Category Archives: Money

6 easy ways to get broke

Haha.. We have all discussed ways to make Money, how to save Money. secure your future, and live with Financial Independence.

While we continue to grow, and spread Financial Literacy, todays topic is off the grid, stating 6 easy ways to get broke, so you can avoid them all. 😉 If you wish.

1 . Getting Involved in a Get Rich Quick Scheme

Yes, while your intentions might not be wrong, creating wealth is not an overnight game, not for most! Being part of a Ponzi or Pyramid scheme, where you get money if you recruit people can be your way towards not just wasting away your life savings money, but also the time & effort. Not to mention the legal repercussions that one might face. Want to read more about them click here.

2 . Winning a Lottery

Though it sounds great, those happy hormones ain’t gonna last long. Yes you heard us correct, according to a study more than 50% of Lottery winners end up broke within five years. So next time you play that game, remember its just a game with rules not in your favor. Wanna read more, this is an interesting read I found.

3 . Addiction

Whether its an Addiction to Drugs, or Video Game; Addiction can leave a pretty deep hole in your pocket. Take the Cocaine addiction for example, people start small but with time they end up buying several grams a day, doing that for just a year if you have an average household Income can leave you broke, and not to mention the side effects of it on Health. If you thought, drugs were worse, then gaming addiction is even worst, gamers often neglect aspects of real life, including their finances and job. From being late on a job, to spending recklessly on virtual artifacts like skin, coin, life etc, to getting fired from a job, gamer may lose it all for their virtual life & pleasure.

4 . Buying on Credit Card

If left unnoticed, excessive buying on Credit Card with no full payment by end of every month, can definitely leave you in debt trap. People can easily get from 1 to 5 credit cards, with a limit of around 5000 dollars, thinking they have enough money to buy that extra refrigerator, or that big TV on sale, without realizing the Interest they would be charged if they don’t pay back their credit. Well, gradually this Interest piles up (not to mention some credit cards can charge you up to 25%) leaving you broke!

Now I am not saying its not good to have Credit Card, off course credit card has some great perks but you have to know how to use it. If you want to know more about some benefits read here.

5 . Investing in Penny Stocks

Now you might be wondering, but Salrite you say Invest, Invest, Invest!, well I do!, but not in just random penny stock…

Investing has risk, and in Penny stocks the risk is akin to gambling. With no proper financials to check, not so transparent Business practices, no proper corporate governance, Penny stocks can lead you broke in just few months!

6 . Look Good, Feel Good

All that Glitter is not Gold, all that Plastic Surgery is not worth. Well, its one thing to be in shape, and take good care of your body, and completely other thing to have a cosmetic surgery just to appeal to the larger audience!, or buy that Lambo, designer clothes, that Gucci scarf, those shoes, that no one except you care about! The complete show off.

Thank you for reading. If you want to know What the Rich way truly is, check out – The Rich Way. Have a great day.

7 Ways to Save More

They say the only way to Financial Freedom is Investment, starting with Investing in one-self. But how do you Invest if you don’t have enough? The answer is ‘Save‘, Save more to keep calm, to raise capital, to spend more.

So, lets discuss how to save more –

1. Stop using Credit Card

Debt on credit card is one of the worst to accumulate with Interest up to whooping 25%. So throw away your credit card, or if you can control yourself pay only the amount you have in your bank account with your credit card, and pay your credit card bill fully every month.

2. Sell Unnecessary TV

One not so obvious way to save, can be selling out what you don’t need, or maybe just flipping some items. You sell that extra refrigerator that you never use, or maybe that furniture that is depreciating its value, and later put the money you got into Savings.

3. Avoid Impulsive Purchases

  • Don’t shop when you are hungry.
  • Wait for 7 to 30 days before purchasing a luxury or an expensive item.
  • Think before you make the purchase if you really need it, or you just think you need it.
  • Stick to your Shopping list. (No Extra Cheese)

4. Keep your Emergency Fund Separate

Always keep your Emergency Fund in a Separate account, so that you can make sure not to mess with it, with any impulsive behavior or mistake. This is your most import savings, and is a must!

5. Use Budgeting Apps

You may like to use, budget apps like PocketGuard, Mint to help budget well your expenditure, so that you can save a little more in the end of every month! Here is a list of 7 budgeting apps that you may like to look.

6. Start Piggy banking

Well, every penny counts. In case you are really short on Saving, than Piggy Bank may not be the bad idea at all. You can also use it to develop the habit of saving in the younger ones.

7. Subscription Cancelled!

Change is permanent, and with your changing lifestyle you may no longer need that Netflix, Prime or that Music Subscription. Chances are you maybe subscribed to some services that you may not even remember. Perhaps that Gym membership or that magazine may not be required anymore. So go ahead cancel it and add that to your monthly Savings, unless you are using it!

