INVISIBLE INVESTING

Taking the Mystery out of Cryptocurrency Investing

Owen Weeks

• Publisher: Lifestyle Matters Pty Ltd
• Year: 2021
• eBook ISBN: 9780646843551
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

INVISIBLE INVESTING

Taking the Mystery out of Cryptocurrency Investing

Author: Owen Weeks

Invisible Investing addresses the risks associated with this form of investment, and it highlights the practical steps that investors must take to protect their investments. There are chapters on taxation matters and superannuation. Practical information is provided on how to make your first investment, along with tips on record keeping. Useful tools and resources are also provided.

Readers do not need to understand all of the technical detail that underpins the operation of the various cryptocurrency investments. The book attempts to keep things simple while encouraging readers to do their own research before investing.

CHAPTER ONE

AN INTRODUCTION TO INVISIBLE INVESTING

Traditionally, investing encompassed a range of assets that you can see and often touch. This includes cash, real estate, shares, gold, antiques and collectibles, bonds and mortgages. Collectively these investments can be classified as tangible investments. All of these forms of investment can be acquired individually, or they may form part of investment portfolios managed by a fund manager, a superannuation fund or various types of trusts and companies. All of these investments are regulated by government authorities and the income and realised capital gains are subject to taxation regulations in Australia.

In recent years a new type of intangible investment has emerged, and with it comes a whole bunch of new terminology. These new investments are referred to as cryptocurrencies, and there are literally thousands of them. To date governments have been unable to regulate this industry and debate still rages as to whether this form of investment should be called a ‘currency’.

Invisible investing is based on a technology known as Blockchain. How Blockchain operates will be explained in the next chapter. In an attempt to keep things simple, this book will only focus on one cryptocurrency, namely Ethereum. Readers will no doubt have heard of Bitcoin which is the most widely traded cryptocurrency at present. Ethereum however, is the second most widely traded cryptocurrency, and is fast catching Bitcoin because the business case that supports Ethereum is based on sound business principles. Ethereum is, in fact, a whole new internet and it allows people and organisations to develop their own applications called Dapps (Decentralised Applications). You are no doubt familiar with Apps on your mobile devices. Dapps are similar, but they are applications for commercial and government internet users.

There is another side to the invisible investing ‘coin’. On the one side we have the fact that the investor is making an investment in something they cannot see, whilst on the other side, no one else can see your investment unless you tell someone about your investment (this issue is touched on in the chapter on Cyber Security). Unlike shares that have a share registry, or real estate that has Land Tax records etc, there is no centralised record of who the investors are when you invest in a cryptocurrency. There is no central bank, and there are no other banks.

Ethereum is the operating system for the new world of money. This book aims to provide an insight into the underlying principles that support Ethereum as a possible investment option. The platform supports applications that make human life better, faster and easier. Blockchains are only useful if people use them.

An investment in Ethereum is all about capital growth. This form of investment does not provide any income. A suggested investment strategy is to hold an investment in Ethereum for at least one year, for tax reasons. Remember that it is really hard to get rich quickly. It is much easier to get rich slowly. The minimum investment to get started is only A$1.00. This is expanded on in Chapter six.

Why hasn’t this form of investment become an unmitigated success already? In a word, it is all about trust. It takes time to build trust, even in a digital world. Paradoxically a technology that seeks to disrupt ‘trust’ is not yet generally trusted. This is about to change.

I want to also alert readers that alongside Invisible Investing is another new phenomenon that I call Invisible Gambling. Gambling is a short-term bet. There are a growing number of people who buy and sell cryptocurrencies just to make a quick buck. This book is not designed to encourage this type of behaviour because of the risks involved. I do need to point out that some people become obsessed with cryptocurrency. The only bet you are making when investing in Ethereum is on human ingenuity, and mankind’s ability to find productive solutions to the world’s problems.

Brief History Of Ethereum

In 2013 a well-known computer genius Vitalik Buterin wrote a whitepaper that led to a group of fellow computer nerds developing the ‘company’ we now know as Ethereum. Buterin believed that a new cryptocurrency was needed to support business and government applications. Ethereum is the most complex blockchain ever built. The company’s head office is in Zug, Switzerland.

Readers who want to gain an insight into how the company was developed should read ‘The Infinite Machine – How an Army of Crypto-Hackers Is Building the Next Internet with Ethereum’ by Camila Russo. Two brief comments about the book title. Firstly the ‘Infinite Machine’. Ethereum has no limitation on the future growth of the company. By way of contrast Bitcoin has a limit on how many coins will be issued. Secondly, ‘The Next Internet’: Ethereum is a new much more secure form of an internet. By investing in Ethereum, you become a part owner of this new internet.

Ethereum is a smart contract platform that enables developers to build tokens and decentralised applications (Dapps). A smart contract is a computer code that runs exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference. It can facilitate the exchange of money, content, property, shares or anything of value. Ethereum is the first blockchain based smart contract platform, and it allows developers to build unique and innovative applications.

Why Readers Are Encouraged To Take An Interest In Invisible Investing

Some people argue that trying to get your head around cryptocurrency investing is all too hard because there is so much to learn. The fact is that once you grasp the underlying concepts you do not need to understand every component part of the particular cryptocurrency in which you are interested.

My argument is that most of us drive a motor car, but many drivers have no idea how an automatic gearbox works. The fact is they do not need to know. In the case of Ethereum, you do not need to know how every application works. What you do need to know is how to monitor the performance of your investment and how to buy and sell. This book aims to get you started.

You may have heard the often-repeated phrase, ‘if you do not understand something, do not invest in it’. This book aims to provide a basic understanding of cryptocurrency investing and after doing your own research, you should be in a position to make your own judgement. If you decide to pass up the opportunity, that is your decision. No one is going to j...

Table of contents

• Cover
• Copyright
• Table of Contents
• Preface
• 1 An Introduction to Invisible Investing
• 2 Understanding the Terminology
• 3 Ethereum: The Operating System for the New World of Money
• 4 Taxation Implications for Australian Residents
• 5 Self Managed Superannuation Funds (SMSFs) and Cryptocurrency
• 6 Cyber Security Issues Everyone Needs to Consider
• 7 How Do You Start Investing?
• 8 Useful Tools and Reference Books
• 9 The Visible Alternatives to Direct Cryptocurrency Ownership
• A Summary of the Key Messages in this book
• About the Author