Everything You Always Wanted to Know About Cryptocurrency (But Were Too Nervous to Ask)

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You’re not alone if you find the concept of cryptocurrency daunting. When someone mentions the topic of cryptocurrency or starts talking about all things Bitcoin, you might find your mind wandering. So, what is digital money? Where does its value come from? Is this something I should be investing in? How risky is it? And what exactly is the blockchain? And we don’t blame you. The idea of digital currency that isn’t managed by a bank or government seems like a plot point straight out of “The Matrix.”

So, to help break it down, we tapped Ayelen Osorio, the content and community manager at Netcoins, a Canadian cryptocurrency exchange company. “A big part of my job is learning about cryptocurrencies and bringing women along that journey with me,” Osorio tells Create & Cultivate. “A year ago, I had no clue what cryptocurrencies were but in a surprising twist of events, I became fascinated by them.” (Which is something that should give hope to all of the cryptocurrency-curious novices reading this right now!).

Ahead, she answers all our most pressing questions about cryptocurrency, from what it is to where it gets its price from and whether or not it’s a risky investment.

Most people have heard of cryptocurrencies, like Bitcoin, but might not totally understand what they are—Can you give us a brief overview?

Cryptocurrency is digital money. It’s money like the dollar or euro or yen. But it exists only in a digital form and is not managed by central authorities like banks or governments. 

What this means is that we aren’t reliant on something like the bank if we wish to access, withdraw or move our money (Bitcoin). This is something called “decentralization.” It allows someone to send Bitcoin from one part of the world directly to another in a way that’s instant, secure, and with minimal fees. 

You can also think of Bitcoin as a store of value like gold. While Bitcoin, like gold, isn’t commonly used to buy goods and services on a daily basis, it still holds value because of its limited supply and because of the difficulty of producing. Many refer to Bitcoin as “digital gold”.

We’ve gone through many iterations of money throughout history from seashells to cattle, gold and other precious metals, to paper money and plastic money (a.k.a. credit cards). For many Bitcoiners, cryptocurrencies like Bitcoin are the future of money. 

Where does cryptocurrency get its price from? 

Cryptocurrency prices are set in the same way that the price of real estate is set by the supply and demand of the market. Then there are platforms and sites that aggregate these market prices to pull a global price average—that’s the number we use when we say “the price of Bitcoin is $50,000.” 

What makes cryptocurrency unique? 

A unique characteristic of Bitcoin is that it has a limited supply of 21 million coins (remember these aren’t physical coins). In theory, this scarcity would suggest that Bitcoin is protected from hyperinflation and therefore should hold value in the long-term. 

This stands in stark contrast to the dollar which is unlimited in supply. Governments are known to be willing to print an unlimited amount of money, which causes long-term inflation. That’s why the dollar keeps losing buying power over time; that sandwich that cost $1 about 15 years ago, today costs $5. Inflation is keeping us poorer. 

It’s precisely because of this that Tesla recently bought $1.5 billion worth of Bitcoin, why the Winklevoss Twins (investors and entrepreneurs) believe that the price of Bitcoin will reach $500,000, and why we’re seeing more and more investors buying Bitcoin. What they all have in common is that they believe Bitcoin is a safe haven and a valuable savings technology during the unprecedented time that has been the pandemic. 

What are the risks of investing in cryptocurrency?

To start, all forms of investments carry with them an inherent level of risk so you should never invest more than you’re willing or ready to lose. 

Cryptocurrencies like Bitcoin are known to be volatile and the price fluctuates quite a bit on a day-to-day basis. But many Bitcoiners see this as the growing pains of a new, better financial system being put in place. 

It’s important to zoom out and look at the bigger picture. In 2010, one Bitcoin was worth less than $0.10. Fast forward 11 years, in 2021, one Bitcoin is worth over $54,000 (at time of writing). This is partly why Bitcoiners are willing to withstand volatility in the short-term because it trends in an upward direction in the long-run.  