Bonus : Automate thy Savings

yes! you need to Automate this. As they say out of sight is out of mind, every 1st of month or whenever your Income gets credited Automate a recurring deposit to another account that you can’t / won’t access for your expenses. Even if its just 10% of your Income, over time it can grow to a substantial amount which you can later Invest. Remember Save first spend later.

Also remember there is no certain specific amount that you need to need to save, it can be as little as few hundred dollars or few thousand rupees to as much as a million. It really depends on your goal, see what you desire, plan and then stick to it.

Thanks for reading. Come back for more. Have a nice weekend!

Psychology for Money

Today lets discuss the behavior & the thinking that will not just make you rich but also help keep you rich!

1. Compounding is confusing

Compounding can make a small amount of money to start with, a huge sum defying all the logics. Good Investing isn’t just about high rate of return, its more so about time. The earlier you invest the better the compounding works for you later in the life.

2. Enough is never enough

There is no reason to risk all you have for what you don’t have! Don’t put all eggs in one basket. Always keep some emergency cash, always have enough to survive while you try to thrive!

3. Staying wealthy is harder than getting wealthy

There are thousand ways to be wealthy but to stay wealthy you will need a bit of fear, and a lot of money management skills to not risk what you for what you don’t. As warren buffet says – “Rule No. 1: Never lose money. Rule No. 2: Never forget rule No.”. To remain wealthy you just not need to make money you need to know how to preserve your capital. In order to make more money you need to be more comfortable to have it, hold it and not just spend it.

4. Wealth is what you don’t see

Spending money to show people, on things you buy for show-off is the fastest way to lose wealth! Wealth is made of your financial assets that may not be easily visible to the outer world.

5. Be Happy

To be wealthy, we need to feel good about other people being prosperous. If you have a deep seated idea that rich people are not nice, you are never gonna make it!

That’s all folks, want to know more? I recommend Reading two of the great books that helped me create this post.

5 rEASON TO iNVEST IN cRYPTO

Hellow Riters, Hope you are healthy, hope you are doing great! Today lets discuss about those Adas and Doges’, I mean Cryptocurrency. So, lets dive in.

Token to Freedom

Cryptocurrency is your token to freedom, You and only you are its owner. You have full control over where to spend it when & how, no Government or Bank can control it, no Govt. can block or freeze it. Demonetization, hyper-inflation and other risk factors due to the Central System are not present.

Safe Money

Probably the best reason to own a Cryptocurrency is the Cryptography behind it. It can’t be forged or attacked, also your identity is hidden, encrypted and safe. Blockachain technology ensures secure digital transactions through encryption and “smart contracts” that make the entity virtually unhackable and void of fraud.

Accessibility

Anybody with access to Internet can access the crypto, and use it. Even the people who don’t have rights to use to traditional exchange systems can access it.

Higher returns

Even though Cryptocurrency prices are volatile the returns has been way higher than the traditional Stock markets. Also several organizations like Blockfi provide you Interest over your Crypto assets. And the high liquidity of this asset makes it worth investing at least a little portion of your portfolio

Instant Settlement

With Blockchain, all you need is an internet connection and a smart device to instantly become your own bank making payments and money transfers. Also coins like Ripple (XRP) empower cross-border settlement and currency exchange in real-time by allowing banks & money-transfer institutions to join their distributed ledger network.

Bonus – The other unique reason to own a Cryptocurrency is the uniqueness it brings on the table. Each coin is separate in its functionality and usuability, like Ripple is used for cross-border settlement, Bitcoin can be used as Gold to store wealth, Ada (Cardano) can be used to build smart contracts and in turn create decentralized applications.

To Know more about Cryptocurrency do read our Beginners’ guide to Crypto!

Thank you for reading.

2020 Rewind : the good, the bad and the ugly!

Hello Riters, hope you are well, hope you are doing great, & hope we together reach new financial height this year. Thank you for all the support fueling me to write yet another time.

Today, lets discuss what are somethings that 2020 taught us. So lets dive in.

The Good

You might be wondering seriously was there anything Good?, lets not disappoint ourselves yet and follow along.

