Aside from investing in or owning crytocurrencies, there are other ways to participate. There are the back-office services that provide the pick-and-shovel resources necessary in the mining functions of the blockchain environments in which cryptocrurrencies are stored, traded, and generated. That mining is critical, as it adds new blocks that generate new crypto-tokens. Then there are the other more traditional services like custody banking, tax accounting, and trading systems.
David Wills, COO of Caspian crypto trading systems, points to another dimension of the opportunity—being a first-mover: “There are no off-the-shelf solutions from traditional finance. Everything is still getting pieced together. The experts in this space are people who got in early and have learned the pitfalls.”
For investors bewildered by the thousands of new currencies and spooked by the occasional shutdown of a new coinage by the U.S. Securities & Exchange Commission (SEC), there may soon be IPOs (initial public offerings of stocks) that might be more appealing than the flurry of ICOs (initial coin offerings) already under way. Bitmain Technologies Ltd., the world’s largest producer of currency mining chips ($2.5 billion in revenue in 2017) has announced that it’s open to an overseas stock listing. Bitmain is reported to own up to 80% of the market for crypto mining pick-and-shovel gear, so a public share offering would be quite a landmark in the industry if this happens.
A WORKING VOCABULARY
As with all things FinTech, cryptocurrency has its own exclusionary language of invented acronyms and borrowed phrasings. Here are just a few basic terms:
Altcoin are any of the 4,000+ cryptocurrencies besides bitcoin. Fiat are official currencies backed by governments but not physical commodities like gold or silver. Cryptocurrencies are digital assets protected by strong encryption in a DLT (distributed ledger technology) such as a blockchain. The valid blockchain transactions are ruled by software that define the blocks; forks can change the rules as hard forks (affecting all nodes) or soft forks (backward-compatible rule changes that require buy-in from a majority of the nodes). Hash functions are cryptography tools that turn input into fingerprints of the data that can’t be forged. Mining is the method for validating transactions on the blockchains like bitcoin or the others that use the consensus protocol called proof of work. Mining also adds new blocks to existing chains, generating new crytpo-tokens. A smart contract is a computer program embedded in a blockchain that moves digital assets between accounts after verifying established conditions.
The learning curve begins with understanding the language. For a concise working glossary, you can check https://cryptominded.com/glossary-cryptocurrency-terms-need-know. At the heart of it, the basic promise of cryptocurrencies is to strive to provide a faster, more secure, more efficient payment system accounted for on blockchain ledgers.
Help is available where cryptocurrencies live—online. A good place to start for the absolute novice is The Visual Capitalist website (www.visualcapitalist.com/beginners-guide-cryptocurrencies). It covers the basics using graphical FAQs that show rather than tell. Some of the topics covered include crypto wallets, a diagram of a working blockchain, money raised by ICOs ($5 billion so far in 2018), and past famous hacks. Its graphic history of bitcoin at www.visualcapitalist.com/the-definitive-history-of-bitcoin is worth a look.
Several online indexes that cover the current state of cryptocurrencies are useful for investors. To check market cap, price, and volume on more than 1,300 entries, there’s http://coincap.io. If you like charts, www.tradingview.com has a wide variety and includes an application for advanced charting and advanced analysis.
News is essential in the rapidly shifting landscape of cryptocurrencies where spikes and precipitous declines are common, so here are some of the higher-profile news sites. Bitcoin News—https://news.bitcoin.com—might be the largest resource for news and resources. Coin Desk, another large international news media platform, is at www.coindesk.com. CNN owns Cryptocoins News at www.ccn.com, and www.cryptocurrencynews.com and www.cryptoclarified.com are often listed among the best resources. The site www.bitcoinmagazine.com claims to be the first online magazine on the subject.
You don’t have to invest, but you should be aware of what’s happening in this banking revolution.