Always wanted to learn more about the new realm of digital assets and cryptocurrency but didn’t know where to start? Bitesize gives you the answers to all the top 10 questions you’ve had but been too embarrassed – or just too busy – to ask! Let’s go through it.
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What is a digital asset?
Digital asset is simply defined as ‘anything that exists in binary data which is self-contained, uniquely identifiable, and has a value or ability to use’. When the term originated in the mid-90s, digital assets were things like videos, images, audio, and documentation or any content that is stored digitally basically. Since the late 2000s, digital assets have come to represent a whole new type of financial assets called ‘cryptocurrencies’, made possible through modern technological advancement and blockchain technology.
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What digital assets/cryptocurrencies are there?
The most famous of them all has got to be bitcoin. We’re sure you’ve heard of it before. Invented by Satoshi Nakamoto, who has remained as enigmatic as the technology he pioneered the use of, bitcoin is the first of the cryptocurrencies which has gained mainstream credibility of late. It also has the largest market capitalisation (~212 billion USD). But there are also plenty of other currencies called ‘altcoins which are basically alternative currencies to bitcoin such as Ethereum, XRP, Litecoin, Bitcoin Cash and Ripple, which all sound like they belong in Sci-Fi more than on Wall Street. But these are some of the main crypto currencies – there are an estimated 5000 cryptocurrencies in existence and this number is growing daily.
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Why is bitcoin (or any of the altcoins) so valuable?
1 bitcoin is now priced at approximately 11,500 USD. When it first started, its price was almost nothing, which has made millionaires (if not billionaires) of early investors who cashed out when bitcoin hit a high of 20,000 USD in 2017. But the reason why bitcoins and some cryptocurrencies have value is because it is seen as ‘an efficient means of transferring money over the internet controlled by a decentralized network with a transparent set of rules’.
Firstly, bitcoin has all the characteristics of money: durability, portability, fungibility, scarcity, divisibility, and recognizability. There are only 21 million bitcoins available in the system, it’s durable; it cannot be duplicated or destroyed, it can be moved (portable) and exchanged for other currencies (fungible); it is divisible by 8 decimal points, and of course, bitcoin is recognisable.
Bitcoin is backed by mathematics and no central authority. All that is required for a form of money to hold value is trust and adoption. In the case of Bitcoin, this can be measured by its growing base of users, merchants, and startups. As with all currency, bitcoin’s value comes only and directly from people willing to accept them as payment. This makes it a store of value and a medium of exchange.
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Is it too late to jump on the bitcoin bandwagon?
Another very good question and the answer to which is tricky. It depends on what your objective is. If you are looking to make a quick but small return on your investment then you’d just be trading and you would have to know when to buy and at what price to sell. You’d need to invest a lot of time into studying the market and the trends.
Buying bitcoin is not a ‘get rich quick scheme’.There are various ways to make money with Bitcoin such as mining, speculation or running new businesses. All of these methods are competitive and there is no guarantee of profit. It is up to each individual to make a proper evaluation of the costs and the risks involved in any such project.
If your strategy is a long-term passive investment and you are looking to earn capital gains on bitcoin, it might be the right investment, but bear in mind that bitcoin is a volatile currency with unpredictable fluctuations in price.
It really boils down to one’s individual belief in the value of Bitcoin, its technology and ability to hedge against currency depreciation. As a basic rule of thumb, no currency should be considered absolutely safe from failures or hard times. Bitcoin has proven reliable for years since its inception and there is a lot of potential for Bitcoin to continue to grow. However, no one is in a position to predict what the future will be for Bitcoin.
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Where can I buy cryptocurrency in Thailand?
This is another good question, you can buy and sell Cryptocurrency in any of the major exchanges in Thailand. There are several regulated by the Securities Exchange Commision (SEC) including Zipmex, Bitkub, Satangpro and Huobi. Study the fees and prices before you buy though as these can vary from exchange to exchange.
Zipmex has a 0% commission fee model, which allows large volume traders to save a lot on fees as compared to exchanges that incurred trading fees.
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How can I cash out of my cryptocurrency?
Your best bet is through the cryptocurrency exchanges. However, you don’t have to sell on the same platform that you bought on. Studying the prices and seeing which one has the best price will certainly give you more return on your initial investment.
Once you sell your cryptocurrency to fiat, it then becomes the local currency (THB) that you wish to withdraw., which you can withdraw into your Thai bank account and use as cash. Withdrawals usually take 30 mins or so, depending on the exchange. A good, regulated exchange like Zipmex will ensure that your money is in a safe place.
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What is a crypto token?
The exact definition of a crypto token is ‘a particular fungible (replaceable, interchangeable) and tradable asset or a utility created over an initial coin offering (ICO) often found on the blockchain’. They are not a currency per se but a symbol of a contract whose value does not depend on mining or market dynamics. They are digital assets that operate on top of a blockchain acting as a medium for the creation and execution of decentralized applications (dApps) – applications that run on a distributed computing system – and smart contracts.
There are several types of tokens including utility tokens, credit tokens and equity tokens, all used to represent another valuable asset or service.
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What is an Initial Coin Offering (ICO)?
An Initial Coin Offering or ICO has a concept similar to that of an IPO (Initial Public Offering). It is a way of raising funds from investors by project starters looking to develop a new coin/app or service related to blockchain and cryptocurrency.
The token may have some utility in terms of offering a service/product that the project creates in exchange for funding (can be fiat or crypto) from investors. The token can also just represent a stake in the newly created entity/project. In this case token holders will get a dividend or fixed commission and can take part in company decisions.
In Thailand, we’ve seen some public ICOs, SET listed mobile distributor Jay Mart sold its JFin digital currency through an ICO, but nothing much have been covered since then.
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What are cryptocurrency funds?
A cryptocurrency fund is a pool of money from investors used to invest in cryptocurrencies like bitcoin. There are several funds that have been recently launched such as Fidelity’s Wise Origin Bitcoin Index Fund I, Grayscale’s Bitcoin Fund (GBTC), which are like professionally managed funds that charge a management fee as well as expenses. Even prominent venture capital firms like Andreessen Horowitz (a16z) have launched two crypto funds.
We covered cryptocurrency funds in more detail in one of our previous articles.
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What are De-Fi and cryptocurrency lending?
You’ve probably been hearing the buzzword ‘De-Fi’ a lot lately. ‘De-Fi’ is short-form for Decentralized Finance and refers to the ecosystem of financial applications that are being developed on top of blockchain systems. However, it can also refer to the current movement creating an open-source system as an alternative to the traditional finance system and its services. There are 3 major uses for De-Fi:
- Creating monetary banking services (issuance of stablecoins)
- Providing peer-to-peer or pooled lending and borrowing
- Enabling advanced financial instruments such as tokenisation platforms, derivatives and DEX
So there we have it, all the questions you probably wanted to know answered in the most condensed way. Hopefully, you can use this guide as an entry point into the world of digital assets. It’s a wild, fun journey out there, so make sure you cover your bases, check the facts and make sure you know what you’re dipping into.