  • Legendry Investor Warren Buffett once said ‘Be Greedy when Market is Fearful and Be Fearful when Market is Greedy’. Now what do I mean by that is, 2020 gave us all the existing long term stock market investors a chance to buy great companies share at a discounted price, and it gave a golden opportunity for new Investors to put a lump sum, off-course after doing all necessary due diligence for the firm. Also not to forget the new highs that Stock Market reached in 2020 end.
  • Time to slow down and reflect. Yes, 2020 gave us plenty of time to slow down and reflect back on the necessities in our life. When we (Indians) were locked in for couple of months that was an opportunity for us all to slow down and re assess our priorities. Sometimes in this mad rush for fame, money we forget what we truly want, and I suppose for many of us 2020 gave us that golden opportunity to rethink our lives.
  • A respect for healthcare workers. Especially in a developing country like India we often times neglect the importance of health care. 2020 taught us the importance of healthcare, and I am sure it also helped increased Govt. budget allocation towards health care for near future.
  • Time to rejoice with family. Sure lets admit it, it was not all roses when we had to spend time with everyone under the roof, but nevertheless for many of us it led to better understanding and importance of family.
  • Need for luxuries. You might be wondering what? we are talking of luxury, hold on one sec, hear me out. Now not everyone would agree on this point, But 2020 taught some of us the need to have our own little private beach house or a hill side mansion where we can retreat if another such calamity re-appears. Now, this does not mean we should not help fellow beings, in fact one thing that 2020 taught us was what is enough and what should we do for the society as a whole.
  • Another asset class saw some glitter. I am not talking about Gold well that too was pretty volatile, and gave opportunity to many of us to cash in/invest; nevertheless there is one asset class that out performed everything else in 2020, Bitcoin – Cryptocurrency! 2020 saw Bitcoin breaking its records time and again. It was also the year that taught us the need for digital currency and decentralization.
  • Refinance, not to forget with Interest rates at all time low, 2020 gave us an opportunity to refinance our loans, and mortgages.

The Bad

The easy part, I am sure the list can go on & on for many of us here. But let me say it I want to rewind 2020 with more positivity & hence I have already given the positive angle, covering most of the Bad in the Good by flipping the lens, the perspective or whatever you call it. And if you are still with me than hang on, we are going to discuss the most important lesson that 2020 taught us, below.

  • ‘Hey Rahul, Give me some cash man, I am broke, please help’, ‘Sahaab kuch kaam nhi hai, khane ko kuch nhi hora, thodi madad kariye na plz’ (Sir, we don’t have any work, nothing to eat, please help). These were some words I am sure many of us would have heard who would have tried to reach out to their cook, maid or even friends during lockdown. While we were busy living paycheck to paycheck, Pandemic happened! And we were never prepared, never learned the importance of Emergency fund and savings. If there is just one thing I want you to learn from this Pandemic it is the importance of Emergency Cash. Read more about Emergency fund here.
  • ‘I lost my Job, I have consumed all the Stimulus check (applies to United States specifically), Can I borrow some money dad?‘. In Early 2020, when Pandemic knocked our doors, stores were shut down and it was a sight all around the global, with consumer spending at all time low and unemployment all time high, we were left with barely food on our plate. Now most of this was out of our hands, but still there was something we could have done about it, ‘Invest’, Invest, Invest! Yes, you heard correct, Invest and let the asset grows, Invest in yourself and let the most important asset your brain grows, so that when you are out of one opportunity you have something to fall back to. I know it is easier said than done, but things like side hustle and Investment can help us better cope with difficult times. Especially when the future Jobs are changing it becomes even more important to re skill ourselves by teaching ourselves a new skill in demand like video editing, data science etc.

The Ugly

I wish their was a skip button and I could just skip this part of 2020.

  • Death, Desperation and Misery. Yes, lets admit it, It send shivers in our spine when I saw coffins lined up in places like Italy, and people were not even allowed to have the rituals performed for their loved ones. While the worst is over, is behind us, nevertheless we should not forget the importance of life. Money is good but its not the end in itself, we must realize its worth. We must understand the importance of Happiness and why it matters more than the riches & luxuries in our lives. Nor should we forget the importance of donation, charity, philanthropy and the need to uplift the other half, and at times the better half of our society.

Key Takeaways

If you have made it this far or if you have skipped through most of the article, so here I urge you to stop for a minute.

  1. Importance of Emergency Fund. 2020 taught us the importance of having some cash set aside, specifically 3 to 6 months worth of your expenses in a liquid, high yield savings account.
  2. Happiness > Money, while Money is important it is not the end in itself, realizing its place in society and realizing the need to help the poor & needy is a great lesson to take away from 2020 and well on to rest of our lives.
  3. Importance of Personal Finance. Often neglected & hardly taught in schools, Money management, personal financing is important skill to master. Paying heed to your finances, tracking expenses and saving some extra cash will be the good place to start.

With this and without further making this blogpost any long, I wish you loads of Happiness, Health & Wealth in 2021. Happy New Year!

Get Rich QUICK!

Spoiler Alert – 99.99% of Get Rich Quick schemes sold in Market are Financial Fraud!

Welcome Riters, today will discuss what are ‘Get Rich Quick’ Schemes, the truth behind them and why/how to avoid them. So Unless you have a money printer running on, you may need to know this.