In terms of hacking and theft, you may remember when earlier this year a 17-year old hacked celebrities’ Twitter profiles and asked for Bitcoin donations. The media said that Bitcoin got hacked. But Bitcoin didn’t get hacked, Twitter got hacked. 

The Bitcoin network (known as the blockchain) has actually never been hacked. It’s almost impossible to hack because the network is run among thousands of computers spread around the world. So a hacker can’t find a single, central point of weakness for an attack. This is why the technology is revolutionary. Most of the hacks we’ve heard about have been caused by human error like sharing passwords or allowing other people to manage their funds.

What are some investment tips you can offer to women wanting to start out? 

A common misconception is that you have to buy one entire Bitcoin. But you can actually buy fractions at as little as $10, $100, $1000. The great thing about cryptocurrencies is that you can start out small. For example, 0.5 BTC, 0.1 BTC, 0.01 BTC. This means that even if you’re relatively risk-averse, you can still test out the crypto waters with just $10. This is unlike stocks, where you have to buy the stock at its full price. 

The best way to learn about crypto and start out is to experience it firsthand. Create an account, see how easy it is to fund with an e-transfer, and make your first crypto purchase with just $10. It’s a much simpler process than many imagine it to be. 

Women looking to diversify their portfolio could benefit from investing in non-traditional assets (like cryptocurrencies) alongside their traditional assets (stocks, real estate, etc). But similar to stock trading, you need to be comfortable with a certain level of risk.

Generally speaking, I would say:

• Do your own research.

• Test your learnings with your friends, family, mentors so you can find loopholes in your thinking and grow from it.

• Never invest more than you’re willing to lose.

• Don’t time the market. Time in the market beats timing the market.

• Aim for a dollar-cost average. Buy a set amount of crypto each day, week, or month (up to you).

• Stay patient and disciplined. 

Investing in cryptocurrencies probably isn’t a great fit for those that are looking for quick and guaranteed profit. Cryptocurrencies are volatile, so it does require some patience and time to reap the benefits, but this is also true about stocks and real estate.

“A big part of my job is learning about cryptocurrencies and bringing women along that journey with me.”

—Ayelen Osorio, Content and Community Manager at Netcoins.

About the expert: Ayelen Osorio is the content and community manager at Netcoins. She has a natural knack for writing and community building. Ayelen brings years of experience in communication, marketing campaigns, and partnerships. If she’s not writing, she’s out hiking.

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Roundtable Topic: Should You Invest In Cryptocurrency?

graphic: Chloe Cecilia 

The value of bitcoin fluctuates. That’s cool, right? But what does it mean? Cue us banging our heads against a wall. As self-diagnosed non-techfluents we really tried to understand cryptocurrency. Bitcoin by Bitcoin.

And still, we felt lost. Cue: sad violin.  

So we went to the experts because we want to gain some cointelligence. Here's who we tapped. 

Sarah Austin: A two-time venture backed startup founder and renowned entrepreneur, Sarah’s known for her work with artificial emotional intelligence agents (NBD). Having seen Silicon Valley firsthand, she is also the founder of CodingFTW, a nonprofit organization established to assess and address the gender divide that is so prevalent in the technology industry. (Big deal.)

Lisa Frame: Lisa is based in LA and the head of Content at crypto and financial startup Stackin. She’s also the creator of Crypto Obsessed, a cryptocurrency group managed by women. (Obsessed.) 

Madeline Mann: As the head of People Operations Operations at a blockchain technology company, Gem, Madeline is used to explaining blockchain to people. (YES!) She also is the host of Self Made Millennial where she posts videos weekly on how to find and excel in your career.

Nicole Loher: She began her career at Tumblr, obsessed with with social media and emerging technologies within the digital space. She’s now Global Digital Editor at Christian Louboutin and teaches at NYU. (Prayer hands.)

If anyone can explain crypto, it’s them. And thank goodness. Dig into the below.

You’re welcome.

What is the easiest way to explain blockchain to a confused non-tech nerd?

