How to beat myths and make money from cryptocurrency

Many cryptocurrencies are decentralized networks based on Blockchain technology. [Courtesy]

When Lawrence Mberi and Louis Kaptich first heard of cryptocurrency back in 2010 and 2016 respectively, both of them did not care much for it. This is despite Bitcoin - the world’s largest cryptocurrency by market capitalisation - having debuted in 2009 with a lot of fanfare.

Just like everyone else, they obeyed the instincts which strongly told them not to indulge. “Bitcoin is a scam and cryptocurrency is another Multi-level marketing pyramid scheme.” This was all they heard.

Also to note that at the time, Bitcoin was trading at $ 436.46 (Sh49,376). Currently, a Bitcoin will cost you $48,364.80 (Sh5,467,889.66). This is high growth in value of 11,081 per cent from the first time the duo heard about Bitcoin to today.

Burnt fingers

After researching online and tracking cryptocurrencies in the international media, they decided to invest. But the decision was a bit hurried.

“In the true Kenyan spirit, we first jumped into this ‘new investment opportunity without finding out much about it,” Lawrence recalled. “I mean, we are marathon runners so off we went with the resolve to find out more later.”

The first time they both did, they lost money through a scam that cost them a significant amount of money in the hope that they would recoup their investment.

They burnt fingers in pursuit of what in Kenya is known as get-rich-quick schemes.

They then decided to find out more about Bitcoin and cryptocurrency and how to get into it.

“Ours was baptism by fire and that is what fueled the quest to gain more knowledge,” Louis explained. “We teamed up and founded Decrypt Edge, an organization that focuses on educating people about cryptocurrency, just to guide individuals interested in the trade.”

What is cryptocurrency?

Cryptocurrency (simply crypto) according to Investopedia, is a digital or virtual currency that is secured by cryptography which makes it nearly impossible to counterfeit or double-spend. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.

Currently, there are over 14,000 cryptocurrencies worldwide, with the oldest being Bitcoin. Satoshi Nakamoto, (believed to be a Japanese man), is the name used by the presumed pseudonymous person or persons who developed bitcoin. He authored the bitcoin white paper, and created and deployed bitcoin’s original reference implementation.

As part of the implementation, Nakamoto also devised the first blockchain database.

Cryptocurrency investor, Louis Kaptich. [Courtesy]

Bitcoin continues to lead the pack of cryptocurrencies in terms of market capitalization, user base, and popularity.

Other virtual currencies such as Ethereum are being used to create decentralized financial (DeFi) systems.

Some altcoins are being endorsed as having newer features than Bitcoin, such as the ability to handle more transactions per second or use different consensus algorithms like proof of stake.

Many cryptocurrencies are decentralized networks based on Blockchain technology. Blockchain technology, on the other hand, is a distributed ledger enforced by a disparate network of computers.

How to get started

The most important thing for anyone who wants to get started, as advised by Louis and Lawrence is gaining knowledge on what exactly one is getting into.

“Just to demystify, crypto is not a scam. You can make real money. However, you have to know which one you want to buy and how the markets behave and at what point to hold and what point to sell, similar to what is done in the financial markets,” Louis explained.

All cryptocurrencies are held in an exchange wallet. The most famous exchange wallet is Blockchain. Trading volumes for several African currencies have especially grown on LocalBitcoins and Paxful, the world’s biggest peer to peer (P2P) platforms by transaction volume since 2016. There are several options for cryptocurrency wallets that one can use today.

Once you have your settings in order, you’ll get an address. Now that address is what is used like a bank account to which you can buy or sell (send and receive) crypto.

There are exchanges where cryptocurrencies can be converted into cash fiat currency like US Dollar or Kenyan Shilling which you can use in real-life purchases.

Do not use your wallet using public WiFi as you run the risk of being hacked and losing your digital assets, crypto analysts warn.

Lawrence and Louis are heavy on the knowledge bit, doing weekly webinars and podcasts as methods of passing the knowledge on cryptocurrency, for Kenyans.

The other big myth is that cryptocurrency is a conduit for money laundering. Louis asserts that it is not. The pricing as currently constituted is moved by market forces of supply and demand.

However, regulators worldwide, including the Central Bank of Kenya (CBK), have warned over the risks associated with some of these cryptocurrencies. Because, the identity of those who transact in bitcoins is hidden, regulators have argued that it is popular with criminals who would like to conceal their tracks.  

Indeed, historically, the first place and channel that crypto was used, was in the dark web.

“When something is new, people tend to have a lot of notions around it. We saw the same with M-PESA. Today, M-PESA is not just a tool but it has become a Kenyan lifestyle and a verb. The biggest way to know is to experience,” Louis explained.

“Bitcoin and cryptocurrency are not for everyone. Investment decisions must be based on your understanding and knowledge and risk appetite. If you feel otherwise about the digital currency wave in the world, then do not invest in it as there are alternative investment opportunities out here,” said Lawrence.