A well-known publication in Kazakhstan has recently released an interesting article about cryptocurrencies, where Alex Reinhardt talks about the key rules of working with digital assets, sharing his opinion about the future of cryptocurrency regulation in the CIS. We have prepared a special translation of this article for our community.
Everything you wanted to know about cryptocurrencies, but didn’t know who to ask
If you’re interested in the topic of digital currency, but you don’t know where to start or whether it’s worth getting on a train that’s already left the station, this is the article for you.
We’ll discuss the definition of cryptocurrencies, how and where to buy and store them. Alex Reinhardt, venture investor and founder of the PLATINCOIN cryptosystem, talks about the essential rules for buying cryptocurrencies and what to expect when they are legalized in Kazakhstan.
Cryptocurrencies and how they work
Cryptocurrencies are digital assets and a payment system that encrypts records with cryptography. Cryptocurrencies are based on distributed ledger technology, or, in other words, blockchain. Cryptocurrencies are considered an alternative to fiat money issued by
Central Banks in various countries.
All cryptocurrency transactions exist exclusively in digital records stored on the blockchain, and anyone can access them on the Internet – that’s why the blockchain is known for its transparency and decentralization.
People first started talking about using cryptography in payments back in 1990, and on October 31, 2008, a Bitcoin whitepaper was presented by Satoshi Nakamoto, the anonymous creator of the first cryptocurrency. This is considered one of the most significant dates in the history of Bitcoin, closely followed by January 3, 2009, when the genesis block was generated.
This document presented Bitcoin as a new electronic decentralized transaction system, where transactions are carried out directly between participants without the involvement of a third party. The launch of Bitcoin heralded the beginning of a new financial era, which we are fortunate to witness.
You can already use cryptocurrencies for payment in many countries around the globe, but very few countries have fully legalized cryptocurrencies. At present, cryptocurrencies are neither legally banned or allowed in Kazakhstan, and yet it is impossible to conduct financial transactions with cryptocurrencies.
Bitcoin may be the most famous cryptocurrency in the world, but it’s not the only one. Today, there are more than 10,000 cryptocurrencies in the world, and the most famous ones are Ethereum, Ripple, Tether, and Stellar.
Blockchain (literally, a chain of blocks) is a distributed ledger consisting of a chain of blocks, with transactions recorded within every block. Each subsequent block is linked to the previous one. This sequence cannot be violated or modified, otherwise the data in the cryptocurrency network will become invalid.
Cryptocurrency mining is the process of finding a block in the blockchain of a given coin. Miners - people and their mining devices - receive a cryptocurrency reward for finding a block, that is, for mining it.
Altcoin is a term that describes all digital assets that are alternatives to Bitcoin. The first altcoins, Litecoin and Namecoin, appeared in 2011.
Bitcoin is the first cryptocurrency. It was released in 2009 by a person (or group of people) using the pseudonym Satoshi Nakamoto. Bitcoin is currently at the top with a market share of 59%.
Where and how to buy crypto
When it comes to buying cryptocurrencies, you have several options. Crypto exchanges provide the most popular solution. However, keep in mind that this isn’t the safest method due to frequent hacker attacks on cryptocurrency platforms. Another deterrent factor is the requirement for mandatory verification.
Another way to purchase cryptocurrencies is through decentralized P2P platforms that connect buyers and sellers. One of the most popular sites is LocalBitcoins, with a trading volume exceeding $20 million, which reached $120 million at its peak. LocalBitcoins features both online and offline cryptocurrency sellers.
Where and how to store cryptocurrencies
People often say that cryptocurrencies are stored in wallets, but technically this isn’t entirely true - coins are stored on the blockchain, while wallets contain important data enabling the user to access these funds directly inside the blockchain and providing safe storage, if properly managed.
There are different types of cryptocurrency wallets:
- crypto exchange accounts
According to common knowledge, a hardware or paper wallet offers the safest method of storing coins, since the keys are offline and thus protected from hacking and theft. However, software or exchange wallets are often used for trading and small daily transactions.
How to exchange cryptocurrencies
There are several ways to exchange cryptocurrencies for fiat money: using online exchangers or through a cryptocurrency exchange, P2P services or cryptomats.
If the first three methods require the Internet, then the cryptomat exchange takes place offline. By the way, since the beginning of 2021, the total number of cryptomats in the world has increased by 71.7%, from 13,993 to 24,030.There are only three cryptomats in Kazakhstan today: two in Almaty and one in Astana.
Who has already made millions on cryptocurrencies
Before crypto gained widespread popularity and coin prices didn’t exceed $200, some people had already invested in them. Today, their names are at the top of the Forbes ranking.
For example, take 27-year-old Vitaly Buterin, whose net worth is estimated at $850 million. He first got involved with blockchain projects in 2011, and by 2015 he had created his own Ethereum cryptocurrency, which is the second most popular in the world today.
