What is crytocurrency and why is everyone talking about it?
Poku Banks is passionate about personal finance and aims to show you what they don't teach you at school about money. His money-savvy content is seen by thousands on his Instagram, TikTok and YouTube channels and in the nation's newspapers.
Here he discusses digital payment systems and why you should consider investing in it.
Read through Poku's tips in the interview below then have a going at our crypto quiz!
Poku Banks discusses cryptocurrencies
Ok, let's start at the beginning, what exactly is crypto for those who don't know what it is?
Cryptocurrency, or just crypto, is a digital or virtual peer-to-peer payment system that doesn't rely on any banks to send through transactions.
What exactly is a Blockchain?
A blockchain is a digital leger that records transactions. If you send money to someone, it's on the blockchain for everyone to see, not hidden behind some kind of wall, which makes it hard to be changed or hacked. Unlike regular banking, you can see the contents of everyone's wallets in the chain, but for privacy reasons you won't be able to see their names.
There's no one in the middle of the transaction, like a bank, who can hold onto your money for a certain amount of time before it reaches the person you're sending it to. Every payment is secure and individually encrypted.
Why is everyone investing in it?
The reason people like crypto is because it's decentralised, which essentially means you can make a payment without involvement from a big financial organisation - it just runs off the network and the blockchain.The first virtual currency, Bitcoin, was created in 2009, a year after the financial crisis. Lots of people were disappointed with how the banks treated the financial system and lost a lot of trust in them, so were attracted to crypto as there's no institution in control of the system.
It's also a really private way to make payment and the hype of a new technology, or fear of missing out, means that everyone wants to be a part of it. It's also really high-speed.
What is the future of crypto and where do you see it going?
In my opinion, although it is fairly well-known at the moment, I believe that crypto needs to get a point where the average person can jump on and use it to make a payment or invest. Less than 5% of the world's population uses cryptocurrency at the moment, so we need to raise the adoption rate and then we'll begin to see prices for Bitcoin reach five or six figures.
I do think crypto is the future. In the same way that everything happens online now, it's going to start coming together and will just grow and grow. It's also likely that banks will start to develop their own digital currencies - big firms like JP Morgan have already begun to embrace it - but as for the government, we'll have to wait and see.
What are the pitfalls with crypto?
If you add money to a crypto wallet, a regular person might be shocked at how quickly the amount can fluctuate - more than you'd see through normal banking. It's also very easy to create your own currency, so aside from the top names like Bitcoin or Ethereu, there are lots of scam coins out there.
Lots of people are caught out by 'pump and dump' schemes in which a certain coin is hyped up through advertising, but the price of it is the dumped, meaning people miss out. Always be careful and do your own research.
Crypto can also seem quite confusing to people - it's not just a case of needing an account number and sort code to send money to someone. For this reason, people don't want to get involved and could lose money because they don't know how to use the system properly. I think crypto needs to be made much more straightforward to increase adoption rates as I mentioned earlier.
Should we all have some crypto?
I believe everyone should have a bit of money in a crypto wallet, even if it's less than 10% of your money. It doesn't hurt to try new technologies and it's always good to invest or diversify your money. You're hedging your bets against the central system falling apart, however if it does crumble, it could mean your small bit of cryptocurrency isn't worth very much...
What is an NFT?
NFT stands for non-fungible token. If something is fungible, it means you can exchange it, but non-fungible means it's unique and there is nothing on the blockchain that can replace it.
Types of NFT data units include photos, videos, and audio. You could own a digital piece of art and everyone on the blockchain will be able to see it's owned by you, the value of which is determined by the community. It's a bit like purchasing something through a video game and being the only person to possess that item.
What is the future of NFT?
I definitely think there will be a rise in NFTS, especially as companies like Nike are now getting involved and Twitter has started allowing you to change your profile picture to an image of an NFT, which can be verified by the blockchain.
Yes there will be fluxuations, but as long as people are online, I'm sure it will continue to grow.