If your family knows you are into crypto, they are bound to ask you about it during the holidays. After last year’s incredible bull market and this year’s crash, your parents, siblings, and other family member are bound to have questions.
Read on to find answers to what we believe are the most common crypto questions you will be asked during this holiday period. That way, you will be prepared for what they are most likely to ask you.
The Top 8 Crypto Questions You May Get During the Holidays:
…Let’s jump in!
1. What is Bitcoin?
Bitcoin is a decentralized peer-to-peer (P2P) network that enables an intermediary-free global payment system. The Bitcoin network is powered by an underlying technology called blockchain and uses the cryptocurrency bitcoin to transfer value. The digital currency trades on exchanges under the ticker symbol BTC.
By eliminating intermediaries like banks, the Bitcoin network allows people to transact directly with each other, erasing the costs and hassle associated with such middlemen.
A person or group of people going by the pseudonym Satoshi Nakamoto created Bitcoin in 2009. Nakamoto envisioned a P2P electronic cash system that would facilitate online payments. Bitcoin hasn’t achieved this goal yet on a large scale due to scalability issues — the number of transactions the Bitcoin network on its base layer blockchain can process per second is only around 7. However, this doesn’t mean Nakamoto’s vision is lost since Bitcoin developers are working on solutions to improve the network’s transaction throughput. They have implemented upgrades like the Lightning Network (LN) to enhance transaction speeds.
Besides payments, bitcoin has taken up other roles along the way. It has become an investment asset that is seen as a store of value by some. Because of its digital scarcity - there will never be more than 21 million bitcoin units - proponents believe that the cryptocurrency will increase its purchasing power into the future.
Moreover, bitcoin has also shown characteristics of being a safe haven asset. Since bitcoin has some similarities to gold (it’s a store of value asset, it’s scarce, it’s liquid, it’s a speculative asset, and safe haven asset), it has been called digital gold.
2. Can Bitcoin be Regulated?
No regulator can change the Bitcoin protocol without joining forces with its users. To take control of the Bitcoin network, a regulator would have to take over half of Bitcoin’s computing power.
Nevertheless, retaining this control is difficult since they would have to invest more than all the other bitcoin miners in the world. What governments can regulate, however, is the use of bitcoin. They can do this by targeting centralized crypto exchanges, for example.
3. What is a Blockchain?
Bitcoin’s underlying technology is called the blockchain. This is a decentralized and distributed ledger that stores information, i.e. transactions, in blocks. The blocks are linked (hashed) together, creating an unbreakable chain. This means that you cannot modify the data in one block without changing the data in the previous blocks. As a result, blockchain technology is considered immutable. The blockchain is a special type of the Distributed Ledger Technology (DLT).
When someone says that blockchain technology is distributed, they mean that all the computers in the network hold a copy of the ledger. These computers are also known as full nodes. Nodes are crucial components of the blockchain as they enforce the blockchain’s consensus rules while also validating all the transactions.
There are various types of nodes, each playing a different role. For instance, mining nodes confirm transactions, add them to blocks, and maintain network security. Light nodes on the other hand, don’t hold a full copy of the blockchain but are used to scale the system in some instances.
Blockchains can be public, private, hybrid, or consortium. Bitcoin is an example of a public blockchain. That means anyone can join the network. Private blockchains, on the other contrary, are restricted networks. A hybrid blockchain combines the attributes of private and public blockchains and is controlled by one entity. Conversely, a consortium blockchain also contains both private and public elements and allows different entities (enterprises for example) to work together in a decentralized environment.
4. Where Do You Store Your Crypto?
You can store your crypto in a hot, cold, or exchange wallet. The latter is more like an account than a wallet. A crypto wallet is a device or program that stores private and public keys rather than the crypto itself. Cryptocurrencies are simply bits of data “living” on the blockchain.
A private key comes in the form of a secret seed phrase that allows you to access your coins. It normally comes in the form of 24 words. Without it, you could lose your coins forever. In contrast, a public key is essentially a wallet address. You can publicly share it to receive digital currencies from other people.
Crypto wallets are accessible via mobile apps, browser extensions, desktop software, and physical devices. Any online wallet offers hot storage, while offline wallets provide cold storage. Additionally, a wallet can be custodial or non-custodial. The former means the user doesn’t hold the private keys, while the latter means they do. Custodial wallets typically refer to exchange accounts where you can store your coins. In this case, the centralized crypto exchange controls the private keys.
5. What is the Best Crypto Wallet?
Trust Wallet is arguably the best crypto wallet because you can use it throughout the entire crypto ecosystem and store a whole bunch of different cryptos. You can use it to explore non-fungible tokens (NFTs), decentralized finance (DeFi) applications, the metaverse, and the growing work of web3 apps.
Also, you can store, buy, and exchange a wide range of cryptocurrencies and tokens on Trust Wallet. Trust Wallet is non-custodial, which means users always remain in full control of their private keys and, consequently, their coins.
To access Trust Wallet on your mobile phone, go to the App Store or Google Play Store and download it. You can also get the browser extension on the Chrome Web Store.
6. Will Crypto Ever Recover?
Cryptocurrencies will likely recover when fear fades, and investor confidence returns.
The ongoing bear market was triggered by the Federal Reserve’s interest rate hikes, which have made risk assets like cryptocurrency less lucrative than when interest rates were still lower. As a result, investment in risky assets, including stocks, has slowed down. When the Federal Reserve stops hiking interest rates, crypto prices could start rising.
Nonetheless, other factors, such as crypto news, bitcoin halving events, and institutional investment may affect crypto prices. Or, as we saw this year, the insolvencies of large industry participants like 3AC, Celsius, and FTX.
The crypto market goes through cycles of bull and bear runs. These cycles are affected by market dynamics. When the risk of investment is high, investors are more cautious, creating a general negative investor sentiment. Fear creates selling pressure, resulting in declining prices. Dropping prices indicate a bear market. When the risk of investment is low, investors are happy to invest their money, building positive investor sentiment. Greed then creates buying pressure, driving prices upwards. Rising prices signify a bull market and fade out again once the optimism has reached a local peak again.
7. What Cryptocurrency Should I Invest In?
The cryptocurrency you decide to invest in is at your discretion. You should consider factors like the project’s roadmap, developer activity, the team, and the progress made so far when selecting a cryptocurrency to invest in.
Trust wallet supports over 4 million assets. This guarantees users that they can always find the cryptocurrency or token of choice in the wallet.
The prevailing bear market offers investors a chance to buy cryptocurrencies at a lower price compared to a year ago. So, rather than feeling pressured to sell your crypto assets, you may consider buying more coins instead. This investment strategy only makes sense, however, if you believe in the future success of the coins you choose to purchase.
8. What Can I Do With Crypto Once I Have Bought Some?
Once you have bought some crypto, you can HODL it on Trust Wallet. This means simply holding it in the long term.
Also, you can earn a passive income by staking your crypto. If you don’t want to HODL or stake, you can consider exchanging your coins for another cryptocurrency. For example, you can swap DAI for ETH and then use it to buy an NFT.
Download Trust Wallet on your family members’ smartphone to kickstart them on their crypto journeys.