Crypto 101: Understanding the Basics of the Blockchain and Crypto (Fintech Fridays Special Edition with Binance Africa Ep.11)

[00:00:00] Hello everyone, welcome to the Fintech Friday series on The Sound of Accra Podcast, where we unpack economic topics and affairs across the African continent. I'm your host, Adrian Daniels.

[00:00:13] This special series on Fintech Friday is the 11th of a 12 part series where we explore blockchain technology and cryptocurrency in a lot more detail.

[00:00:23] Special thanks to our sponsors, Binance Africa.

[00:00:25] Now, Binance is the world leading blockchain ecosystem and cryptocurrency infrastructure provider, with a financial product suite that includes the largest digital asset exchange by volume.

[00:00:35] Now, trusted by millions worldwide, the Binance platform is dedicated to increasing the freedom of money for users and features, an unmatched portfolio of crypto products and offerings, including trading and finance, education, data and research, social good, investment and incubation, decentralization and infrastructure solutions, and more.

[00:00:54] For more information, visit www.binance.com.

[00:01:00] For more information, disclaimers, risk warnings and links, please check the podcast description section below.

[00:01:06] In today's episode, we are going to talk about the basics of blockchain and cryptocurrency.

[00:01:13] The references for today's episode used will be all found in the description player below.

[00:01:19] Now let's get straight into it.

[00:01:20] Now, what is cryptocurrency?

[00:01:22] Cryptocurrency.

[00:01:22] Now, cryptocurrency is a digital or virtual currency that uses cryptography for security, making it difficult to counterfeit.

[00:01:30] Now, the first and the most well-known cryptocurrency is, of course, the Bitcoin.

[00:01:35] And this was introduced all the way back in 2009.

[00:01:39] Now, since then, thousands of cryptocurrencies have been created, each with their own unique features and applications.

[00:01:44] Now, each cryptocurrency has its own unique utility.

[00:01:49] Now, the key characteristic of cryptocurrencies include decentralization, which is arguably the most important one.

[00:01:55] This enables them to operate without a central authority like a government or a bank.

[00:02:00] Transparency.

[00:02:01] Now, transactions are recorded in a public ledger called a blockchain.

[00:02:05] Security is another one.

[00:02:06] These are cryptographic techniques that ensure the integrity of transactions.

[00:02:11] And then we have peer-to-peer transactions.

[00:02:13] Now, users are able to send and receive funds directly without intermediaries.

[00:02:18] Okay.

[00:02:19] So, I'm sure you guys are all thinking, how does cryptocurrency actually work?

[00:02:24] Well, we're going to get into it.

[00:02:26] Now, cryptocurrencies, now they operate on a blockchain technology.

[00:02:29] This is a decentralized and distributed ledger that records all of the transactions across a network of computers.

[00:02:35] Now, this is essentially how it works.

[00:02:37] So, a transaction is initiated.

[00:02:39] So, a user will start a transaction by sending a cryptocurrency to another user.

[00:02:43] And then what happens is this transaction is sent to a network of computers for verification.

[00:02:49] Then what happens next is that nodes use algorithms to validate the transactions legitimacy.

[00:02:55] And then what happens next is that the verified transactions are grouped into blocks.

[00:03:00] And then once they're grouped into blocks, they are added to the blockchain.

[00:03:04] Hence the name blockchain.

[00:03:06] Now, this block is added to the existing blockchain, making the transaction permanent and immutable.

[00:03:14] So, let's discuss blockchain technology.

[00:03:16] Now, blockchain is the foundation of cryptocurrencies.

[00:03:19] Now, it's a chain of blocks where each block contains a list of transactions.

[00:03:23] Now, the key features of blockchain include decentralization, transparency, immutability, which is once recorded, the transactions can't be changed.

[00:03:33] And consensus mechanisms.

[00:03:35] These are methods such as proof of work or proof of stake, which ensure the agreement on the state of the blockchain.

[00:03:43] So, there are different types of cryptocurrencies.

[00:03:46] Okay?

[00:03:46] So, there are two main types of cryptocurrencies.

[00:03:49] Now, number one are coins.

[00:03:51] Now, these have their own blockchain.

[00:03:53] Right?

[00:03:54] So, for example, you've got Bitcoin, you've got Ethereum, etc, etc.

[00:03:58] So, when you see the popular cryptocurrencies out there, the coins, they usually have a blockchain backed by it.

[00:04:06] All right?

[00:04:07] So, you've got BNB coin, you know, that's backed by, you know, Binance.

[00:04:14] Next one is tokens.

[00:04:16] Now, these operate on existing blockchains.

[00:04:19] Now, many ERC-20 tokens are based on Ethereum.

[00:04:25] Now, how do you acquire cryptocurrency?

[00:04:28] I'm sure that's the question you're asking.

[00:04:29] So, for most people, the easiest way to get cryptocurrencies is to buy on an exchange such as Binance.

[00:04:35] Okay?

[00:04:36] Now, however, some cryptocurrencies can be mined by solving complex mathematical puzzles to validate transactions and earn rewards.

[00:04:44] Now, this is financial intensive and this is also label intensive too.

[00:04:50] So, it's not always the most recommended option.

[00:04:53] Okay?

[00:04:54] Unless you are a pro and unless you know exactly what you're doing.

[00:04:57] Now, let's go into the pros and cons of cryptocurrencies.

