Cryptocurrency.

I generally don't invest in stuff I don't understand and can't explain. :P Which is why I totally invest in houses--- I can point to it and say "That's mine" -- but cryptocurrency is not one of the things I can really explain clearly and confidently.

There are hundreds of cryptocurrencies. There are a few that are popular--- Bitcoin is the most famous one, but there are many, many, many, many others.

Bitcoins are mined at a steady rate-- which is how new cryptocurrency is minted. You can either buy it with real USD at a set rate, or you can put in the time and expense of mining blocks, and each block puts x number of new Bitcoins into circulation, and each Bitcoin is worth y, and transactions often take up z fraction of a Bitcoin, and they're all stored in a digital wallet, which is secure, except for when it isn't. :P

If you want to be a Bitcoin miner, the rewards get halved ever few years. So when Bitcoin first started (2009'ish?), and you mined a block, you would get, like, 50 Bitcoin. Nowadays, though, you mine a block, and you get more like 6 Bitcoin. Likewise, the difficulty increases as well, to keep the rate of production stable.

Because things are difficult, miners usually join mining pools. They team up together and split what they earn.

So-- all money is basically pretend, where a group of individuals all agree that it has a certain value. But different money has different things backing it. If someone had a krugerrand, everyone would agree that it has a certain value. If someone has a Euro or a US dollar or a Canadian dollar or a yen or a peso or a yuan or an Australian dollar, everyone would agree that it has a certain value as well. If someone has an Argentinian peso or a Zimbabwean dollar or a papiermark--- those would probably have value as novelty money, but not intrinsic value that you can go buy a loaf of bread with without needing a wheelbarrow.

And that's kind of the problem with cryptocurrency. People trust fiat currency because they trust the stability of the government backing it. In the time of gold and silver coins, they had an intrinsic material value; with paper money, the value is in the labor behind it. But cryptocurrency by its nature doesn't have a government or a material value-- their worth comes from people's willingness to accept them as payment.

I haven't done much with Cryptocurrency.

Block and chain which is closely associated with it however does have the ability to reshape real estate as it is the technology to outline the history of ownership of an asset.

The underlying theory of cryptocurrency - in my understanding - is an alternative money source. It's supply is definite (controlled by computer algorithm) so central bankers (or anyone else) cannot manipulate it. It is something akin to "electronic gold" in that respect.

The whole process is much more complex than that, but for a practical application as money, I think that is the reasoning, I may be mistaken.

This should be an interesting thread as I know nothing of it myself.

NE, at the rate it is gaining traction you and I will both be dead before it is readily accepted vs the Dollar. There are too many competing crypto currencies, to many holes in the cyber wall to make it anything other than a novelty for most, and too little stability in value. The one caveat is the underworld where it is a great way to avoid big brother watching you transfer large sums around.

These days, it is not worth the electricity to mine crypto in most areas and for most people. So, I would recommend people interested in crypto investing simply forget about the "mining it yourself" side of it. Those days have long since sailed for most people. Great description from Deanna though -- don't get me wrong -- but I think for most here that are thinking whether or not they should get on board with crypto, the "mining" part of it can be ignored.

Whether or not it has real future value is hard to say, of course. It's very speculative. That being said, it clearly IS being adopted more and more by mainstream sources. You can "buy" (* see note below) crypto using the popular Robinhood app -- and PayPal just announced that you can now buy* and sell* it using their platform. There is even something similar to a Bitcoin ETF now from Grayscale Investment -- which has also helped to add legitimacy and mainstream adoption.

Personally, I mined crypto a few years back when I had the opportunity to have free electricity. I made about 0.5 BTC (Bitcoin). During that same time, I also bought and sold a bit -- where I ended up owning about another 0.4 worth of BTC without having any actual cash involved any more. (I.e. I bought some, it went up, and I sold enough to get my original investment out and have just let it mostly sit since then -- except for selling once when it was around $16k and buying again when it went under $10k)

So, long story short, I own about $11,000 worth of crypto right now -- with probably 65-70% of that being Bitcoin (BTC).

I don't see me dumping a ton more cash into it. I actually do expect it to continue to rise -- but I'm not so confident that I'd put a ton into it. I just didn't want to "miss out" and, well, I've made over $10,000 so far, so I'm not complaining. :)

- John...

NE wrote: "Deanna, If I have to spend hours "mining" something that could potentially be erased in a power outage or by hacking, what would you say that makes the effort worth it vs just spending hours mining the next RE lead or finding a few stocks with potential?"

So, some things need to be explained to answer that...

First, your crypto ownership cannot be "erased" through a power outage or anything else of the sort. What you own is on the "Blockchain" and it is permanent. It is current backed up by literally thousands of different PCs. We could have a power outage across 80% of the WORLD and your crypto would still be safe provided that you had your key written down on a piece of paper. (And that "key" consists of simply writing down 24 words. You could own $1,000,000 worth of Bitcoin and keep it all safe by writing down 24 words on a piece of paper and putting it in a safe deposit box and literally destroying every piece of electronic equipment that you've ever touched -- and your Bitcoin would still be yours and safe.)