Pyramid Scheme

Pyramid Scheme is a business model where you recruit people in return of a future promise of wealth creation via promise of payments if you enroll others into the scheme.

In layman terms, it is a sketchy fraudulent business model that works on commissions received by new recruits you recruit or your recruits recruit.

You pay a upfront cost often misguided by the person selling you this scheme in the name of get rich quick! That said mostly pyramid schemes rely on recruitment fees, but sometime they will even sell you tangible goods and services (which of course are not worth the money) to hide the underlying pyramid structure. Often they have a binary structure where in one person has to recruit two others which in turn recruit two others and the list goes on. As long as the Pyramid base is wide the stability remains

Another terms which we often hear is MLM (Multi-Level Marketing).

Multi-Level Marketing, also called Pyramid Selling or Network Marketing

MLM is often a legal business practice, that unlike traditional pyramid scheme involves actual sale of goods & services. Nevertheless their main motto remains hiring new recruits and getting their money. They will at times sell you educational courses and no-value products at high cost, and in turn make you / motivate you to sell them to the new recruits! These schemes work primarily on commission system.

Now other similar financial fraud is referred to as Ponzi Scheme.

Ponzi Scheme

Ponzi Scheme, coined after Charles Ponzi in 1919, refers to as ‘Robbing Peter to pay Paul’, Ponzi Schemes rely on new investors to pay old investors. A certain of people buy into the idea, and Invest, when they sold this to others (new investors) they get to keep the return paying a certain fee to the intermediator a third party.

In a sense, they are similar to Pyramid structure, here instead of recruits you are calling them the Investors and the ideology behind this financial fraud is that of Robbing one to pay other!

Remember the underlying Motto of all these schemes is to steal your money to satiate the greed up the ladder!

News Alert

  • Anubhav teak plantation in India in 1998 was a Ponzi scheme defrauding the depositors of nearly 400 Crore rupees.
  • Bernie Madoff’s (American Financer) Ponzi scheme ran for decades defrauding thousands of investors tens of billions of dollars. Finally in 2009 Madoff was sentenced to 150 years in prison and forced to forfeit $170 billion.Read more about it here

Why say No to Get Rich Quick Fraud Schemes?

  1. They won’t even get you Rich forget about fast.
  2. They are unethical, and at times operate in a legal loophole.
  3. They rip many of their life savings.
    • Based on True Story – Imagine a 25 year old Kiran from an Indian village get convinced by a few friends to invest (as they say it) few lakhs which he arranged selling a piece of land that he inherited, and unable to further recruit others, in turn he convince his family members who end up selling more of their livelihood, their land, finally losing all they had in pursuit of a secure glaring bright future which was never ever possible by the Scheme!
  4. They waste you time! Yes, as you know Time is more precious than Money, lost money can be made again but lost time never comes back.
  5. They can rip you off your livelihood, even if you don’t sell anything like our imaginary friend Kiran these schemes nevertheless instill a hatred in your heart for your job! Now you may never ever gain the promotion you would have easily got at first place, and you may never ever be happy with your Job and that means your future can be bleak.

Now these schemes do have some benefits but the potential risk and damage outweighs these benefits by large (for the sake of discussion lets discuss them).

Benefit1.  You learn to sell, often network marketing if not anything else teaches you how to sell yourself! Which is a very good skill to learn (You don’t need to be involved in fraud to learn this and should rather pursuit it by other means). 2. They teach you about Investment, yes if you are into a Ponzi scheme and you have lost your money, you now know how to not invest, nevertheless often the cost of learning is too high and you may never learn unless you decide to quit!

How to avoid buying into such Frauds?

  1. Never Invest in things you don’t understand. Often times these schemes are sold by using complicated terms and indirect ways, and psychology against you.
  2. Always do your due diligence, and don’t just listen to a random friend.
  3. Don’t blindly trust people with your money (or anything for that matter).
  4. Lastly if someone says they will make you rich quick, run away from there.

To read more about investing – click here!

Opinion alert

With heavy heart and tears in my eyes, I feel very bad to tell you NO GET RICH QUICK SCHEME EXISTS. Yes, But I am in fact happy about this fact. The fact is you need to use knowledge, create value, sell value or your time in return of the Money! Once you have, as Tony Robbins called it critical mass of Money, the money will work to get you more money throughout your life. And that is how my friends, Financial Freedom is made! Don’t ever buy into anything that is being sold to you in the name of ‘Get Rich Quick’, more than 90% of the times they will end up draining your wealth and even if you end up getting more return than you invested or wasted in this case, you will not be wealthy. Wealth comes those who knows how to manage their money i.e. why the odds of you going bankrupt a year after winning the lottery (whose odds are itself very low) is pretty high.

