in your wallet and you want to buy that signature bag during your US vacation, you still need to convert Peso to USD first.

Now, you have to find an exchanger to convert your Peso relative to USD’s exchange rate.

But with a cryptocurrency, you can buy that signature bag without going to physical exchanges — provided that the merchant accepts cryptocurrency payments.

You just need to:

1. Open your phone and connect to the internet.
2. Open your cryptocurrency wallet.
3. Send payment thru your merchant’s crypto wallet address or simply scan their wallet’s QR code.
   
   

As simple as that.

But this example only uses cryptocurrency as a mode of payment. This is how Bitcoin was exactly built.

There are actually more use cases of cryptocurrencies. Let me cite more examples with the cryptocurrencies today.

How is cryptocurrency used today?

1. Bitcoin – Store and transfer money securely and with privacy.
2. Ethereum – Create decentralized applications or startups.
3. Litecoin – Low-cost and instant money transfers.
4. Monero, Zcash, and PIVX. Anonymous financial transactions. Anybody can make verified transactions without revealing the source, amount, or destination.
5. SureRemit– Send non-cash remittances from anywhere in the world to selected African nations.
6. Brave – Safe, fast, and secure browsing.
7. Steemit (Now Hive) – Blog and earn cryptocurrencies (Steem / Steem Dollars / Hive Tokens).
8. Storj – Faster, safer, more affordable cloud storage alternative.
9. Cryptocribs – Book rooms, apartments, and flights with Bitcoin (BTC) or Ether (ETH).
10. Virgin Galactic – Book space travels with Bitcoin! Whaaat? Wow!
    
    

Here’s a good read if you want to know more about the real use cases of the top cryptocurrencies other than Bitcoin: The 10 Most Important Cryptocurrencies Other Than Bitcoin. 

What are the pros and cons of Cryptocurrency?

But just like any form of currency, a cryptocurrency has contrasting benefits as follows:

What are the advantages of Cryptocurrency?

I believe I have given you a good overview on how cryptocurrencies provide more convenience than the typical money you know.

But to summarize, the benefits of using cryptos include but are not limited to:

1. Privacy and anonymity. Transactions can be verified without revealing your identity.
   
2. Convenience. As long as you have a device that is accessible to the internet, you can create your wallet and do financial transactions online. Anytime. Anywhere. 
   
3. Global acceptance. Cryptos are not controlled by any central bank so you can spend it anywhere as long as your merchant accepts crypto payments. 
   
4. Low transaction fees. In order to send funds, you don’t have to go through banks, remittances, or any middlemen. That means you’re saving a lot of TX fees!
   
5. Fast transaction. It won’t take a lot of verification to send or receive funds simply because third-party approvals are completely eliminated. 
   
6. Uncapped and unlimited transactions. You can transfer to anyone and anywhere in the world without any amount or transaction limits. 
   
7. Tradeable. It is not limited to the purpose of having financial transactions alone. You can actually trade it just like what you do in the stock market or forex. 
   
8. High Security. Cryptocurrencies are built with codes that are impossible to alter so there will never be unauthorized transactions unless you’re defrauded and your account gets hacked. Here is a list of cryptocurrency scams and ways to prevent fraud.
   
   

What are the risks of Cryptocurrency?

1. Fraudsters can take advantage of your lack of knowledge. Cryptocurrencies are quite complex to understand before getting the hang of it. Scammers and hackers often take advantage of this (like what happened to me a few years back). 
   
2. The value of Cryptocurrencies fluctuate too much. Some people still consider cryptos as some sort of speculative investment. Huge fluctuations are caused by injecting and ejecting large sums of funds into crypto in a short span of time.
   
3. Transactions are irreversible. If you happen to send funds in wrong amounts or into a wrong crypto wallet address, you’re doomed. There’s no chat support nor code expert who can help you get that back unless you ask your receiver to send it back to you. 
   
4. Not widely accepted as of this moment. As of this moment, most people still find it convenient transacting through the usual modes of currency.
   
   

Now, let me proceed to your most awaited Bitcoin.

What is Bitcoin and how does it work?

As I’ve said, Bitcoin and Cryptocurrency aren’t exactly the same thing. Bitcoin is just one type of cryptocurrency. And I want to dedicate this whole section for Bitcoin alone. 

Why?

