Crypto currency for Noobs (Part one)

First things first.. What really is cryptocurrency? To quickly (& crudely) simplify a complex topic, these are unique digital entities (commonly called coins) based on blockchain technology. A technology that has been designed so that this entity can never be replicated and retains its unique identity all along. Once assigned a notional value (much like a piece of paper is assigned value in traditional currency) it continues to be associated with some value forever, due to its unique identity. Cryptocurrencies are believed to have been created by technologists as a decentralized community-owned alternative to the current system where central banks print currency and governments bail out entities based on their whims and fancies.

How do you lay your hands on one? There are three ways. Either you digitally “mine” a coin, earn it by providing an asset / service, or you buy them on one of the many coin trading exchanges that have now been set up across the world. Digital mining is an interesting “self propelling” process where you devote a certain degree of computing power to the coin, in a sense “searching” for undiscovered coins in the internet space. The coin algorithm uses this compute power to perform the tasks of unique identification for the coin in daily usage and in return for the compute power you have devoted, you get rewarded with more coins (which are auto restricted in number)! People have now set up huge server farms devoted to this function. The easier and most common way of course, is to sign up to a coin trading exchange and buy the coins for cash. People then tend to engage in a popular activity called crypto currency “trading”.

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Gambling on the Stock Market

There are some people who consider the entire space of equities as akin to gambling. They may have dabbled in it briefly, burnt their fingers in a downturn and exited, having reinforced their initial belief system. Then there are those who understand the difference between long term value investing and the various instruments of trading, such as short term holding, day trading, BTST (buy today sell tomorrow), futures and options etc.

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