[00:05:01] Okay?

[00:05:02] Now, some of the pros include decentralization and autonomy, which means you're in control.

[00:05:07] You don't have anyone regulating how you go about this, like a government or a bank.

[00:05:13] Now, you do have a potential for high returns, which is why cryptocurrency can be popular.

[00:05:18] And then you also have fast and cheap international transfers.

[00:05:22] This is why during this series of the FinTech Fridays with Binance Africa, we've spoken a lot about how it makes cross-border transactions in Africa so much easier.

[00:05:32] You also have increased financial inclusion as well, which means that cryptocurrency is highly accessible because as long as someone has got a smartphone,

[00:05:40] as long as someone, you know, can get onto the internet and download an app and get onto an exchange, you know, they can purchase a cryptocurrency for no matter how much money they have.

[00:05:52] They can purchase a cryptocurrency essentially, no matter how low or how high that amount is.

[00:05:58] Almost any amount is enough to buy some form of cryptocurrency, even if it's a fraction of a cryptocurrency.

[00:06:04] For example, you can buy a fraction of a Bitcoin.

[00:06:06] You don't have to buy a whole Bitcoin, but you can buy even a fraction of a Bitcoin and still be a cryptocurrency holder.

[00:06:12] Now, as much as there are pros, there's also cons that come with cryptocurrency.

[00:06:16] So this includes high volatility.

[00:06:19] So for those of you who have been paying attention to what's been happening in the cryptocurrency market, one day cryptocurrency values can shoot up.

[00:06:27] The next it can actually crash down and sometimes it's up and down based on what's happening in the market and what's impacting the market.

[00:06:33] There's also regulatory uncertainty.

[00:06:37] So at the moment, you know, it's not, you know, completely regulated.

[00:06:42] You know, there are a number of regulations that are surrounding cryptocurrency, but nothing's really certain.

[00:06:47] Nothing's really set to stone at the moment.

[00:06:49] Everything is still work in progress.

[00:06:52] Another con is potential for use in illegal activities.

[00:06:55] Of course, like almost any other industry, there is options or there is, of course, you know, that option.

[00:07:03] Opportunity or, you know, there's also that, you know, possibility that illegal activities can be used based around cryptocurrency.

[00:07:11] And on top of that, there are also environmental concerns.

[00:07:15] This is particularly for proof of work cryptocurrencies.

[00:07:20] Okay. Okay. Let's dive into the future of cryptocurrency.

[00:07:23] Now, cryptocurrencies continue to evolve with ongoing developments in areas such as decentralized finance, that's also known as DeFi, non fungible tokens, NFTs, which are really popular around the 2021, 2022 period.

[00:07:38] You've got central bank digital currencies, also known as CBDCs, which are, you know, digital currencies, which are regulated by the government and the bank, you know, which are probably the enemy to cryptocurrencies.

[00:07:50] And you also have improved scalability and energy efficiency.

[00:07:55] So cryptocurrency has a uncertain future, but also based on what's happening at the moment, you know, the future of cryptocurrency is really going to change in the years to come.

[00:08:07] And, you know, these are huge factors that would influence cryptocurrency.

[00:08:12] So once again, decentralized finance, non fungible tokens, that is NFTs, central bank digital currencies.

[00:08:19] You've heard me talk about the digital city.

[00:08:20] You know, the UK is talking about their own digital pound.

[00:08:24] America's looking at their own central bank digital currency.

[00:08:26] How would this impact cryptocurrencies?

[00:08:29] Would they want both currencies to coexist at the same time?

[00:08:32] I'm not sure the government and the banks would want that.

[00:08:35] So it's going to be interesting what's going to happen in the months and the years to come and also improve scalability and energy efficiency as well.

[00:08:43] So I believe cryptocurrencies are only going to get better and the utilities are only going to improve over time.

[00:08:52] So having said that, as the technology matures, cryptocurrencies have the potential to revolutionize various aspects of the financial industry and also beyond.

[00:09:02] As we have explored throughout the whole FinTech Fridays with Binance Africa series.

[00:09:08] Understanding these basics provides a solid foundation for further exploration of the cryptocurrency ecosystem.

[00:09:14] But however, it's important to note that this field is rapidly evolving.

[00:09:20] It's constantly changing.

[00:09:21] It's constantly improving.

[00:09:23] It's constantly iterating and it's constantly pivoting to.

[00:09:27] And in order to keep up with cryptocurrency and blockchain, you know, you need to continue to learn.

[00:09:33] You need to continue to keep yourself up to date with the trends, with what's happening in the market, the latest insights.

[00:09:38] In order to stay informed about new developments and any potential risks that may come your way.

[00:09:43] Especially if you're someone that plans to hold, invest, buy or leverage cryptocurrency or the blockchain.

[00:09:50] Now, thank you for listening to today's episode.

[00:09:52] That's a short crypto one-on-one episode on understanding the basics of the blockchain and crypto.

[00:09:58] I hope this episode really helps you to maybe understand a bit better some of the terms that we've unpacked throughout this series.

[00:10:05] For more information on Binance and disclaimers, risk warnings and links, please do check the podcast description section below.

[00:10:11] You'll also find references from today's episode.

[00:10:14] See you in the next one.

[00:10:16] Thank you very much.

[00:10:17] Bye-bye.

[00:10:18] Bye-bye.