Thank you for reading, follow us for more, and if you gain anything from this do share with your friends!  Keep Hustling, Keep Learning & Keep Investing!

Where is my Money?

A huge guy with a elite blue suit walks out of his rolls royce and hand over a brief case full of cash. Here Santa, here is your Money, go fund the Banta Co. Cheers!

If only Businesses used to work that way!

Welcome back Riters, today we will discuss how Businesses raise money and whats in it for you as a consumer. So lets dive in.

Every Business comes with a cost. Business need money to generate money, and there are four major ways a Business can raise capital –

  1. Early Stage Investors or Seed Money – This is usually when a Business is just starting up, and the founders may put in their money or may reach out to venture capital for investment.
  2. Profit as a source of financial capital – If firms are earning, they may chose to reinvest some of their profit back.
  3. Borrowing – Firms may choose to borrow money from Banks, that they can then invest back into the Business. This can also be referred to as debt financing. While debt is easy, it puts a additional burden to pay off interests.
  4. Stocks– This is a way by which a company can issue shares, and in turn get the public money to invest back into the Business. This can be referred to as equity financing. While this may sound attractive but going public may often means a lot of additional work that goes into financial reporting, where in you need to announce your earnings to the public and file them. If not done correctly it can also result in a company downfall, and eventual demise.

Oftentimes a company will use a mix of both debt and equity to finance their Business. And the best mix of debt & equity referred to as an optimal capital structure of firm helps maximize a company’s market value and minimize its cost. Often debt/equity ratio is something that a potential investor looks at.  

Lets further discuss how do the company raise capital via stocks.

IPOInitial Public Offering is the way by which a privately held company goes public and get listed on Stock Exchange. Think of Exchange as a place where Stocks (a piece of company) are sold & bought, so that you public get to be the owners! Owners, not in a real sense though you don’t get to take or make any decision as such, but you do get to keep a part of profit or loss.  

Now, as a consumer, you just don’t need to sell the shares/stocks to encash the profit, Some Companies also offer a regular payment a part of their earnings as ‘dividends’.  And remember the golden rule of Investment – Invest only in things you understand & do your own due diligence.

Now, if your Car runs out of fuel, you go to a petrol pump nearby and pour in some gas! Same way if a Company feels it needs more fuel aka more money to run, it may go back to you the public and ask for it, via FPO.

FPO – referred to as Further Public Offer or a Follow-on Public Offer is a process by which a already listed company issues new shares to the existing shareholders or the new investors.

FPO is used by companies to diversify their equity base with a aim to inflow subsequent public investment. FPO is comparatively less riskier, more predictable, and has a profit lower than IPO

The issue of shares IPO, FPO, private equity or debt instrument is regulated by SEBI (Securities and Exchange Board of India) in India.

There are two types of FPO:

  • Dilutive FPO – when the new offer of shares actually increases the outstanding shares of company. Such FPO is undertaken to fund the expansion activities or pay off some debts like the current Yes Bank FPO.
  • Non-Dilutive FPO– This one provides no additional shares or diversify the equity. This is when company’s founders, the board of directors, or other large shareholders sell their privately held shares on the open market.

Tata Steel Ltd, Engineers India Ltd, Power Grid Corporation of India, Power Finance Corporation Ltd, and NTPC Ltd are some of the successful FPOs in the past. The success of any IPO or FPO, depends on various factors like pedigree of the company, its promoters, earning capacity, potential and the Sentiment among the Market.

Each type of funding has its pros and cons, not knowing how to invest the money you earned or raised whether for a consumer or a business can make a whole difference between expansion or fall, growth or decline.

Thank you for reading, look out this space for more!

Am I Dumber than She thinks?

Am I? I don’t know (confused), Are you?

“Too many people spend money they haven’t earned, to buy things they don’t want, to impress people that they don’t like.”

-Will Rogers

Hello Riters, Welcome to riteFinance, this is your host Ritesh and today lets discuss about-

