I got to know about cryptocurrency in 2012 but honestly i did not really understood what it meant or how it operates as of that time. Like most people, i was skeptical, because i can't fathom the fact that something created from a thin air and has no intrinsic value, can assume the role of a currency and function as a money. if i had invested in bitcoin that year, i would have profited so much by now. But that would have happened had it been i made some attempt to understand the concepts and the terminologies without relying on my assumptions to condemn it.
In reality, we all are faced with limited resources to take care of our daily needs, that is why most people tends to maximize the limited resources in their possession in order to make profit, hence their hunger for any viable option that promises high yield and meets their expectations, investment wise.
Cryptocurrency seems to have shifted the rudiment involve in investing to a common ground where anybody can buy stock or asset to reap the dividends. Financial market activities all around the world are centered on the principle of demand and supply, like the popular saying goes; man is insatiable, and its evident as shown by market activities of cryptocurrency, that so far, there is a utility resulting from the usage of a service or product, the principle holds.
The demand for money is multi-faceted, people need it for different purposes. While a lot of people are yet to understand what cryptocurrency all entails, the few that are aware of its potentials, has already been able to create their own isolated economies, raking in millions of dollar from transaction fees and benefits resulting from holding respective crypto assets over time. Different options exist for traders and developer alike to leverage on this burgeoning technology, that somehow seems to confuse a lot of people.
Let us just say, i am an advocate of distributed ledger technology with cryptocurrency as the subset and i am trying to bring to your knowledge the principle and technology behind cryptocurrency and how it has successfully given us an option on how we carry out different activities, be it; Health, Agriculture, Communications, Administration, Management, Banking, Finance, Real Estate, Manufacturing and almost any sector in any economy. it brings the possibilities to record information that are immutable and have been proven and approved by all participants in the network, thus deemed acceptable and represents the unanimous agreement by every body. Because the technology functions like a digital ledger, its applications in different sectors becomes a necessity.
In case you are still wondering how all this whole story fits together and why you should invest in crypto or a security token, think of it like an alternative to your regular traditional banking experience but with the one based on blockchain.
What is a smart contract?
Smart contracts are programmable, decentralized and transparent financial application. It is a programs that allow contract participants to load blockchain-based currencies to a contracts control account. The contract's code defines rules and conditions under which its funds will then be transferred out of the contract, typically to one of the contract participants(Hodler). It is commonly argued that smart contracts provides significant advantages over traditional financial instruments. One advantage is their generality. The second is improved transparency: smart contract code and execution is verifiable by anyone from the public block chain, unlike in traditional financial business application offerings, for building novel financial applications.
it is the ability of smart contract to create an asset from thin air using codes and algorithms programmed into an account and even make it a scare asset by building utility into it occasioned by the isolated economy that drives the demand and supply of the crypto asset, that seems to give crypto investment elusive compared to its fiat counterparts.
The permission-less and trust-less nature of the blockchain technologies and with the addition of smart contract, has given rise to a number of applications that runs on blockchain ranging from; health, politics, engineering, supply-chain, etc, and attracts numerous users in the community given relevance to the new normal: cryptocurrency.
The Smart Contract as a Central Bank
With reference to bitcoin that represents a coin with an address whereas smart contract introduced by ethereum added code and storage in addition to the coin and address so that account can execute programs as transactions.
The reason why cryptocurrency is so popular today is the proliferation of decentralized applications running different services with different isolated economies attracting participation from all around the world. This is further buttressed by border-less nature of the technology. Anybody can belong to any community build around a crypto project for different reasons. Either to purchase the crypto to use it for transactions purposes or purchase it for speculative reasons, driven according to market activities.
How does Smart Contract produce Money that has values
The the cryptocurrency projects with its respective token/coin are all built around a value proposition. Different business model targets different user segment, thus the different isolated economies. A crypto project that want to deliver value to its customers using blockchain technology will develop an application that runs on the blockchain that renders its services to its users. Such services/products are usually tied to an account. A cryptocurrency account represent an address that is tied to your account that hold your crypto assets. For Ethereum smart contract, the account also holds code that can be executed by the account holder and storage to store program state.
The typical process of a creating crypto asset would start from first defining the crypto asset specification in terms of the account holders. it is in this specification that rules and conditions are specified such as how the assets will be distributed, who will give approval for transfers to another accounts to happen?, how will the governance around the assets be fashioned, The amount of the assets owned by each account holders, what will be the name and symbol of the crypto assets, etc. Different blockchain technologies such as bitcoin, etherem, Binance, etc, all have their respective native token/coin that powers activities such as transfer of money, payment fee for transactions on those networks.
The project value proposition is now defined using the smart contract which are programs that are executed when transactions are sent to it. it is a form of agreement enforcer between parties. How the project accept instructions on behalf of the account holders of the assets specification for the project is defined by rules and conditions. Records of account holders are kept in state plus the record of their transaction are also saved in the blockchain state. All transaction are immutable once committed and it is open for all to access the records.
Why investing in fiat is loosing momentum to cryptocurrency investing
There is something unique about the high yield that accompanies cryptocurrency investment. it is the rate of speculations around the crypto assets and the inherent values perceived by the users. Ordinarily, saving your money with fiat traditional banks only comes with little interest while sadly the bank reaps the larger part of the profit being charge back to traders/businessmen borrowing the capital from the bank reserve. In cypto such saving attracts some interest yield and when locked as an investment either by staking it in a liquidity pool or just by hold for a long time which usually comes with high yield over time due to the dynamic market activities.
Take bitcoin for example, in April 2020 a unit of bitcoin was worth around $7,700 with total trading volume at $33,187,959,921, but exactly a year later the same unit of bitcoin is sold for $55,000. An investor who bought a unit of bitcoin in April 2020 till April 2021 have generated a profit of over 500% in profit. Take a look at the price movement for the one year span. A typical Nigeria bank pays per annum at 4.2%, meaning if you invest/save $7000 in a nIgeria bank, after one year, you will have interest of 4.2% which will be equivalent to around $7,294 summing both principal and interest together. Take a look at what different Nigeria bank offer to their customers.