Every industry, organization and entity eventually creates a jargon of its own. Usually acronyms are used as short hand for conveying information and are sometimes adopted as words in their own right. Think CYF, IAS, DWF, DMF, FCC, DOC, ODF, etc. In the realm of finance and investment, acronyms and specialized jargon are used extensively. Understanding the terms means you are not new to the subject. Failing to understand the terms can be hazardous to your wealth. This is particularly true in today’s world of Blockchains and cryptocurrencies.
Do you own cryptocurrency? Are you considering a cryptocurrency “investment”? Are you seeing all the people who are getting rich buying and selling BTC, ETH, DOGE, SHIB and hundreds of other cryptocurrencies? Do you wonder what an NFT is? Do you know what cryptocurrency is?
First of all, cryptocurrency has nothing to do with crypts and only a passing resemblance to a currency. The world of cryptocurrency is volatile, fast paced and growing by leaps and bounds. Cryptocurrency started with an effort to create a nongovernmental digital form of money that was secure, encrypted, decentralized, and provable on a distributed ledger called a blockchain.
If there is anything real about cryptocurrency, it is found in the blockchain. Blockchains are useful for things other than proof of the validity of the cryptocurrency. Some blockchains allow applications to be run on them. This allows things like contracts to be validated and performed automatically between parties. It also allows banking functions referred to as DE-FI or decentralized finance. It could also be used to record and secure real estate titles, personal property ownership, stock and bond transactions, etc. Cryptocurrency is what incentivizes and makes the blockchain work.
Having said all of the above, you should know that investing in any cryptocurrency involves extreme risk. Aside from market fluctuations, cryptocurrency can be impacted by governmental regulation or outright ban. Further, since there is little to no underlying intrinsic value, cryptocurrency is worth what someone else will pay you for it. In a bubble, where there is always a greater fool until there isn’t, those who get in early and cash out at least their original investment are the winners. Most people cannot do this. Greed (one of the seven deadly sins) usually sets in and in the end the initial gains disappear along with the original investment. If you decide to put money in cryptocurrency please do it with the expectation you are going to lose it all. In other words, hope for the best, but prepare for the worst.
In July of 2021, the Oklahoma Disciples Foundation Board of Directors authorized the Foundation to accept gifts of intangibles such as cryptocurrency subject to review and approval. If you happen to be in or get into a cryptocurrency or non-fungible token (NFT) that increases in value and you hold it over a year you might consider the benefits of donating some or all of it to your favorite charity (hopefully ODF) and getting a tax deduction for the full value without paying tax on the capital gain. BTW, we can help you with this.
Eric S. Gray, Executive Director