Cameron and Tyler Winklevoss, the twin brothers who sued Mark Zuckerberg for stealing their social media idea, invested the amount paid by Zuckerberg in Bitcoin in 2012. Today, experts believe that their 11 million investment has increased to $1.4 billion each.
Investor Matthew Roszak, who bought the first Bitcoins in 2012, is another crypto billionaire. Today his capital is estimated at $ 1.2 billion.
What you need to know if you’re going to buy cryptocurrencies
“Few people know how to make money with cryptocurrencies. It’s as if everyone is trying to gamble, and they’re constantly surprised that they’re losing. I always say that you have to understand whether you are playing a game or doing business. If you’re playing, don’t be surprised when you lose. If you’re doing business, then you should follow certain rules, and make sure you know these rules before you begin,” says businessman Alex Reinhardt.
Hold on to your cryptocurrencies for three to four years
Whatever happens - your house burns down, you need money for a new car - it doesn't matter. If you’ve purchased a cryptocurrency - hold on to it. This is the golden rule of crypto investing.
Average out the risks
Choose a specific day each month when you will buy one cryptocurrency. It doesn't matter how much it costs, whether the price rises or falls. When you buy it on a regular basis, you average out the risks: sometimes you’ll buy it for a higher price, sometimes for a lower price. In three years, the price of the cryptocurrency will certainly increase, and you will be in the black anyway.
In three to four years, you’ll gain enough experience to start understanding how the market works. You will stop listening to the news, and it will no longer matter whether China banned Bitcoin and what Elon Musk said.
Formulate a strategy
Cryptocurrencies and the profits they offer don’t depend on Elon Musk, the world banking system, or anything else. The one thing that defines your success is your strategy. Without your own strategy, you start listening to other people, reading and trying to analyze the news, getting anxious. Meanwhile, cryptocurrencies have been on the market for 13 years.
Blockchain and Bitcoin are decentralized, which makes them impossible to kill. They will exist for another thousand years. Everyone wants to know: will the price of Bitcoin rise or fall? It will rise and fall. Fall and rise. The crypto market is both a game for the ages and an environment for business, and you just need to understand whether you want to play the game or build a business.
For some reason, many people would rather earn $30 every day instead of a million in three years. This is a problem, because this mentality kills any undertaking. You need to be patient and keep improving your financial literacy in order to win without succumbing to emotions. I have enough endurance for this, because it is fueled by my high-quality economic education and experience. And they tell me that there is no quick money. You need to earn them.
When will cryptocurrencies be legalized in the CIS?
Today, only Belarus has fully legalized cryptocurrencies in the CIS. According to partial legalization in Russia, people can buy cryptocurrencies, but they can’t use them to pay for goods and services. Residents of Kyrgyzstan will soon be able to open cryptocurrency accounts in banks, but paying for goods within the country is prohibited. In Uzbekistan, you can make transactions for the purchase and sale of cryptocurrencies only through a cryptocurrency exchange. In the other CIS countries, cryptocurrencies haven’t been legalized, but they haven’t been banned, either.
“Cryptocurrencies are the future,” says Alex Reinhardt. “The first country to master them will boost its budget by billions. When money flows into a country, it always offers new opportunities, and the population experiences a sharp rise in quality of life.”
“Cryptocurrencies allow societies to achieve greater freedom. Therefore, their legalization also depends on the development path chosen by each country. Cryptocurrencies are neither good nor bad. They are a tool that needs to be used wisely. There’s only one question for the state: will they learn how to use cryptocurrencies and build the appropriate infrastructure, in order to receive benefits like additional taxes and develop innovations? So legalization depends on the development vector chosen by each specific country,” the businessman continues.
The prospects for legalization in Kazakhstan
In Kazakhstan, cryptocurrencies can’t be used as a means of payment, but they have been granted the status of property. The country has a law on the taxation of cryptocurrency owners and it plans to introduce a law on taxation for miners, which are gradually increasing in number.
“I really hope that cryptocurrencies will be legalized in Kazakhstan. I have been to Kazakhstan and I know that many people in this country have an entrepreneurial streak. They have a desire for personal growth, energy, a strong interest in technology and progress,” says Alex.
“What will happen once Kazakhstan enters the crypto market? First, an increase in budgetary funds due to higher taxes. Secondly, new tools to conduct global business for all cryptocurrency holders. They will be able to do business with China, India, Africa without the intermediation of banks, which now control cash flows. Legalization will attract additional investment in local businesses, the development of innovations, and the birth of new startups.
The best thing that Kazakhstan can do is take a close look at Dubai, allocate a free zone for cryptocurrency projects and give entrepreneurs the opportunity to obtain licenses to work with cryptocurrencies. Then, thousands of companies will certainly come to the country, and Kazakhstan will have its own Google, Amazon and Facebook. You just have to want to do it, stop being afraid and try."