Most young people in Nigeria are involved in one form of Cryptocurrency or the other. These are the select few who understand exactly how it works and how to monitor the fluctuations. The rest of the population are still unsure of how exactly it works. It has been hailed as the money of the future. If you’re in doubt, keep reading for the very basic things you need to know about it.
Cryptocurrency became popular in Nigeria in 2016. Prior to this even though it was popular in other parts of the world since 2009, little was known about it in this part of the world.
Cryptocurrency is a digital or virtual currency designed to work as a medium of exchange. It uses cryptography to secure and verify transactions. This is also used to control the creation of new units of a particular cryptocurrency.
The earliest known form of cryptocurrency was the Bitcoin. This was created by Satoshi Nakamoto. It is unclear if he was one programmer or a group of programmers. Nakamoto’s goal in the beginning was to create nothing more than an electronic peer-to-peer cash system.
Previous attempts at building an online centralized cash system failed so the single most important part of Satoshi‘s invention was that he found a way to build a decentralized digital cash system. A decentralized system means is that it doesn’t have a fixed depot like you would go to a bank for any form of transaction.
With cryptocurrency you have to ‘mine’ it. You need resources to do this. A company or group of people are the ones who will facilitate the process so investors can then acquire from them.
To make it easier for the layman to understand, Bitcoin or any other form of the cryptocurrency becomes cash in hand when you exchange it online and the person you exchange with pays you the value of the coin in cash. One may need bitcoins to use as a form of investment online in companies that use it to trade.
The Central Bank of Nigeria has, however, warned Nigerians that cryptocurrencies are not legal tender in Nigeria and are not licensed or regulated by the CBN. When you trade with it online, you are not protected by the law and hence do so at your own risk. Countries where bitcoin and other cryptocurrency is banned include China, Thailand, India, Taiwan, Germany, Russia and others.
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The major problem one faces when engaging in cryptocurrency is that they are insecure. When you make a transaction with your bank, if anything goes wrong it can be traced and money refunded. With cryptocurrency that is not the case. Once you’ve exchanged coins with someone, you have no way of contacting that person anymore. The system is also prone to hacking. You may wake up one day and find that all you have amassed is gone.
The second problem that plagues this new form of financial trading is that it is volatile. Between January 2013 and November 2013, the price of Bitcoin rose 8,313%, then collapsed to half of its value. Because of this, cryptocurrency is used by ‘risk takers’ and cannot be counted as a long term saving. You get in and get out. You have to watch the ebbs and flows and dump your coins ( exchange it for cash ) when it best favours you. Be ready to lose sometimes as well.
The third problem is money depreciates with cryptocurrency. It’s best to buy when it is low and wait for it to appreciate. When you buy high, chances of it getting higher are slim.
If you chose to embark on this venture, you do so at your own risk. Also, do more research on the company that you want to exchange cash for Cryptocurrency to ensure its validity. There have been success stories but the failure stories are also plenty. The rule of thumb is always to invest with what you can afford to lose because you never can tell when the value will drop. Just be careful!
