If you are like me, you ignored all the crypto craze for many years because of all the code words and silly technical words that participants use. They feel like they are a special intelligent clique by throwing around words like blockchain and Bitcoin and AltCoin. Trust me, they are some of the dumbest people on earth and a trained monkey can understand how cryptocurrencies work if someone simplified it and removed the technical jargons.
There are two sides to it. One is the back end that deals with blockchain technology, contracts and payment systems specific to platforms. Nobody cares. The other is the currencies you interact with which is the frontend. You know those silly gold coins you used to win in Super Mario game every time you kill a tortoise? Let us say that the makers of the game decide to call it “MarioCoins” and they say that you can also buy some of those coins with real money instead of just waiting till you kill a tortoise. The question would be ‘how much should each of those coins cost?’.
So now the makers of the game say each coin is $1 to buy but they will only produce 10 of those coins for sale. You can get more only by killing tortoise while playing the game. You understand so far abi? Good.
Everything is going well at the beginning when we were only 5 people playing the game and each of us bought two MarioCoins each. Then one month later the game goes on PS5 and now there are 100 players and they all need the 10 MarioCoins that 5 of us already hold. One of them offers me $5 to sell my coin, that I bought initially for $1. I said no and the other original 5 players say no too. Now the new players get desperate and keep offering higher prices till one day someone offers $1,000! I then sell to him and he holds it till people are offering 2K and so on and so forth.
Two things can happen, the demand keeps moving the price higher or people get tired of the game and stop playing Mario so the MarioCoins are just value-less pebbles. A new game may have come out with better coins and people rush there and demand drives that price up too. You see how MarioCoins can go from $5,000 and drop back to the original $1 the next day cos nobody wants it anymore? That is the risk. Nothing is really holding the value of the currency up except demand by other people.
This is a VERY SIMPLE way of explaining why Bitcoin is now $60,000 for 1. It was not like that before, demand caused it. ALTCoins (Alternative Coins) are any other coins other than Bitcoin since it was the first crypto and others took marking from it and promised to operate better. Thats why they were called “alternatives”. Ethereum was the original Altcoin and now we have more than 9,000 ALTCoins as as March 2021. Almost anybody can issue a crypto for their personal group to use and put a price to it and then hope demand drives up the price. So when you hear XRP or DOGECoin or LiteCoin or BitcoinCash etc, in fact any crypto name that is not just BITCOIN, then it is an ALTCoin.
The main problem is that many real life sellers don’t accept crypto directly for rice and beans. They still prefer real money like US dollar or Nigerian Naira that is produced by Central Bank and is the legal tender in the country. They call these real monies like US dollar or Euro or Naira, “FIAT Currency”. So the only way to use your crypto is to sell it. You sell it and collect normal money into your account and then use it to buy things. So in summary, if I use 100 naira to buy 1 MarioCoin, my prayer is that Chidi and others will also buy and be looking for more to buy so the price will go up to 500 naira then I will sell mine to Chidi and collect real naira in my bank account. I can either do that OR convert my own ALTCoins to another type that is now in demand OR change them to Bitcoins so that I don’t lose too much and the demand of the new crypto will increase my money. This will change when more real life goods and services start to accept payment with crypto, like Tesla has promised to do soon. It will now start having real value like Fiat currency.
So you see, minus the code names like Fiat Currency and AltCoins and XRP and BCH and BNB, it is a very simple system. It is very risky too so be very careful and research a lot and keep your ears to the ground so you know if an event will affect the value of the particular crypto you are holding, before it happens. I hope this helps reduce the confusion and fear.