Cryptocurrency and Bitcoin - Part 2

 While the first posts are filled with information about Bitcoin and how it works (in general terms), there are questions which it did not cover and some which I found were deliberately hidden away from the masses which could create doubts in them whether it is a good idea to invest or participate in Bitcoin. I have came across a Youtube clip from the famous online news channel (WION) which did cover some of the "hidden" aspect of Bitcoin which I feel must be shown and addressed before anyone become involved in it.

Source : https://youtu.be/7PGt28X4ufU

Topic : Bitcoin, Cryptocurrency and Blockchain

From WION (World Is One) online news channel.

The important aspects from this video can be summarized into these points :

What is Crytocurrency :

1) Medium of exchange for Bitcoin.

2). Crypto means "Data Encryption".

3). Ensures security of transactions.

4). Has NO physical counterparts.

What is Blockchain :

1). enables existence of Cryptocurrencies (like dollars, Yen, Rupees etc).

2). Operates across a vast network of Computers.

3). NOT exclusive to bitcoin and Crypto.

These are the definitions and descriptions of Cryptocurrency and Blockchain. The one aspect I find it unacceptable is the fact that Bitcoin does not have a physical counterpart. In traditional sense, a physical counterpart means establishing a value for currency based on something which is solid and physical. This is important because the value of a currency can drop (or increase) depending on the situations (mostly political and economic reasons) but the physical counterpart of that value could remain the same. 

While in today's market, foreign exchange currency are often considered as the "value" of a country. One Malaysian Ringgit (RM) for example is just equivalent to 23 cents (USD) and 100 India Rupee is equivalent to 1.29 USD (as of 22/5/2022). However, before paper currency was invented, this value was placed on precious metals like Gold, Silver and Copper and trades were conducted using these precious metals instead of paper money (even in countries which already had paper money like China). 

Which means that if currency of a country like India or America were to drop, there could be inflation or deflation of the dollar (or rupees) accordingly BUT the physical value of gold, silver and precious metals would not be highly affected. These physical values can be used (by the central government of the country) as leverage to increase or decrease the currency and stabilize the economy again. As for "foreign exchange currency", these precious metals can also be used as trade items to increase the number of foreign reserves to allow imports and exports of a country to commence as well. 

Basically the reason why Pakistan and Sri Lanka is in current economical upheaval is because they had ran out of foreign currency to use as trade but they cannot bring in more foreign currency from outside because their economy is in hands of foreigner (China), their local GDP (that's nation's income per year) is being drained to pay for debts to a foreign country (namely China) and they had ran out of foreign currency from other countries (like their neighbors, India or from South-East Asian countries) because they had focused too much on a single source of income (again, namely China). 

Why this is relevant? Because a person who invest in Bitcoin and Cryptocurrency needs to understand that they will be making the same move here with their own finance situation as well. They will likely to "invest" a large sum of money into Cryptocurrency and they have no guarantees that it could work or that their investment could be stable in long-term. They will be trusting a single source of income and the likelihood that it could collapse could lead them to a financial ruins. 

Here's some more facts which most people new to Cryptocurrency and Bitcoin trading are not aware of (from above mentioned clip as well). 

ONLY 1 out of 10 people understands how Cryptocurrency works. (worrying).

ONLY 1 out of 3 investors (dealing with the cryptocurrency) knows little about it.

Fact - No one knows who created Bitcoin but it have been in circulation since 2009. The name Satoshi Nakamoto came up as the creator's name but no one knows the real identity of the person. The actual person named Satoshi Nakamoto had stated that he did not create Bitcoin but create a banking solution for something called Double-Spending. It refers to a problem in digital payment where the user can manipulate the system to pay the same "currency" or dollar for something else when it is already used to buy something else. Think of it as verification for the dollar you use (via its serial number) and then ensuring that the dollar (with the same serial number) is not used to pay something else. 

Problems with Bitcoin :

1) The value keep fluctuating from high and low very much like a stock market value. It is largely determined by the attitude of the users, buyers and sellers of Bitcoin.

2) Security. The digital wallet contains bitcoin data are stored in smartphones and computers. 

3). How many cryptocurrencies are there? Answer : 4,000+. Software to creating Cryptocurrency is open-source which means anyone with the knowledge can create a cryptocurrency and use them, and there is no authority or governing body to control, regulate or even protect the users' rights. 

My opinion - Problem with Bitcoin market is that its investors believed that it is a stable form of (short-term) investment. Throw in money, wait for it to grow and cash out. However, they do not understand a lot of things with the working of Cryptocurrency, and has no idea what could cause a major drop in the market (like what happened on 5th June, 2022 - more on that on Youtube link below) or who or what is influencing the market. 

In my opinion, Cryptocurrency had a dip in the Black Market of the World, and the imminent fall of Ukraine (which is one of the Cryptocurrency hubs) to Russia had caused the significant impact into the market which caused the current collapse. For a long time (before the war), countries like Ukraine were thought to serve as middle-ground for goods which usually cannot be found legally - like drugs, women for prostitution in Europe and Pornography materials taken and posted online. The War with Russia is proving to be too costly for Ukraine whose infrastructures are being destroyed and dismantled everyday, cutting Europe and Middle East from valuable but illegal commodities like drugs and women. 

So the summary of these (in my opinion) is :

People needs to understand that they are investing in a commodity resembles stock-market trading but run like a gambling operation, has no guarantees that they could make fortune, very volatile (anything can cause it to collapse like what happened a few days back) and that they probably financing illegal activities like child pornography, prostitution and drug syndicate operations via their "investment".  

Source :-

https://youtu.be/Bze53qwHS8o

Mystery Founder of Bitcoin

Source : https://youtu.be/GR3rUlDiMxY

Couple steals $4.5 billion in Bitcoin heist.

Source : https://youtu.be/64xcgvEJ3Ys

"Fake Bitcoin" - How a woman scammed the World and then vanished.

https://youtu.be/6IRgSSBPrWY

Cryptocurrency crash causes trillions of dollars worth of damage 

(the report is just a few days before - June 5th, 2022).