Guide to Understanding Cryptocurrency and Bitcoin

Guide to Understanding Cryptocurrency and Bitcoin
What is crypto currency?
“Cryptocurrencies are the tools of a new generation decentralized financial system that is predetermined how it can be produced with an algorithm and who can contribute to this production, with a software that does not have any boss or any institution behind it.”

 
How long has cryptocurrency been in our lives?

“This started with the first Bitcoin in 2009. Right after the financial crisis in 2008, an article that we call 'white paper' was published. This peer-reviewed article caught people's attention when it went viral on the Internet in the form of a 'manifesto'. The title of this article is the peer-to-peer money transfer system Bitcoin. However, when looked in a little more detail, it is not a monetary system; it seems to be a brand new financial system where everyone can participate and people have a direct say in its production and use. In 2015, a new asset was defined, called Etherium, which we now consider to be the second largest cryptocurrency after Bitcoin.”

What is blockchain? 

 “Blockchain is the infrastructure where these cryptocurrencies are recorded. Blockchain is a decentralized registry system that we call a kind of 'distributed ledger'. Bitcoin is the first popular use of it. Etherium is the second usage area. With Ethereum, the business just went out of use. Even more sophisticated software, which we call 'smart contracts', has turned into a financial system, where all banking services can be provided, with algorithms leaving the financial system only to pay and send money. A financial structure was built, from keeping the record of this entire transportation chain, which is widely used in the logistics sector, which we call the 'supply chain', to decentralized production in the energy sector and to its coordination, where all kinds of records are made without being kept by any authority or any central place. Right now, after Bitcoin and Etherium, there is a last trend called 'decentralized finance'. Here, a financial system is being built based on the free will of the people, where banking, lending, insurance transactions, buying and selling derivative products and many other protocols exist.

How many cryptos are there?

“The first cryptocurrencies were Bitcoin and Ethereum, which were decentralized. But right now there are over 9000 coins. Some of them are not decentralized unlike Bitcoin and Ethereum. There are coins issued by a number of groups, companies, individuals, and some even give their own names. Blockchain and Bitcoin are actually an invitation to evaluate the shock of trust created by the financial crisis in 2008 and say that a different way is possible with technology. In the current pandemic period, people are more aware of the potential of cryptocurrencies. In order to get out of this difficult situation, he hopes to use Bitcoin, Etherium and cryptocurrencies, that is, the tools of this new financial system.

How many people use cryptocurrencies, what is the market cap of cryptocurrencies?

“There is a finding that there are more than 3 million woods in Turkey. That is very serious number. This is much more than Borsa İstanbul users. It is not possible to give an exact figure about the world. In general, we can say that it has a large number of users. But determining the number of people is not easy. Because their numbers here are not one-to-one. In other words, it may be that a person has more than one wallet, and this is even recommended. Therefore, we can see the number of wallets. Therefore, we can measure the market volume, which is an important indicator for us. The total market volume is around 2.1 trillion dollars. This may seem like a small number when we compare it with the forex markets. The continuous growth of a system that started out with the aim of becoming public, since there is no company, institution or person behind it, is important in terms of showing the extent that the business can go even further.”


What is the difference between digital money and crypto money and digital money?

“Central banks are making digital currencies in their own monopoly, which, by definition, cannot be decentralized, in the distributed ledger structure in the technological structure of the blockchain, which is inspired from here. This is the distinction between digital money and cryptocurrencies. Cryptocurrency is decentralized, bossless, digital currency centralized and patronized. That boss could be a corporation or the central bank itself.”

Can states ban cryptocurrencies? 

 “These jobs and technological jobs are not jobs that can be prevented and banned. Banning blockchain, cryptocurrencies, is like banning the internet. Impossible. It's against the nature of the business. There is currently a somewhat cautious view and approach towards cryptocurrencies. This is mostly due to the volatility of cryptocurrencies. Here, central banks and states highlight the risk of investors being victimized and emphasize the need to take precautions here. As an academic, I think differently. Education prevents these grievances, not banning cryptocurrencies or reducing their use. The second reason is that it is used as a tool in money laundering or terrorist financing, and there is a cautious and prohibitive attitude towards cryptocurrencies. The fault is not in cryptocurrencies. The world's most used money in these dark works is, by definition, the reserve currency, the dollar. Whichever is the most used money is used in these works. Just as our banning the dollar does not prevent this, our banning of cryptocurrencies will not prevent this. Here again, what needs to be done is to identify those who mediate these dark deeds and to impose sanctions on them. It's not about blocking cryptocurrencies."

What risks do cryptocurrencies pose? 

 “As the upward trend appears, people expect us to buy and get rich. This is risky. Those who follow these works for a long time and know the markets have internalized a very simple data. Whenever high levels are seen in Bitcoin and Etherium, there is definitely a decrease. There are decreases of 10-20, up to 30 percent. There was a similar decline last weekend. All of them dropped 10 percent. In normal markets, this 10 percent decrease can be perceived as a big drop. But there are 50 percent 60 percent rises in cryptocurrencies. A 30 to 40 percent drop is also quite possible. A risky asset is, by definition, highly probable. But when it suddenly drops by 10 percent, we see that people make panic sales and are evaluated as if they were burned down. Our state institutions have regulations regarding the risks that such impulsive behavior may create, and measures that advocate that such warnings should not be encouraged. Financial literacy was an important concept in the past. It is still important. There is currently an updated version of it. Financial technology literacy and these things are very intertwined. Financial knowledge is required as well as the knowledge of using hardware and having a good command of technology. You need to read and research.”