Five Dumb ways to spend your Money

  1. Gambling, Believe it or not an average American spend $1000 a year on Lottery, with a odd of winning 1 in 14 millions, i.e. you are 20 times more likely to be struck by a lightening (thunder roars in far), and even if you win the Lottery you are more likely to be broke the next year than to be wealthy. Gambling in any form is a total waste of money, with slot machines and equipment designed in favor of Casinos to drill a hole in your Pocket! Here is link to an interesting read on Psychology behind Casino   
  2. Things you buy to impress them! Yes, that Gucci Scarf or the blue Jaguar, all the liabilities you take just to impress the girl or guy next door can drill a deep hole in your pocket and all your future cash flow may flow down that banking stream. So think before next time you go on a Shopping spree, ask yourself can I really afford it?, will this serve a purpose?, is there a way I can be happy without it? Do I really need it or its just a show-off?  (squirm face)  
  3. Things you buy to destroy health, yinkeesss, what did I say?, yes you heard it right, things like drugs, excessive junk snacks to munch on, or too much alcohol. This things not just have a recurring cost due to their addiction capability but also a cost far beyond your imagination, a cost that no money can pay for.
  4. Fees that Bank Charges: Overdraft charge, Bank Account Maintenance charges, your Card fees or that interest they charge you on Credit Card, even the money that’s deducted when you used your xyz card on abc ATM! To top it all, Bank also has a unique advantage of deducting cash directly from your account. So next time you may like to read your bank statement more carefully or maybe make a call & ask your banker. To know more on how to avoid some of these fees, check out the article here by lendup.com.
  5. In-App Purchases; yes, the skin you bought just to show-off in the virtual world or the extra life in your favorite game, even if it is in 50% discount (which is obviously a fake number to put on), may not be worth your Money (and your time). In most cases put away your phone for few minutes or watch an Ad and you will get an auto renewal of life totally free of cost. Also, the more you spend, the more likely it becomes for you to spend again, so it not only have a present but also the future cost attached to it.

Thank you for reading, let us know in comments below if you don’t do any of the above mentioned Dumb Expenses, or if you have one of yours own. Follow for more, #KeepLearning #Money

Is Bitcoin party over?

Hello Riters, Buckle-up your seat belts, today we are going on a Crypto Ride down that hill.

We will discuss the thing that Bankers hate – ‘Cryptocurrencies’!, and why you should buy it!

What is it?, How can they be bought? Issues, types, the likely Future and finally about a coin of Shiba Inu dog. So lets dive in.

To understand Crypto let us first understand the Story of Money.

Human evolved and adopted Barter system naturally where in one can exchange their good for others goods (for example – 10 sheep for 1 cow). With time Barter evolved into a system of using Metals like Gold, Silver to trade easily even across International Borders. Later it evolved with time into Currency System, paper money whose value is symbolic but trusted and agreed upon.

Currency is a form of payment,

it is something (usually paper and coins) you exchange for goods & services. The conventional currency relies on network of mints, central banks and governments. Currently every transaction around the world involves exchange of currency of some kind. And the piece of paper, ‘fiat currency’ you have holds value because your government says so. if you take a note and read it you will see “I PROMISE TO PAY THE BEARER THE SUM OF XXXX RUPEES” written on it, that said its a promise by the Bank backed by the Central Government that the note holds XXXX Value.

Indian Currency

What is Cryptocurrency?

Cryptocurrency is a digital or virtual currency secured by Cryptography (a method of protecting the information).

The Underlying Technology

Underneath Cryptocurrency is a technology whose aim is to make it possible for two individuals to send and receive payment without revealing their identities and maintaining security of transaction with no involvement of a third party.

Blockchain is a major technology behind Cryptocurrencies (except a few like IOTA – a currency built on Tangle, read more here) Blockchain is essentially a list of blocks connected together and secured using Cryptography. Each Block stores data (transaction), a unique hash (mathematical code to identify the block), and the previous block hash. Blockchain can be thought of as a distributed public ledger with all transactional data.

A Blockchain

Attributes of Blockchain

  1. Immutable – Blockchain can’t be modified. Every time the data is modified the hash associated with the block is recalculated, and since every block contains the hash of previous block it causes the following blocks to become invalid making it obvious that the data is modified (here computational power is the limit, as long as you don’t have enough computational power to recalculate all the hashes).
  2. Consensus – Blockchain uses a peer-to-peer network, allowing peer to peer interactions. Each participant in the peer-to-peer network is known as node. And each time someone adds a block to the blockchain, that block is sent to every node and is verified by every node to establish consensus (to read more refer).
  3. Decentralized & Distributed Structure – Block chain is decentralized meaning the information is distributed to everyone on the network. Each peer has a copy of blockchain but no one can manipulate it.  

How is a Cryptocurrency like Bitcoin issued?

Currencies like Dollar & Rupee are issued by Central Banks, backed by government. The central bank more or less can issue new units of currency anytime they think so. With Bitcoin this is not the case (for those of you who don’t know Bitcoin is the first and most prominent cryptocurrency), Bitcoin is usually mined with the help of specialized computers in warehouses, which work to solve a cryptographic puzzle. Mining is not just about creating new money but also validating transaction. With Bitcoin miners are awarded new bitcoins every 10 minutes. The issuance rate is set, so miners cannot create bitcoins out of thin air by cheating the system. Miners have to use tools i.e. their computing power to generate the new coins. Imagine it like the Gold, instead of mining physically they are mined digitally.