Because some people only know Bitcoin! And all they know is they’ll automatically earn once they buy or “invest” in it! 

So what must be very special about Bitcoin that makes people go crazy? That even when its price went close to $20,000, people were still eager to buy it?

Hype. 

Right, that’s one.

But the truth is, Bitcoin is the first cryptocurrency ever created. And basically, people were so eager to buy knowing how its price has crazily leaped since its first appearance in 2009! 

Well, let’s see.

You see, bitcoin’s price is gaining traction once again. Yet unlike before, people are now in for the tech behind. This simply means more and more people accept cryptocurrencies, particularly Bitcoin, as a mode of payment or store of value.

But price predictions and financial advice are beyond this post’s scope. So I will never touch how high (or low) its price can go.

So what is Bitcoin, really?

One of the best explanations of Bitcoin I have read so far is the one from freecodecamp. There, he used the analogy of a digital apple to Bitcoin.

The bottomline is Bitcoin cannot be faked, copied, or spent twice!

That is made possible with a digital technology called blockchain (which I’ll explain later).

This is how secure bitcoin is built that no third party entities are required just to see if anyone falsified bitcoin for their own financial gains. You won’t even need banks, government, nor remittances to verify transactions! The blockchain technology will do it on third parties’ behalf.

What is Blockchain in simple terms?

Just think of a blockchain like a diary or a spreadsheet containing all the information of every transaction made in every single Bitcoin. Except it’s all digital.

Meaning, every transaction history of Bitcoin, of where it was sent from, where it was sent to, how much and when it was sent — are being put in that digital diary or spreadsheet.

Finance and crypto geeks prefer calling this digital ledger a blockchain so let me stick with that.

Now think about that. If you’re holding a Bitcoin, along with it is the history of where it all came from. Amazing, isn’t it?

With this blockchain technology, it is also entirely impossible to create fake bitcoins and inject it into that digital ledger just like that.

You may ask, where did those effin’ Bitcoin come from then? 

Let’s backtrack a bit when Bitcoin was first noticed. *insert retro music*

When was Bitcoin created?

Bitcoin was invented in 2008. It was only in 2009 when its source code was released. 

But does the year 2008 ring a bell to you? 

Right, that was the year when a global market crisis happened. Financial analysts strongly believe that such a crisis led to the creation of the first-ever cryptocurrency which is Bitcoin.


Here’s an interesting read about that: Origin of Bitcoin: A brief history from 2008 crisis to present times

Who is the owner of Bitcoin?

Well, if you happen to buy or receive bitcoin, you automatically become the owner unless you spend it or transfer it to another peer.

The question should rather be: Who created Bitcoin?

Bitcoin was released by an alias Satoshi Nakamoto. Up to this moment, no one knows his real identity. Though some personalities are claiming they are the real Satoshi.

That sounds like a Japanese name though.

But here’s one of my favorite wild guesses:

SAmsung TOSHIba NAKAmichi MOTOrola 

Perhaps it’s a joint venture of the owners of these companies, don’t you think? But well, this mystery is still unsolved. Who knows, the MOTO part may be taken from AjinoMOTO. But don’t take it seriously, it’s just a meme. 😂

So where did that Satoshi Nakamoto name first appear?

Here. In Bitcoin’s Whitepaper.

by Valentijn v/den Hout | Source: Satoshi Nakamoto’s Bitcoin Whitepaper: A thorough and straightforward walk-through

Bitcoin’s whitepaper was published on October 31, 2008 in bitcoin.org (a domain that was registered on August 18, 2008). It was published to a cryptography mailing list with a link to a paper authored by Satoshi Nakamoto. Bitcoin’s whitepaper was titled Bitcoin: A Peer-to-Peer Electronic Cash System.


White… WHAAAAT?

What is a Whitepaper?

A whitepaper is simply an in-depth report of how a certain cryptocurrency could provide a solution for an existing problem. It has similarities with a research paper except it does not follow any standard format. So yes, you can just source it out to a ghostwriter.

You can think of whitepaper as a marketing publication that serves to explain the technology used in a certain cryptocurrency. It is widely available to the public.

I have read a lot of whitepapers that led me to write cryptocurrency token reviews. One whitepaper averages to 20 pages. And as opposed to what people think, it is not as complicated to read and understand whitepapers. In fact, I really find them interesting sometimes!