Madeline Mann:  Imagine you are back in first grade. Your teacher hands out gold stars for good deeds. The teacher makes one kid in charge of keeping a tally in her personal notebook of how many gold stars each student has. You all grow uncomfortable with this...is she giving herself more gold stars? She was absent the day I got my gold star, was it recorded? How accurate is her account? You all decide to change the system from centralized to decentralized. Everyone takes out their notebooks and copies down her account of the class' gold stars. From now on EVERYONE in the class writes down when someone gets a gold star. Now everyone has their own record of truth and no one can cheat and give themselves more gold stars because when their amount is compared to what everyone else has recorded then it will be proven as a faulty star. This is the principle behind blockchain, it is an archive of actions that is spread across thousands of computers so that it is near impossible to tamper with the information.

Sarah Austin: Blockchain is a technology that allows companies a transparent and secure way to store data in ordered records.

Lisa Frame: Without using terminology like “nodes” or “ledgers,” a blockchain is a distributed record book. Each “block” or “line item” in the book is a transaction that is verified by thousands of other computers not just one person, bank or foundation.

It’s basically the equivalent of sharing a photo publicly on Instagram to verify your outfit is smoking hot, instead of sending one photo to your roommate. You now have a record of hundreds of people verifying that your outfit is goals. It takes out the middleman, which makes it decentralized. Our current banking system is centralized. This means we rely on their private record keeping.

Centralized banking is basically a controlling ex who tells you to change outfits because your dress is "too short," according to “their records.”

Centralized banking is basically a controlling ex who tells you to change outfits because your dress is "too short," according to “their records.”

Tweet this. 

Nicole Loher: Simply put, blockchain provides a decentralized database of transactions (as it relations to bitcoin) that everyone within the “network” (i.e. that owns Bitcoin) can see. To simply further - the network is a chain of computers that must approve of an exchange of currency before it can be verified and recorded. Think of it as a decentralized stock market.

OKSO. BITCOIN. What do blockchain and bitcoin have to do with each other?

Lisa: Bitcoin purchases are verified through the blockchain. Instead of one bank saying “yes, she owns Bitcoin” you have thousands of computers, around the world, verifying your purchase.

Sarah: Blockchain is also associated with "Bitcoin" (a popular token), "cryptocurrency" (digital tokens of all kinds) and ICOs (Initial Coin Offerings). A token is a feature of a blockchain technology. With all the buzz and hype around Bitcoin, and money being raised from the sale of digital tokens, there is a growing misconception around the actual value of building a business. This notion needs to be recognized by entrepreneurs who want look past the buzz of cryptocurrency and focus on the underlying Blockchain technology to create new value.

Can you give a sensible analogy that most anyone could understand?

Madeline: Blockchain is to Bitcoin as Windows 10 is to Microsoft Office. Blockchain is the underlying technology of Bitcoin, and Bitcoin is the first and most well known example that utilizes blockchain technology, but blockchain can be utilized in countless other ways.

Bitcoin is the first and most well known example that utilizes blockchain technology, but blockchain can be utilized in countless other ways.

Nicole: Bitcoin is the buzzy cryptocurrency that everyone is talking about. There are many types of cryptocurrency, Bitcoin just happens to be the CocaCola stock of this market. The Bitcoin network orders transactions (think of it like a buy in the New York Stock Exchange) by putting the transactions together into groups called blocks. Each block contains a definite amount of transactions and a link to the previous block.

Speaking of buzzy. Why and how did cryptocurrency start to matter?

Lisa: Now is the answer. Why it matters is because cryptocurrency could be as a big of a technological breakthrough as the telephone or the internet. The blockchain technology is the real breakthrough as it solves the double spend problem. Where bad people could conceivably spend digital money more than once. It's also bigger than just Bitcoin. We can now transfer digital property safely. It has the potential to be much bigger than just a digital currency also. Someday all of our contracts could be done through crypto, such as real estate and legal contacts, our medical records could be on the blockchain. The possibilities are really endless.