Second, you don't personally "spend hours" doing anything. When crypto is "mined", your computer sits and does complex math for hours on end. You don't have to "do" anything. So, it isn't like you are spending time "mining" while you could be doing something else. You set it up and let it mine all day in the background -- while you continue to use your time "spending hours mining the next RE lead or finding a few stocks with potential."

It's not an "either/or" situation. It is something that you do IN ADDITION to whatever else you are doing. Because it doesn't take time to do it once set up -- it just take electricity.

- John...

Oh! I forgot to give my "* note" in my post above when I kept saying to "see below" for some details...

This would get a bit too technical to explain, but a quick short version is this: if you don't hold the keys to your crypto, then you don't actually own any crypto. So, if you have a "digital wallet" with "keys" for your Bitcoin, then you own it. It is yours and you can sell it or transfer it or use it to buy a pizza if you want. It's yours.

But when you "buy" Bitcoin through PayPal or Robinhood, you don't have the "keys" to that crypto. You're paying PayPal or Robinhood and they control everything. Some do not believe that Robinhood actually owns the Bitcoin to go with it at all. They simply have a speculative investment that tracks/follows the price of Bitcoin.

So, that is why I put the notes/exception on "buying" Bitcoin from PayPal or Robinhood. You aren't actually buying Bitcoin. You're paying them to have a sort of placeholder or "Bitcoin-like" investment that just follows the current value of Bitcoin -- but they are actually the ones just doing the books behind the scenes. In other words, if Bitcoin jumped to $100,000 tomorrow, I think Robinhood would be in REAL trouble -- because they don't actually own it and would suddenly have a lot of investors wanting to sell at $100,000 when they didn't have the money to back that up.

Finally, one last thing to explain... You basically buy and sell crypto in tiny little PIECES of a full coin. Currently, 1 Bitcoin is at $13,000. So, if you wanted to buy in, you might buy only $50 or $500 or $5000 worth of Bitcoin and then you'd own that piece of Bitcoin. (i.e. if you bought $500 worth right now, you'd own 0.03846153 Bitcoin).

- John...

I invested in Bitcoin years ago when it was at $280. Sold at $8000. Nice. It's very volatile, but I think anything below $6000 is a safe entry point for a long hold until the next panic.

Don't bother mining. The hash algorithm makes difficulty a sliding scale based on number of miners and coins mined. It slides to keep the number of coins mined steady. The electricity needed to run those mining machines is a deal killer for most people. It's hard to make a profit with places like China mining using hydroelectric power.

Investing and speculation is the best play. However I'd stay clear of all the other coins except Etherium. The rest are just opportunists trying to make money using a coin version of an IPO.

There is a lot of mentions above about how Bitcoin will have a limit on the number of coins in the market. While this is true, it should be noted that the last Bitcoin won't be mined until around 2140. So, it isn't like that is "right around the corner" unless things change significantly. :)

- John...

Side note: I earned most of my ETH by selling a virtual cat on CryptoKitties that looked like a vampire and mentioned the show Stranger Things. Just to remind you how crazy this all is! I literally sold a virtual cat for $1000. :)

- John...

I have some bitcoin, Tezos, compound and free crypto earned from watching videos. If your interested on learning about some of them Coinbase has a deal where you watch a few short videos (10 min each coin roughly) and they give you a few dollars worth of the crypto. I invested what I was willing to lose. I was down but currently have trippled my investment. Plan on riding it out for a few years to see what happens.

NE: It's because you're worried about the details.

If I buy gold as an investment, I really don't care much about how the picks and drills work that mine it -- nor the trucks that bring it out of the mines. It's just something that I see as an investment.

People can look at Bitcoin that way -- and probably do a little learning and even see its potential more than "gold." I mean, gold, to me, has little "potential" to become more usable in the future. Crypto, on the other hand, very likely WILL become much more usable in the future.

Here's the Simple Wiki definition for Bitcoin: "Bitcoin is a digital and global money system currency. It allows people to send or receive money across the internet, even to someone they don't know or don't trust. Money can be exchanged without being linked to a real identity."

Heck, that's more than I know about the gold market probably!

So, again, you don't have to fully understand the details of the tech to see how it can be used and invest in it. Much like, again, I don't know how gold is mined. I don't need to care how it is mined.

- John...

That sounds good, but MOST people who "invest" in "gold" aren't actually buying physical gold to touch. They are buying some gold ETF or other virtual entity that REPRESENTS the price of gold.

I also think your account is a bit out of touch. Over 2 years ago, the IRS added information related to crypto to their forms. It is easy to mark that you deal with it, give proper pricing data if needed, and so on. It is no longer a "red flag" for the IRS compared to most other such investments, IMO.

But, sure, you do you. I'm not saying you should buy it at all. I'm just trying to explain why some of your concerns (i.e. taking "hours" to "mine" it) aren't accurate and are simply a lack of understanding how it works. I thought that was the point of your thread -- to learn more about it?

- John...

It's a pretty basic question: "At any time during 2019, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency?"

It's similar to the "Did you buy anything from another state" question. :)

- John...

I heard about bitcoins when it first surfaced and mining was doable(like 10-15 years ago). I never bothered to invest into it, feel like fiat money. Now wife decided to invest some when it costs gazillion a coin.