If you feel like your geek self is activated at this moment, try reading bitcoin’s whitepaper. It has only 9 pages. The 9th page is for references.

How to Get Bitcoins?

There are so many ways of getting yourself a Bitcoin. But I would just cite three: Mining, buying, and receiving bitcoins.

1. Mining bitcoin

You can think of it like mining real golds. But instead of going to physical mining sites, you’re just there, with your supercomputer, mining a “virtual gold”.

But no, you don’t need some sort of virtual axe for this one.

Do you remember blockchain, which is the digital ledger I mentioned lately? Of how it becomes a virtual diary of all the transactions ever made for bitcoins?

If you participate in verifying and adding transactions to that digital diary, then you’ll be rewarded for your efforts. You’ll receive bitcoin as a reward. Here’s a good read from Cointelegraph on how to mine bitcoins.

2. Buying bitcoin

This is one of the easiest ways on how to get yourself a bitcoin. Just go to international cryptocurrency exchanges like Bittrex and Binance. 

If you’re from the Philippines, you can go to PDAX and directly exchange your Peso to Bitcoin (or other cryptocurrencies). Will tackle more on how to buy bitcoin and other currencies on my next posts.

BONUS: You can earn a PHP 30 rebate once you cash-in in PDAX using my code “pinayteenvestor“! Here’s how you can trade cryptocurrencies in PDAX.

3. Receiving bitcoin

You can accept bitcoin as payment or you can receive bitcoin for FREE by doing tasks such as:

• Taking surveys and completing jobs on Bitcoinget
• Reading books for FREE on Paid Books
• Writing crypto-related topics for blogs or news outlets on Coinality
• Participating in forums on Bitcointalk
• Playing mobile games like Bitcoin Blast 
  
  

How does Bitcoin get its value?

So how did an effin’ “currency that was written with codes” has a value? 

Now, it’s getting interesting, isn’t it?

Simple. Because people believe it is valuable. Because people agree on its value. Just like how you and I agreed that the government’s money has value.

 

But if you go back on the seven stages of evolution of money I presented lately, you’ll notice two huge factors on how bitcoin (and other cryptocurrencies) become valuable:

1. They bring people convenience.
2. They are scarce.
   
   

The first point is quite understandable. In fact, that’s how money evolved anyway. To bring people MORE convenience.

Now, let me talk about the second point.

SCARCITY.

Gold, for example, is a non-renewable environmental resource. Meaning, gold cannot be replenished. So once it is all mined, you cannot get more of it.

Bitcoin has almost the same analogy as gold. The number of Bitcoins is finite. There were only 21 million bitcoins ever produced. And just like gold, bitcoins can only be mined. 

That is why most geeks call bitcoin the “virtual gold”.

At this time of writing, 18M+ bitcoins have already been mined. That leaves us with only 2M+ (12% of the total supply) bitcoins which are left to be “mined”.

Again, bitcoin was built in a way that it cannot be faked, copied, or spent twice. And knowing how some bitcoins vanished through thin air, that leaves us with fewer circulating number of bitcoins than they actually are!

Now, if bitcoin experiences wider adoption, which in turn would create more demand, you already have an idea of what will happen to its price considering its scarcity.

So how did bitcoin get its value? Because people believe it brings MORE convenience and it is ULTIMATELY scarce. These things make people conclude it is valuable enough.

Can Bitcoin be converted to cash?

The short answer is YES! Bitcoin can be converted to cash the same way that cash can be converted to bitcoin (and other cryptocurrencies). 

It’s just the same way as to how you can buy gold with cash and convert gold back to cash. Bitcoin is a type of currency after all, but just in a different (and newer) form.

How much does it cost to buy 1 Bitcoin?

Currently (May 2020), one Bitcoin’s cost is close to a whopping $10,000! Here’s to check bitcoin’s current price.

One Bitcoin is WHAAAAAAAT? Is it really that expensive?

Bitcoin’s price is too damn high! How am I supposed to afford that? I barely even have a single dollar in my f*cket rn!

You and I when we first knew how much a single Bitcoin costs

I know. I got the same feeling when I first encountered bitcoin when it was still around $1,000.

But no, you don’t have to have $10,000 to get yourself a bitcoin. In fact, you can just have a portion of it.

