Cryptocurrency for Beginners

Cryptocurrency: The news of FTX going bankrupt has been in the headlines lately. The CEO, Sam Bankman-Fried, is arrested for allegedly channelling the customer’s fund to its sister company, making a $10 billion hole in their finance.

That’s a lot of money. It looks like cryptocurrency and their exchanges are a big deal, but what are they exactly?

Today, we’re introducing cryptocurrency basics, providing a good starting point to understand the latest news about digital assets.

Cryptocurrency, or crypto, is a form of digital currency. As you might have guessed from the name, it uses “cryptography” for safer transactions.

The transaction happens in the digital, virtual world, peer-to-peer. When you make or receive a payment, the record is registered on blockchain technology. Cryptocurrencies are also stored in a digital wallet, not a physical one.

As it does not need intermediaries, like a bank or the government, it is often described as a currency of a “decentralized network”. 

You might have heard of one of the first cryptocurrencies: Bitcoin. The cryptocurrency was introduced in 2009 amid the backlash against traditional banking systems.

The prices of these cryptocurrencies are sometimes different. It fluctuates in a big range, especially when speculators drive high costs.

How do you get a cryptocurrency, then?

Buying from brokers or exchanges, both offering ways to purchase various types of cryptocurrencies is one.

Another is “mining” cryptocurrencies, in other terms, making “new cryptocurrencies” instead of buying them.

You use your computer power to solve complex mathematical puzzles. Afterwards, you must validate your transactions on a blockchain system and add them to a public database.

When you have cryptocurrencies, you do not own any fiat money. You can still make payments in cryptocurrency, but this transaction is not a transfer of funds but a unit of digital assets from one to another.

Making transactions in cryptocurrency is not a niche hobby either. According to Bank Rate, the total value of all existing cryptocurrencies is $919 billion as of 2022.

Returning to the story of FTX, the company was the third-biggest cryptocurrency exchange by volume before its demise.

With the company’s failure, reports suggest that cryptocurrency is not inherently “decentralized” anymore, as there are leaders who make decisions and impact the market at exchange platforms.

Big intermediaries like FTX attracted more users and investors and expanded the cryptocurrency market. In the wake of FTX’s collapse, some suggested that the government should intervene to settle the situation as the company is “too big to fail”.

Despite the recent turmoil, the popularity of cryptocurrencies continues to this day. Will it remain as popular as now in 2023?

Sunny Um is a Seoul-based journalist working with 4i Magazine. She writes and talks about policies, business updates, and social issues around the Korean tech industry. She is best known for in-depth explanations of local issues for readers who need a better understanding of the Korean context. Sunny’s works appeared in prominent Korean news outlets, such as the Korea Times and Wired Korea. She currently makes regular writing contributions to newsrooms worldwide, such as Maritime Fairtrade, a non-profit media organization based in Singapore. She also works as a content strategist at 1021 Creative. A person who holds a Master’s degree in Political Economy from King’s College London, she loves to follow up on news of Korean politics and economy when she’s not writing.