Since the price of bitcoin first skyrocketed to more than $1,000 in 2013, cryptocurrency has been a hot topic. As awareness grows, Kenyans are becoming increasingly interested in how to trade cryptocurrency.
While the CBK has issued caution that cryptocurrency isn’t regulated in Kenya, a Citibank report estimated the total worth of Bitcoin held in Kenya to be more than Ksh. 162 billion. This isn’t surprising considering the millions of dollars worth of bitcoin traded annually in the country.
But before you start trading, it’s important to understand exactly what cryptocurrencies are and how they work, in order to secure yourself and avoid getting scammed.
What Cryptocurrency Is and Isn’t
Cryptocurrency is a form of exchange that works both as a currency and as a digital asset. Like a currency, it has a value and it can be used to make payments. Like a digital asset, cryptocurrency can be invested in with an aim of gaining value.
There is no physical coin or note unless you use a service that allows you to cash in cryptocurrency for a physical token. That said, there are certain things that cryptocurrency isn’t.
Cryptocurrency isn’t a get-rich-quick scheme. Any promise of making huge returns in a short time is nothing more than a scam. Like anything of value, it takes effort and patience to realize the benefits of investing in bitcoin and other cryptocurrencies.
The Origin of Cryptocurrency
The origin of cryptocurrency as we know it today dates back to 2009 when Bitcoin was released as open-source software. Its release is credited to Satoshi Nakamoto, an unknown person or group who developed it a year before it became accessible to the public.
At its time of release, bitcoin was worth virtually nothing. Over time, its value has grown so exponentially that today, it can cost thousands of dollars to buy one bitcoin. For instance, bitcoin’s value went as high as $60,000 (approximately Ksh. 6.47 million) in April 2021. This is why most people buy bitcoin in units depending on how much they can afford.
The value of bitcoin has risen significantly since its inception
Bitcoin is based on blockchain technology. Essentially, blockchain is a public ledger where all purchase or sale transactions are recorded and verified through cryptography.
The Different Types of Cryptocurrencies
While Bitcoin is the most prominent cryptocurrency, others have emerged over time. Some of the most widely known and traded cryptocurrencies include:
How Cryptocurrency Is Traded
Remember the public ledgers mentioned above? Since these exist digitally, they are powered by computer networks. There are many participants around the world whose computers connect to form a peer-to-peer network that verifies and records every cryptocurrency transaction made.
This decentralized network makes it easy for anyone to use cryptocurrencies from any part of the world. That is, millions of people around the world can own cryptocurrencies and exchange them easily. And to further make this process simpler, service providers that make this exchange smoother and safer were developed. These platforms are known as cryptocurrency exchanges. When you sign up on such a platform you can, therefore, buy, store or sell cryptocurrency easily, safely and affordably. All this is done on a virtual or e-wallet.
One such example is Yellow Card Kenya. With Yellow Card, you can top up your e-wallet via mobile money or bank transfer and use Kenyan shillings to buy bitcoin. Once you have bitcoin in your e-wallet, you can sell it, receive your money and withdraw it in local currency.
The platform has seen widespread success in African markets such as Nigeria owing to its rates but more importantly, its focus on security and financial literacy.
Yellow Card Academy is an innovative solution helping people learn about cryptocurrency
Unlike most platforms, Yellow Card uses a B2C (business to consumer) model rather than P2P (peer-to-peer). This means that when you buy or sell cryptocurrency on the platform, you’re transacting directly with Yellow Card rather than external parties. This goes a long way in upholding security by minimizing the risks associated with cryptocurrency trading.
If you decide to venture into investing and trading in bitcoin and other cryptocurrencies, the important thing is to arm yourself with knowledge by researching the topic and monitoring developments in the crypto space.