Many have had the opportunity to make a profit from investing in cryptocurrency. It’s not a get-rich-quick scheme, but it can be a worthwhile investment and potential route to financial security with proper research and implementation. Despite decades of being excluded from building wealth, Black women are flourishing in entrepreneurship, gaining financial knowledge and seeking opportunities towards their financial freedom. For example, 44% of individuals investing in cryptocurrency are people of color, and 41% are women. Investing in cryptocurrency could help Black men and women bridge the wealth gap created by stolen financial time stemming from the Jim Crow era and systematic oppression.
What is Cryptocurrency?
Simply put, cryptocurrency is a form of digital money. With cryptocurrency, banks aren’t necessary for storing, accessing, or transfering funds. This is possible through blockchain technology, a digital ledger that allows parties to make transactions without a central verifying authority, such as a bank. Third-party verification can be avoided in blockchain technology because the identities of the parties making and accepting the transactions have been previously verified. Cryptocurrencies rely on this decentralized technology to operate.
Decentralization means that no single person or entity is in charge. Decentralization aims to dissolve absolute power by distributing that power among multiple people or entities. For example, instead of a teller, every computer in the network confirms each transaction in cryptocurrency.
Goals of Cryptocurrency
Cryptocurrencies aim to solve some of the issues with traditional forms of money. For instance, cryptocurrency seeks to reduce corruption with the blockchain by eliminating banks and centralized methods of holding money so that one doesn’t need a bank to store, access, or transfer funds. Cryptocurrency also aims to eradicate excess money printing. By stopping the creation of surplus money, cryptocurrencies prevent the devaluation of their dollar amount. To explain, while a country’s currency value can decrease when they print excess cash, the number of cryptocurrencies in circulation at any given time is finite.
Furthermore, when centralized banks are used, the government is entitled to an individual's assets if proper estate planning isn’t in effect. Within reason, banks can also decide to freeze an individual’s assets, prohibiting them from accessing their funds. Cryptocurrency is so secure that only the verified user linked to the account can access the funds. More than 1.6 billion people in the world remain “unbanked,” which means that they don’t have access to a banking institution. Cryptocurrency aims to resolve this issue by providing access to anyone who has a mobile device.
Development of Cryptocurrency
There have been many attempts to create a digital currency; the first cryptocurrency created was Bitcoin. An anonymous developer(s), using the pseudonym Satoshi Nakomoto, developed the code for the first product of the blockchain, which was Bitcoin, in 2008. He described it as a “peer-to-peer version of [the] electronic cash system.” Bitcoin was created through a “mining” process, which occurs when coders use powerful, high-performance computers to solve complicated math problems. The first coder (crypto miner) to crack this code can authorize that particular transaction, and they also receive a small amount of cryptocurrency as payment. This process verifies cryptocurrency transactions and adds them to the blockchain ledger. Bitcoin remained the only cryptocurrency until 2011, when enthusiasts started to develop alternatives, or “altcoins.” One of the first altcoins to be created was Litecoin. Now there are close to 8,000 cryptocurrencies in circulation, and more are projected to be established.
Digital wallets are needed to hold and utilize cryptocurrencies. Think of this like PayPal, Venmo, CashApp, or Apple Pay accounts. Digital wallets are highly secure, requiring multiple forms of identification to establish and a password to open. After obtaining a digital wallet, investors can shop for cryptocurrencies on a crypto exchange. An exchange is where investors use traditional or “fiat” money—currency that’s value is determined by a government’s decree based on credibility and power, like the dollar, yen, and euro—to purchase cryptocurrency. Cryptocurrency exchanges are also utilized to store and exchange different kinds of cryptocurrencies. A good practice is to transfer newly purchased cryptocurrencies to a digital wallet, as some exchanges have been victims of hacking.
Cryptocurrency has the potential to do many things; it can be bought and held similarly to the traditional stock market because it has the potential to grow in value over time. In addition, cryptocurrency can be traded to maximize the chances of making a profit. However, each investor must take the time to research. Online resources and communities can provide the knowledge to ensure due diligence and sound decision-making when investing in cryptocurrency.
Why isn’t everyone investing in cryptocurrency? Surprisingly, it’s not due to a lack of resources. Instead, people fear what they don’t understand. NORC at the University of Chicago revealed that 62% of the surveyed individuals are skeptical about investing in cryptocurrency because they don’t know much about it. Overcoming fear of the unknown could provide additional options for retirement and financial freedom. In addition, cryptocurrency could be a route that Black families can utilize to build generational wealth.
Chris Jaikaran, Blockchain: Background and Policy Issues.
David W. Perkins, Cryptocurrency: The Economics of Money and Selected Policy Issues
David Rodeck & Josh Schmidt, What is blockchain?
Forrest Stroud, What is cryptocurrency mining?: How bitcoin mining works.
John Wanguba, How Many Cryptocurrencies Are There In 2021