Madeline: Cryptocurrency allows people to own their wealth without a central party, like a bank lording over it. It also presents exceptional ease of use both domestically and across borders that allows for rapid transfer of wealth. For example, for me to send a friend $100 it takes roughly 5 days for our banks to reconcile the transaction. With most cryptocurrency transactions it takes just a few minutes or hours to reconcile. With the rise of ICOs (initial coin offerings) it allows companies to raise money through token sales with the public, where consumers can invest in companies and projects they believe in (think Kickstarter on a larger scale). This could highly benefit women entrepreneurs, and in fact we've seen several high-profile ICOs led by women, such as Propy and Paragon! ICOs present an alternative to VC funding, a group that has been shown statistically to be unconsciously biased towards giving funding to companies with male founders. ICOs present a new avenue to funding where biases and pedigree may become less pronounced.

Nicole: Cryptocurrency (i.e. Bitcoin specifically) was kind of an accidental side project by way of a person (who is still yet to be confirmed) that goes by Satoshi in the late 2000s. Essentially what he created was the first decentralized “peer-to-peer electronic cash system” in order to prevent double spending. This was incredibly advanced for that time.

Bitcoin is the buzzy cryptocurrency that everyone is talking about. It just happens to be the CocaCola stock of this market. 

Why doesn’t anyone know who Satoshi is?

Lisa: We will never know the real answer but I can think of 5.6 billion reasons why! One theory as to why Satoshi never came forward was that governments would try to come after he or she to try to cut off the head of the snake. Remaining anonymous prevented them from having a face to attach to Bitcoin and letting the technology stand on its own.

Sarah: Because that person doesn’t want to be discovered. Probably because Satoshi is afraid of going to jail.

Madeline: Satoshi Nakamoto is the pseudonym of the person or persons who invented Bitcoin and their identities have never been revealed. The draw of Bitcoin, and blockchain at large, is that the technology utilizes a decentralized network so that no central party owns the information recorded on the blockchain, like a bank or an information aggregator like Facebook. At its core, there are no "leaders" or "owners" of the Bitcoin blockchain which is why an anonymous creator fits perfectly with the mission.  

What does it mean to “have” a Bitcoin?

Lisa: From a technical standpoint, owning a Bitcoin means having possession of the private key for the number of Bitcoin(s) you own. Like having the code to the safe to get your money. From a simpler standpoint it's like owning a stock. You have the right to sell it or transfer it to whomever you want.

Sarah: It’s just another way to buy goods and services. It also may mean that someone is holding Bitcoin as an investment.

Madeline: A misconception is that to have bitcoin you have to buy a whole Bitcoin, which discourages many new people from investing because they have sticker shock. But a Bitcoin can be split into one hundred million pieces. Therefore a person can invest any amount and still experience the ups and downs of the market. If you invest $200 when Bitcoin is at $13k and it goes up to $20k as we've seen, then your investment would have swelled to around $320. Not bad!

Right not bad. Which leads to investing. Why is Bitcoin stock worth so much?

Madeline: First of all, I want to dispel the misconception that buying Bitcoin is similar to buying stock in a company. There are no underlying business fundamentals to Bitcoin - no stream of cash flow that you can discount to present value. There is no "Bitcoin Corp." The value is based on the community collectively believing it has value. Bitcoin effectively combined the attributes of scarcity and utility to create a "digital gold" for the internet age. Bitcoin is scarce because it is an deflationary currency, in that only 21 million bitcoins will ever be in circulation. There's 12.5 bitcoin released approximately every 10 min, and that amount halves every four years until we hit the ceiling of 21 million. It has utility because bitcoin allows individuals to have full and uncensored control over their own wealth, by converting it and securing it digitally on the Bitcoin blockchain. Bitcoin, and cryptocurrencies in general, also facilitate the nearly instantaneous and inexpensive transfer of value anywhere in the world, 24/7.

Lisa: The same reason why anything has worth! Supply and demand. There are currently just over 16.7m Bitcoin in circulation and the maximum that will ever exist is capped at 21 million. This set cap is well known, making its scarcity transparent. Some people consider it a great store of value because of this, like digital gold. Imagine if the world's gold supply was capped at 21 million ounces. One ounce of gold would likely be worth a million dollars or more.