Warehouse of Specialized Computers

Crypto vs Fiat

With Fiat Money the very nature of the system is its flaw, the ability of Central Bank and Government to be able to manipulate its value by changing the supply & demand, and causing inflation / deflation. Since the system is Centralized not everybody has a say in it. That is where Cryptocurrency (Crypto) comes into picture. Cryptocurrencies challenge the orthodoxy of Fiat Currency. Cryptocurrency is decentralized, distributed, and works in a peer-to-peer network which is difficult to cheat and manipulate.

Types of Crypto and differences

  • Bitcoin (BTC) – Launched in 2008, The gold standard within the Cryptocurrency space. It is the first and most prominent cryptocurrency. It has a coin limit of 21 million and uses ‘SHA-256’ algorithm for hashing.
  • ADA (Cardano) – Cardano is a proof-of-stake blockchain platform: the first to be founded on peer-reviewed research and developed through evidence-based methods. Ada is Cardanos’ digital currency named after the first computer programmer Ada Lovelace.
  • Litecoin (LTC)- Launched in 2011, It is referred to as Silver standard and is believed to feature faster transaction times. Litecoin like other currencies is an open source, global payment network that is completely decentralized. It has a coin limit of 84 million and uses ‘scrypt’ algorithm as proof of work.
  • Ether (ETH)- Ether is the cryptocurrency built on top of the open source Ethereum blockchain, which runs smart contracts. Launched in 2015, it is currently the second-largest digital currency by market cap, 1/10 the size of bitcoin. Ether supply is not capped like Bitcoin and its supply schedule is determined by members of Ethereum community. 
  • Ripple (XRP)– Launched in 2012, it enables banks to settle cross-border payments in real time, offering instant low cost international payment with end-to-end transparency. Ripple doesn’t require mining like Bitcoin reducing the usage of computation power & minimizing network latency. All of Ripple Tokens are pre-mined before launch, only the introduction & removal of XRP from the market supply happens according to the network’s guideline.
  • Bitcoin Cash (BCH)– Introduced in August 2017, as fork of Bitcoin Classic. It is created for the purpose of bigger transaction blocks of ~8MB compared to original Bitcoin block size of ~1MB. Advantage? Faster processing speed for the users.
  • IOTA (MIOTA)– A cryptocurrency without blockchain Instead of a blockchain, IOTA uses “tangle,” which is based on a mathematical concept called a directed acyclic graph, as it is a cheaper alternative compared to blockchain. It is referred to as the Oil Tanker in the Cryptocurrency world, to read more click here.
  • Dash – Dash whose name comes from Digital cash, launched in Jan, 2014 as a fork of Litecoin. The cool thing about Dash is it keeps 10% of its mining profits to upgrade its own network in a democratic voting process, which means it can literally fund it’s operations without being bought by corporate interest. Read more here.
  • ZCash (ZEC) – Unlike Bitcoin which is Pseudonymous, Zcash is a decentralized cryptocurrency focused on anonymity & privacy. It uses the zk-SNARK zero-knowledge proof technology that allows nodes on the network to verify transactions without revealing any sensitive information about the transactions. Read more here.
  • Monero (XMR) –  In Cryptos like Bitcoin because blockchains are transparent It’s easy to trace payments back to their original source. Here comes XMR, designed to obscure senders and recipients through the use of something called ring signatures. Read more about Monero here.

Above are some major Cryptocurrencies, the number of Cryptocurrencies available today is 1000+ with a overall value close to ~$250 Billion. Check out more here.

Promise of Crypto

Cryptocurrency is currently in its infancy and early adoption phase, nevertheless crypto has potential to revolutionize the FinTech space. The Banking system is old, and nothing much has changed since its inception. Cryptocurrency can help change the face of banking, it can take the power from a few elite and distribute it back to many. Also the technology behind Cryptocurrency has far reaching potential in Finance & other fields, It can help transform the payment ecosystem making it more secure, efficient and affordable. An interesting read on the applications of Cryptocurrency is the article here.   

How to purchase?

Now in case you are wondering where and how to buy/invest in Cryptocurrency then Binance, Coinbase, Huobi Global, Zebpay (available in India), WazirX (available in India) are a few exchanges where you can change your Money for Crypto (Disclaimer – do your own due diligence before investing).

Based on your country some may or may not be available to you. To read more on how to buy Cryptocurrency in India, you may like to read the article here.

