If you asked someone on the street how the internet works, they likely wouldn’t be able to give you a scientific explanation citing packets and protocols. But if you asked them how to send an email, they could probably give you an expert tutorial.
The same is true of cryptocurrencies. While mining, blocks and hashes make up the mechanisms of how Bitcoin and alternative currencies operate, understanding those backend functions are not necessary for participation in a crypto-based economy. The primary focus of most explainer articles are on these technological underpinnings, leaving many people confused and deterred from entering the market.
Thankfully, for those of us without computer science degrees, there are tangible steps we can take to gain a better understanding of cryptocurrencies and get closer to incorporating them into our financial practices.
A cryptocurrency requires three things: technology (the infrastructure for the cryptocurrency to function), liquidity (the ability to convert the cryptocurrency into another asset or currency) and community (people to use and support the cryptocurrency). If one is missing, the cryptocurrency is no longer viable. And within each feature, there are steps newcomers can take to better acquaint themselves with their new environment.
Cryptocurrencies are decentralized digital currencies, meaning no government or formally organized financial body oversees their operations. However, this doesn’t mean there aren’t resources that can help you optimize your experience.
What’s in your wallet
In order to get comfortable handling digital currency, you need to get comfortable handling a wallet. Unlike the wallet you’ve got in your pocket, a cryptocurrency wallet doesn’t store money instead, it stores the keys that are required to authenticate transactions using digital currency.
Wallets can take many forms but they most commonly appear as apps that you access via a computer or phone. Two key pieces of information are stored in your wallet: a public key and a private key. The public key denotes the address that someone might send money to and the private key authenticates that you are the correct recipient of the transaction.
Gaining experience interacting with a wallet is as important as knowing how to use an ATM or accepting an e-transfer. And the best way to do this is to download one and get comfortable exploring it.
Money is only as meaningful as what it can provide you. While an increasing number of merchants allow you to purchase items using Bitcoin or altcoins, you might also want to trade in your coins for liquid cash. This happens via an exchange environment.
Crypto exchanges operate like a stock exchange: individuals can list buy and sell orders but rather than dealing with stocks, they deal with cryptocurrencies. This means you can use Canadian dollars to purchase a cryptocurrency, exchange one cryptocurrency for another or convert cryptocurrency into Canadian dollars.
In order to exchange, you need to set up an account through an exchange service (like Coinsquare), generate a profile and provide some basic financial information. You can then load up your account with Canadian dollars and begin trading.
Choosing your community
Without people to use and support a cryptocurrency, it isn’t viable, which makes community an integral aspect of any digital economy. And just like physical communities, you can choose a currency that best reflects your values and beliefs, giving you control of an environment that can sometimes feel out of your hands,
Bitcoin gained success because a group of people believed in it. If they hadn’t, it simply wouldn’t have survived. But with over 1,500 digital currencies on the market, how do you discern which ones are best for you? To answer that, you’ll need to do a bit of research.
NIKO is a cryptocurrency that supports and believes in the principles of engineer and futurist Nikola Tesla, including the use of renewable resources, youth empowerment, inclusion and financial freedom. Those who participate in the NIKO economy are acting with their heart and minds, bridging fintech with social beliefs.
But just as there’s not only one physical currency, so too shouldn’t there be only one digital currency.
Cryptocurrencies are open-source by nature, meaning that anyone can technically begin creating their own, building on the framework created for Bitcoin and available online. So you might find an existing currency that supports your beliefs. Or there might be a need to create one that best reflects you, your beliefs and the community you want to unite in this world.
Find out more about Niko in this month-long digital residency!