Nicole: There are two trains of thought here. As Bitcoin is the most popular coin, and the one that is most frequently traded, we've seen two vastly different markets emerge (note: the first being totally speculative). There's a lot of hype around cryptocurrency that banks will begin opening cypto trading desks in 2018 - like stock trading. There's a theory that these financial institutions are fueling the conversation and pumping money into the market, so it's at it's prime when it hits mass and the government actually figures out how to regulate this circus. In the meantime, the news and all your pals are talking about it, making this a really crazy cycle of inflation. The second is just, well, the general public is interested so they're buying. Bitcoin is, as I said, the first cryptocurrency and the one that's most easily tradable on an open market, like Coinbase. It's the shiny new toy of the financial world - a world that's so behind the times - so everyone is interested and looking.

It's the shiny new toy of the financial world - a world that's so behind the times - so everyone is interested and looking.

If anyone can invent a cryptocurrency, how is it worth anything?

Lisa: Well, anyone can start an online business. Some companies will continue to have value and some won't. Like anything there will be winners and losers. There are something like 1,300 cryptocurrencies. They're not all going to make it, but a lot of them, such as Bitcoin, have a good chance at holding their value and going up. Bitcoin also has first mover advantage, meaning it was first to the market. Plus it's name is now synonymous with cryptocurrency, like Kleenex with tissues.

Madeline: Ultimately the worth is based on the community collectively believing it has worth. Just like a diamond ring or a Louis Vuitton bag, they are priced so high because consumers value them. I do caution you all be aware of what you invest in because there are scams - artificially inflated tokens and dubious ICOs that are not good investments.

If someone *raises hand* wanted to invest in Bitcoin or another kind of cryptocurrency today, would that be a smart move?

Lisa: Research! I personally think the biggest mistake someone can make is investing in something they don’t truly understand or believe in. It’s extremely volatile and you could lose a lot of money. It's also a good idea to really try to wrap your head around blockchain technology. That's the game changer! Also, only invest what you’re okay with losing because you could lose every penny you put in. How can women educate themselves more on cryptocurrency? I really love community threads like Reddit or FB groups! It’s nice to be able to ask questions and get feedback from a like-minded folks without feeling embarrassed or judged. Watch as many videos as you can, read as many articles or books. Immerse yourself in this new world.

I also recommend reading the White Papers of each coin you're interested in. These papers should accomplish a few things: inform you on their project, what they want to accomplish, their roadmap and methods for meeting those goals. Google all the jargon you don’t understand or ask groups their thoughts. Oh, and trust your gut. If something seems too good to be true, it probably is.

If something seems too good to be true, it probably is.

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Madeline: In short, absolutely, it can be a smart move. Do your research and only invest money that you would be willing to lose. The invention of cryptocurrency has given rise to a wild and unregulated new capital market for investors. There are incredible opportunities there, but you need to carefully research the underlying technologies in order to confidently ride out the incredible volatility that cryptocurrencies experience every day. Values have been known to increase by over 100% a day, and decrease by 95%+ in the same time span.

Sarah: BTC or ETH are not a bad investment so long as you consider yourself willing and ready to potentially lose the money you invest, but who am I to give investment advice? I’m not a financial advisor. I do think it’s smart to diversity your portfolio and Bitcoin is now it’s own asset class.

Nicole: Well,If someone wanted to invest in Bitcoin or another kind of cryptocurrency today, would that be a smart move? You know, honestly, it's like trading within the stock market...except you don't have an advisor. That's on you.

How can women educate themselves more on cryptocurrency?

Sarah: Study up ladies! Read, read, read. I read “The Age of Cryptocurrency” and found it to be a useful book to get started with.

Madeline: Come to meet-ups, we hold one at the Gem office called the Los Angeles Ethereum Meetup. I'm also a part of several women's Facebook groups where we chat about investing, all levels welcome.

Nicole: Be wary of what's out there and take everything at face value. Do your own research, but also know Reddit is a phenomenal place to start.

Have more questions! Comment below and we'll get them answered! 

THE MORE YOU KNOW.