it’s a Sher thing was lucky enough to be able to chat to Cryptocurrency Expert, Shireen Ramjoo. We specifically wanted to do an article on Bitcoin for blondes. Everyone is talking about it, and now in 10 points, we detail what Bitcoin is, how it works and how you can get involved.
1) In a nutshell, what is Bitcoin?
Cryptocurrency is a new form of an asset. It is digital money, that allows for instantaneous, cross border transfers without using a middleman. Traditionally, you would need a third party service like a bank to send money globally. Now money can be sent using a peer-to-peer system, eradicating third party services.
The world’s first decentralised cryptocurrency is Bitcoin, which surfaced in 2009, after the financial crisis that happened in the US in 2008. There are currently over 1500 cryptocurrency already in the market.
2) How does it work?
The idea of creating decentralised cryptocurrencies came as a result of the financial crisis that happened in a centralised economy. The idea was to create a currency that is not owned by any central authority, that would deflate as opposed to inflate, so that people would benefit more than our traditional currencies. That could be dispersed across borders, directly from person to person without using middlemen.
There are two factors to cryptocurrencies that differ from traditional fiat currencies.
1. They act as normal currency, it is interchangeable to any fiat currency worldwide.
2. They act as a transfer service. Money can now be sent from person to person without the need of an intermediary. This in-turn, allows for money to get sent much faster and cheaper than traditional methods.
Cryptocurrencies can be bought the same way we buy other fiat currencies. There are various exchanges worldwide that sell cryptocurrencies. All you are doing is changing your rands to Bitcoin or any of the cryptocurrencies that the exchange offers, the same way you would change your rands to dollars or pounds.
Exchanges offers you wallet services where you can store your cryptocurrencies, we recommend however always moving your cryptocurrency off exchanges and create your own wallets so that you have your own private keys. This way you have control of your own cryptocurrencies. If your crypto is stored on an exchange, the exchange holds your private keys. As exchanges are prone to hacking and we have witnessed many exchanges going under as a result, it is safer to own your own private keys.
Cryptocurrencies are also very liquid and interchangeable. You can sell your cryptocurrency directly to the exchange you bought it from, and you will receive fiat currency deposited in your local bank account within 24-48 hours. If you use the same bank, it’s normally same day depending on the time you do your withdrawal with withdrawal cut of times.
Another way to save your crypto is using a cold storage offline device, this device can store your crypto, but you need to make sure your private keys are backed up. If you lose the device and have not backed up your private keys, your money will be lost. Paper wallets and offline devices store your money offline, so it is not prone to any hacking.
3) What if I lose my online password, do I lose all my funds?
No, you need to make sure you have your private keys stored somewhere safe if you are the custodian of your own wallet. If you lose your password, it will ask you for private key to unlock it.
If you use an exchange however, you can access, recover or create a new password using security information required from exchange to access your account.
4) What if my account gets hacked?
Your funds will be stolen if your account is hacked. That is one of the risks associated to cryptocurrency if you do not use all measures to secure your account. Any digital platform allows opportunities for hacking.
5) How much does it cost to get started?
It should be treated the same way you buy dollars, or Rands. So you can buy from R50, even though 1 full Bitcoin costs at today’s rate is R48 806,32 (25 January 2019)
6) Do you trade anonymously?
Bitcoin is not anonymous, it can be traced using your wallet address. A wallet address is like an account number. The blockchain is an open source platform that stores all records and transactions that happen globally. All verifications of transfers can be viewed on the blockchain. As such a wallet address can be traced very easily on the blockchain. So it is not anonymous as people tend to think it is.
7) Where can you use your Bitcoin?
There are a few places that accepts direct Bitcoin payments. Please see list of a few below in South Africa.
You can however very easily sell your Bitcoin to local exchanges and you will receive Rands in your local bank account within hours.
8) Can you leave Bitcoin to family members to inherit as an investment?
You would have to include this in your will with all the wallet details, so that your family has access to it.
9) How did you get involved with Bitcoin?
I went to a conference on cryptocurrency in 2015. After that I did a lot of research on the topic and realised that unfortunately people are getting into crypto space because of hype and not understanding the actual technology behind the crypto. I also consulted in my previous roles to financial institutions; Nedbank, Standard Bank and FNB in South Africa, so understand well the dynamics of finance of centralised systems.
Bitcoin is built on Blockchain technology. Blockchain technology is being used for various other industries as well. Cryptocurrency is just the first application of blockchain technology, the same way e-mail was the first application of the internet.
10) Is there anything else we’ve left off?
People getting into cryptocurrency should educate themselves on the topic first. People are getting caught in scam programs, because they haven’t done their homework. Also as you are essentially becoming your own bank, you need to learn how to transact and do all necessary to secure your account.
Invest in the technology not the hype of speculation.
- Do your homework
- Keep your password safe
- Understand the technology
- Include Bitcoin in your will.
Happy spending babes!