Source: Google

Issues with Cryptocurrency

As the saying goes ‘All that glitters is not Gold’, the Cryptocurrency also has its drawbacks. Let us understand some of these –

  1. Volatility – Cryptocurrencies are very volatile and the price may fluctuate a lot in few hours. For example in just 2 weeks in December 2017, Bitcoin lost 25% of its value.  
  2. As a method of Payment– Cryptocurrency still lack the infrastructure and mechanism to be viable for acceptance in exchange of goods and services. Couple this with world price fluctuations, it becomes almost impractical to use.
  3. Difficult to Understand – The underlying technology behind Bitcoin that makes it secure also makes it difficult to understand for a non-techie, making it confusing and less widely accepted for the consumers.
  4. Easy to be used as means of illegal trades – The fact that Cryptocurrency is not fully legal or regularized everywhere it becomes an easy tool for people performing illegal trades like sex offenders, drug dealers etc. According to a data, around $70 Billion in Bitcoin are spend in illegal activities.
  5. Storage Security – Yes, the very thing that make Cryptocurrency safe can be a problem for the user. A Cryptocurrency is stored in a digital wallet and if a user forgets his wallet password, it is near impossible to recover the lost data due to strict integration and encrypted blockchain.

Opinion AlertAll said, given the potential of Cryptocurrency for future it seems like fair but a riskier investment to make. You should not hold more than 10% of your wealth in digital asset like Cryptocurrency and use it as a hedge against our own Economy, Govt., Policies and Fiat paper money that can cause Inflation and decrease its value. Also other thing to note is diversification, a little bit of diversification can help you prevent the unsystematic risk and volatility thereof in Crypto world. (you can ignore this section, as it is just an Opinion).

Fun Fact – Dogecoin (DOGE) emerged in December, 2013 as a joke to satirize the growth of Altcoins via meme. It has immensely grown in popularity since and is now among top 25 Crypto assets. It is a derivative of LuckyCoin which is forged from Litecoin (LTC) and uses Scrypt Algorithm. It can be considered as a penny stock of Crypto world, currently valued at $0.0031 i.e. ~20 paisa in Indian Currency.

Want to know about the reasons to Invest in Crypto? Check out our next article Five Reasons to Invest in Crypto by clicking here.

Thank you for reading, let us know in comments below what is your favorite Cryptocurrency. #KeepLearning

Is Dollar dull again?

Soaring Gold & Silver along with the escalating US-China Trade war may lead to Dollar fade its value. A weaken Dollar & surge in the inflow of capital towards India can help appreciate the value of Rupee.

So, what exactly does Strengthen Rupee or Weaken Dollar mean for the Economy & for you as a Consumer? Let us discuss it Today.

Strong Rupee Impact –

  • Cost of Production Rises as raw materials become expensive.
  • Exports become costlier which may mean Business like textiles, IT etc may lose to its competitors. IT sector earnings may decline, as most of them serves the clients abroad.
  • Imports are cheaper. The appreciation may help in reducing prices of imported consumer goods like your iPhone, Computer or TV etc.
  • Strong rupee may impact the job creation and the overall growth.
  • The stock market gains from foreign inflows, funds keep coming in, and the additional liquidity keeps stock prices high.
  • Also Foreign investors, who can borrow cheap abroad, for example ~1% in Japan, & invest that money in Indian bond market, with yields ~7%, can gain from a strong rupee.
  • Strong Rupee helps Government manage inflation on the lower side and the fiscal deficit.

Weak Dollar Impact –

  • A week Dollar may mean higher prices of commodities like Oil, Iron, Copper etc as they make up for the downfall in dollar.
  • Rising prices of commodities increases the cost for producers which ultimately pushes the prices of goods further downstream like Food, Gas etc, directly feeding into Inflation and off-course making a hole in your wallet.
  • Prices of Imported goods rise and foreign Travelers may need to scale back on Vacations. Topmost imported goods in US are (Consumers watch-out)-
    • Electrical Machinery (including computers and hardware)
    • Vehicles and Automobiles
    • Pharmaceuticals
    • Medical equipment and supplies
    • Furniture, lighting, and bedding
    • Plastics and plastic goods
    • Oil and petroleum products
    • Gems and precious metals
  • Some Business are more likely to take hit than others like Luxury products. When consumers tighten their belts, the first industries to take hit are those manufacturing luxury items and nonessential products.
  • Fuel prices may surge, when the dollar weakens the price of gasoline increase because the nation depends at least in part on imported oil.
  • Exports are more competitive in the global market gaining market shares and at times saving U.S. jobs in the process.
  • Multinational Companies and the Shareholders may gain from the Weakening Dollar.

Lastly let’s look at the Factors that help Influence a Currency Strength –

  • Policies Anti-Inflationary monetary policies and Fiscal discipline helps a Strong Currency by keeping debt and inflation in check.
  • Stability- A well-established, strong & stable government boosts the confidence of Investors, which in turns promote the Currency.
  • Interest Rates- Investors seeking a higher rate of returns are attracted by higher interest rates, and their Investments help promote a Country’s Currency.
  • Geo-political factors- Apart from the factors mentioned above, other external factors like Trade wars, trusted partnerships & support from other Nations can also impact a Nation Currency.

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