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Cryptocurrencies: how to start?
Cryptocurrencies: how to start?
Crypto

Cryptocurrencies: how to start?

By Contest Writer - 21 Jun 2020

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Let me say that I do not want to try to explain how cryptocurrencies work at a technical level, it is a complex topic that I would not be able to deal with and I would probably only confuse the readers even more, having said that, I would like to talk about how to start in this innovative space.

I’ve been interested in cryptocurrencies for about two and a half years. 

Contrary to what one might imagine, my interest did not start from Bitcoin (the first cryptocurrency and the most famous) but rather from Ether and particularly from blockchain technology, which is the very novelty that is revolutionizing the way transactions and relationships between people are managed. 

Only afterwards I started to be interested in cryptocurrencies as possible speculative assets and I started (very cautiously and with ridiculous figures) to do some trading. 

I have therefore discovered that there are thousands of cryptocurrencies (currently about 1800) and it is thus possible to have a wide choice to attempt different operations.

In this period of time (but especially in the last 3 months) increasingly more friends and relatives are asking me about cryptocurrencies, whether they are a safe investment, how to enter this mysterious world and what can be done with a cryptocurrency. 

After various explanations and more or less fortunate attempts, I realized that the best way to explain the crypto world is to use a comparison. After some thought, I found what in my opinion is the most fitting comparison: casinos.

We all pretty much know what casinos are and how they work: you go in, go to the cashier and change the money into chips and then you can start playing inside the casino. 

People with a minimum of common sense know that it is wise to change into chips only the money they can afford to lose, without ever risking burning their life savings as there is no guarantee of winning. 

Well, the same rules apply with cryptocurrencies, after deciding how much money we can lose we can change our euros into cryptocurrencies. Admittedly, changing euros into cryptocurrency is a bit more complicated and takes longer than showing up at the casino cashier’s desk and getting the chips, but the concept is the same. 

In the crypto world, the equivalent of the casino is what is called Exchange, just as there are many casinos in the world where you can go to play there are many exchanges that can be used to operate with cryptocurrencies. 

So the first thing to do is to register on at least one exchange, registering means providing all the information that the various exchanges require to create an account, like the username and password. 

Just like every casino offers different games and possibilities compared to the others (of course everyone will have roulette) so the various exchanges are different for particular features or services offered or for cryptocurrencies listed, so sooner or later you will have several accounts open on different exchanges to make the most of each opportunity. 

After opening an account on at least one exchange we will need to make a transfer from one of our accounts for the amount we want to ‘play’ with, it may take several days before the transfer is credited to our exchange account. 

Once we have euros on our exchange account we can make our first crypto purchase, and from this moment on it’s like we’ve walked into the casino with our chips, now we can quickly and simply start trading cryptocurrencies: we can buy and sell, and if we’re skilled and lucky, increase the number of crypto assets in our possession. 

One difference from the casino example is that each casino only recognizes its own chips, basically I can’t walk out of a casino with my chips in my pocket and hope that another casino will accept them for me to play. 

In the crypto world, on the other hand, it is possible to transfer crypto assets between the various exchanges without any problem and this is also usually a very fast operation (in the order of minutes in most cases). 

Keep in mind that the crypto market is very young and not yet fully regulated, this means that it is possible, sometimes within a few hours or a few days, to have percentage variations that are impossible to see in the world of traditional currencies, I am talking about variations of 30% – 50%, in some cases even 100%. 

Well, as long as we stay inside the casino with our crypto everything is quick and easy, but suppose at some point we get tired of playing and we want to get out of the casino and change our chips into fiat currency. In the casino, all you have to do is show up at the cashier and they immediately change your chips into euros and the next moment you’re ready to spend the euros you earned in the casino. 

Just as changing euros into crypto was more difficult than swapping euros/chips at the casino entrance, the reverse operation is just as difficult and time-consuming when deciding to change crypto assets back into euros. 

First of all not all exchanges provide the possibility to make an outgoing euro transfer, only some allow it, so we will have to have an account on these exchanges, transferring the cryptocurrencies we want to sell, selling them for euros and then making the transfer to our current account (several days will pass before we see the euros on the account). 

For the moment it is not yet clear and simple how to transfer the counter value of cryptocurrencies back to one’s own current account and, above all, how to justify (to the bank, to the tax authorities) the origin of this money, so the message I want to pass on is that, at the moment, everything you have in cryptocurrencies is not immediately and easily convertible into euros. 

But apart from these operational aspects, there are some interesting considerations to make, some in favour of crypto and some not: 

What happens if the country I live in declares exchanges or even cryptocurrencies illegal

Certainly, it is a very remote hypothesis, but given that cryptocurrencies can put the traditional financial system in crisis (basically banks would no longer have control over the issuance and value of these electronic currencies), everything is to be expected from a state that would lose its control (and its tax revenue) over the liquid assets of its citizens. 

Well in the first case (exchanges declared illegal) there is the possibility of registering on any exchange in the world so this would not be a major obstacle to the use of cryptocurrencies (perhaps it would be a bit more complicated to enter and exit with euros, but it would still be feasible to ‘triangulate’ on another currency, dollars for example). 

Whereas in the second case (making cryptocurrencies illegal) the thing is certainly more complex and risky, not so much because it would be more difficult or impossible to obtain cryptocurrencies (it is as if they declared it illegal to take more than one shower a day, very difficult if not impossible to prevent/verify) but the fact remains that a sense of guilt is installed in you, for which the simple possession of cryptocurrencies makes you feel guilty and brings you into the world of illegality, certainly a disincentive to use them for many people. 

Certainly decisions of this kind should be agreed and shared between different countries (at least in the European Union) and this makes everything more lengthy and complicated for the various government institutions of the member countries of the Union to accept. 

Let’s now analyze also the positive aspects: what if more and more people, companies, associations, states, etc… acknowledge and facilitate the use of crypto assets? 

It is as if casino chips were also accepted by shops, banks, companies and states. Basically, you don’t have to worry about changing your chips when you leave the casino; you go out with the chips in your pocket, walk into the restaurant in front of the casino and pay with the chips. 

Same for refuelling the car, depositing at the bank, paying taxes etc… surely this scenario is much simpler and more attractive for the saver/consumer than the previous ones. 

In conclusion, my opinion is that the crypto world can currently offer excellent opportunities (it is not easy to take advantage of them because a minimum of skills is required, but nothing that is impossible), but so far it is not guaranteed that these opportunities can be ‘converted’ into the real world for everyday use.

I am convinced that there are many people in the world who today have a fortune in cryptocurrency but cannot use their capital to buy goods that have to be paid for with traditional currencies. 

I think it’s worth a try, one round at the casino table (with a minimum amount of capital to lose) can be worth it, if we are lucky, in a few months/years, someone will be able to ‘clear’ the chips so that they can be spent and used everywhere. 

Paolo Ciccioni

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