Consider one bitcoin as a pie. And you can take a small amount from that pie — the amount you can afford. 

Here, we will do a simple Math. But don’t fret, I will make it easy for you to calculate. I also made a simple calculator. I know your brain is pretty much exhausted by now.

Note: Let me just assume that Bitcoin’s value is $10,000 for simplicity.

Say, all you’ve got right now is $20 (roughly 1k Pesos). If you buy some bitcoin, you will have 0.002 BTC.

$20 / $10,000 = 0.002 BTC

BTC is an abbreviation of Bitcoin. Same as how you abbreviate US Dollar to USD.

Reversely, if you have 0.002 BTC, you can convert it back to $20 considering the price of one Bitcoin is still $10,000. 

Friendly Reminder: The above conversion rates are conservative examples. Take note that minimal fees may be applied per conversion.

This time, I want you to use this calculator:

Check Bitcoin’s current price HERE.

Now, what if you just have $1? That would be 0.0001 BTC, right? 

How about $0.10? Then that’s 0.00001 BTC!

Say you’re an obsessed accountant and you want to audit up to the fourth decimal? So $0.0001 = HWHWHWHAAAAAT? YOU JOKING?

I’m not. So that’s 0.00000001 BTC.

But don’t worry, those decimals can made simpler with Satoshis. No, this is not the human Satoshi though.

How do you convert Satoshi to Bitcoin?

One Satoshi is equal to 0.00000001 bitcoin. Simply, one satoshi is ten-thousandth of a single bitcoin. That’s seven zeros in between the decimal point and the number 1.

You can think of satoshi as a cent to Bitcoin. And logically, there are 100M satoshis in one bitcoin. Satoshi makes it easier for us to quantify Bitcoin in small amounts. 

Satoshi to Bitcoin Conversion Table

Okay. I already have a Bitcoin or satoshis or whatever. How am I supposed to earn from it?

This is you, of course.

How does Bitcoin make money?

Bitcoin was initially launched to bring more convenience as a mode of payment. But if you see it as an investment rather than a mode of exchange, here’s how you can earn from it:

1. Price Appreciation

Based on the historical data, Bitcoin’s value rises and falls over a period of time. You can buy some when its value falls and hold it for the long-term or trade it on a short-term basis.

You can do this for other cryptocurrencies as well. 

2. Investing in other cryptocurrencies

You can use Bitcoin in order to trade and with other cryptocurrencies. This is what commonly known as cryptocurrency trading. Or simply, trading one cryptocurrency (like Bitcoin) to another.

WARNING: Returns in cryptocurrencies are NOT GUARANTEED. Crypto-investing is considered one of the investments involving the highest risks.

Newbies are not encouraged to invest in cryptocurrencies unless they are fully-aware and well-informed about the Pros and Cons of investing in it.

Is cryptocurrency the future of money?

A Cryptocurrency is a people’s money… 

These are the exact words of Robert Kiyosaki, the famous author of the Rich Dad Poor Dad series. This is taken from his recent article titled Trust and Cryptocurrency.

Let me take the full context from Robert’s stand on cryptocurrencies: 

Today there are three types of modern money. They are:

God’s money: Gold and silver
Government’s money: Dollars, Euros, Pesos, etc.
People’s money: Bitcoin, Ethereum, ZipCoin, etc.

Robert Kiyosaki on Trust and Cryptocurrency

Cryptocurrency is a people’s money because it gives us full control over it. No government nor central authority can dictate how we should use it nor how valuable it is.

So is cryptocurrency the future of money?

I am in no right position to tell whether it is or it’s not the future of money, it’s too early to judge. But here’s my take on that.

Currently, you can think of cryptocurrencies as a mere addition to the current money payment systems. But in the next decades, they could serve as replacements for two main reasons:

1. They offer more convenience

2. No one can control it but us, the common people 

Total adoption, however, is still impossible to attain considering the areas that are inaccessible to the internet. 

Now, I don’t want you to get interested in bitcoin or any other cryptocurrencies just because someone told you so. The technology behind these newborn currencies are very promising, and I think this is the best reason to get acquainted with it.

Did you find this article helpful?

This might help your non-techy family and friends know more about Bitcoin and Cryptocurrency in a no BS way! So don’t forget to hit that SHARE button!