To be active in the emerging world of cryptocurrency, you must first to understand the systems that underpin it and that will help to shape the future. It is vital that you understand three fundamental pieces of information before you begin any activity related to cryptocurrencies. Without these three key considerations, you cannot fully understand and navigate the intricacies of the crypto world. Without these three foundational rules, you become extremely vulnerable to financial losses if you become active.
The rise of Bitcoin & Co. has created a gold rush of sorts. There are a lot of frivolous offers from opportunists out to make a quick buck from the hype. In a more sinister twist, there are also seasoned fraudsters who actively look for ways to part you from your money and your crypto-credit. These criminals range from the shady opportunist to the seasoned professional. To navigate this world, you must always be on your toes.
For that reason, you should read these instructions repeatedly. Internalize them and let them sink deep into your subconscious. The following principles must be applied intuitively. Gauge everything—every single thought and decision—by these principles. With these three principles at the core of your every decision, you will be safe from fraud and you will understand how our world is going to work in the near future.
1. Ensure that you—and only you—have the “Private Keys” to your cryptocurrencies (that is, Bitcoin and Co.). Always. No one else! 2. You can only unconditionally trust a genuine public blockchain with many completely independent nodes. 3. The Computer Source Code of a trustable blockchain system is always openly accessible and can be examined and used by everyone.
Even if you don’t yet understand what “Private Keys” are or know what a genuine Public Blockchain is, never forget these principles. Analyze every offer from this perspective, no matter how attractive it seems. Do not allow yourself to be tempted into breaking these rules. Read my book carefully, understand the importance of these rules, and question every offer with this knowledge. That is the only way to protect your property. Only then is your future on a firm foundation and only then are you capable of taking informed action.
Public Blockchain: The word “public” doesn’t accurately reflect the generally accepted meaning of this term. A public blockchain in the sense of a true, genuine blockchain is not a private blockchain nor the blockchain of a consortium or association. The characteristic of a public blockchain is that anyone who has a computer can download the appropriate software and become part of the blockchain system. In general, the data in this blockchain is publicly accessible, although this is not necessarily always the case. The computers creating the blockchain can be located anywhere in the world and work completely independently in creation and management of this blockchain. It is also worth noting that, in this context, “public” does not mean that all data is transparent, just that anyone can participate.
A public blockchain is the only blockchain that is truly tamper-proof. Not all blockchains are created equal, and the differences are crucial.
FIAT Currency/ Money: Fiat money has no intrinsic value—it simply serves as a means of exchange. The opposite of fiat money is commodity money, such as tobacco, rice, gold or silver, all of which have an intrinsic value alongside its exchange value. It’s value is not dependent on governmental decree. It holds its value as long as payment can be made with it.
In principle, Euro, dollars, Swiss francs, yen and all other paper currencies are fiat currencies. They have no real intrinsic value. Critics even claim that they are worthless. At any time, fiat currencies can be inflated through additional printing from central banks and governments, thus become actually worthless. For example, this happened to the Reichsmark in 1920s Germany and has been happening to the Venezuelan bolivar since 2014.
Bitcoin is not a comparable currency because, although it also possesses no intrinsic value, it is unique in that it cannot be manipulated or printed by any government. Thus, the Bitcoin is not subject to this kind of inflation. For this reason, it is defined as neither fiat nor commodity money, but as a cryptocurrency.
Bitcoin’s intrinsic value can best be quantified in the electrical energy that computers need to secure the network and keep it running. It is reassuring to note that if an organization requires more electrical energy per year for purchasing and provision than Iceland uses to keep this network running, then Bitcoins must represent some value.