DID YOU MISS THE CRYPTOCURRENT BOAT?
You can still get in on the cryptocurrency craze. But first, make sure you want to.
FIRST, UNDERSTAND THIS
There aren’t piles of bitcoin in vaults somewhere. Cryptocurrencies like bitcoin exist entirely as data, ones and zeroes passing between computers on the internet, proving their existence as numbers on a phone or laptop screen. In that sense, trading rands for cryptocurrency is like most forms of investing. So buying and holding bitcoin is not as crazy as it sounds, except for one key difference: While typical investing is regulated by some central authority who can bust cheaters and provide an economic safety net when the bottom falls out, cryptocurrencies regulate themselves. They use complex, nearly tamper-proof software running on hundreds of thousands of volunteers’ computers around the world to ensure that everyone plays by the rules no using software to counterfeit, no fudging the numbers on an exchange. The whole thing seems kind of weird compared to investing in corn futures or, you know, putting your money in the bank. But big institutions like Goldman Sachs, which is opening a trading desk for cryptocurrencies this summer, and Square, which now lets you buy and sell them within its cash app, are paying attention to these currencies and the technology that powers them. There are ways you can get in on it, too.
Until 2011, one bitcoin, which is still the most popular cryptocurrency, was worth less than a rand. As we write this, that same bitcoin is now worth around R95 000. But if you missed that first wave, or if you suspect that such appreciation is unsustainable, there are more than a thousand other cryptocurrencies to buy (see page 18). There may be fewer instances of bitcoingrade stratospheric appreciation, but there’s no question that there’s still earning potential. Just be patient through the ups and downs. Brett Gibson, a venture capitalist and software engineer, bought bitcoin about five years ago, when each one was selling for R230. He’s started checking the markets daily, but generally keeps still. “I’ve ridden these waves before,” he says. “I saw bitcoin go from R12 00 down to R2 300, and I just didn’t do anything, Not doing anything today is as easy as not doing anything back then.”
To understand cryptocurrencies, you need to understand the term blockchain. It refers to the collective record (called a ledger) that stores cryptocurrency transactions. Think of it as a communal Excel spreadsheet. It’s the silent, brilliant technology that keeps everyone honest.
The collective record is stored on volunteers’ computers, not a corporate data center, and those computers run software that verifies transactions, checking to make sure that both parties agreed to the change, and that the buyer has enough currency to honour it. These volunteers are called miners, and the reward for volunteering their hardware is
kickbacks in the form of more cryptocurrency.
If enough of those computers conclude that yes, this is a valid exchange, that verification joins the rest of the world’s recent transactions as a “block.” To prevent people from generating counterfeit currency, the math required to verify a transaction takes so much computing power that no one user or group could do it.
Big companies are interested in blockchain because it’s a secure, quick way to move information, like money, between people without having to keep all that data in a single place. The software handles that on its own.
But be warned: buying bitcoin is not the same as exchanging rands for euros before your trip to Paris. Buying cryptocurrency really means investing in a commodity – a commodity that can fluctuate wildly, dropping and rising by thousands of rands in a single day. And since there’s no governing body to step in if the floor falls out, it’s helpful to liken buying bitcoin to gambling. Actually, it’s less reliable than gambling. One Silicon Valley investor put it to us this way: “In roulette, if you put R12 on every number, you’ll spend R444 and be guaranteed to get exactly R420 in return. You could buy R12 of every cryptocurrency and they might all end up worthless.” So, no, don’t put your retirement fund into bitcoin. But if you have cash that you won’t miss, investing in cryptocurrencies is a chance to be a beta tester for a radical new money technology. And you may even make some money while you’re at it.
Things have changed in construction. Houses are more energy efficient than those we were building when I was a teenage carpenter’s helper wearing a canvas nail apron borrowed from my boss in the morning and returned to him at quitting time. Still, there are things I miss. When I was a kid, carpenters built, didn’t buy, their toolboxes and a lot of their day-to- day work aids. I admit, it’s hard to beat the store-bought tool bags and parts organisers in wide use today. Wear-resistant fabrics, plastics, and extruded aluminum are all strong and lightweight. Score one for industrial designers. On the other hand, when you make your own boxes, bins, jigs, and sawhorses, you get exactly what you want, not somebody else’s idea of efficiency – with a free T-shirt thrown in. And believe me, I’m no master craftsman. The tools you see here are easy to build. As a man of humble skills, I can build these. They’re that simple.