The cryptocurrency market has been on the rise in recent years and attracts a lot of investors. The term crypto has become popular but not everyone understands “What is Crypto?”. If you are a newbie and want to learn about crypto. This article is for you!
I. What is crypto?
Crypto or Cryptocurrency is simply understood as virtual money, electronic money, or digital money. Crypto is built on blockchain technology. It is used as a medium of transactions that take place on blockchain platforms.
Unlike the US Dollar, Euro, or other fiat currencies, there is no central authority that manages and maintains the value of cryptocurrencies. The distinguishing feature of crypto is that anyone can create this currency.
Bitcoin is the first cryptocurrency created by Satoshi Nakamoto in 2008. It is also the most popular cryptocurrency even though there are over 19,000 different cryptocurrencies in circulation.
Illustrations of cryptocurrencies – Image: mrwhosetheboss
II. Advantages and Disadvantages
Advantages
- Safety and security: Customer information is kept secure
- Easy and fast transactions: anyone can send and receive various cryptocurrencies easily through an app on a computer or smartphone. Besides, transactions whether domestic or international are very fast, in just a few seconds to a few minutes.
- Low transaction fees: the transaction fees that users pay are very low for low transaction levels
- Inflation hedge: There are only 21 million Bitcoins issued in the world and no more can be created due to the binding nature of the blockchain. Cryptocurrencies with a limited supply like Bitcoin are seen as good anti-inflation tools. It won’t depreciate like cash when too much money is printed
Cryptocurrency Pros and Cons – Image: honestproscons.com
Disadvantages
- Strong Price Volatility: Cryptocurrency prices fluctuate wildly. Therefore, the currency can drop sharply and pose a risk to investors
- Theft Risks: Cryptocurrency exchanges are vulnerable to cyberattacks that can cause your investment to be lost forever
- Unrecognized: Cryptocurrencies are not yet widely accepted and circulated by law in many countries
- Less regulation: Cryptocurrencies are not controlled by governments and central banks. Therefore, in the event that the cryptocurrency platforms are hacked, there will be no regulatory mechanism to protect investors
III. Crypto classification
1. Coin
Coin is a cryptocurrency developed on a separate and independent blockchain platform. Each blockchain has a unique coin. It is capable of solving problems related to finance, payment, and information security,…
Coin and Token illustration – Image: cuitandokter.com
2. Token
A token is a cryptocurrency issued on the blockchain. All tokens can be considered altcoins, but they are distinguished by operating on other blockchains and do not have their own blockchain.
3. Bitcoin
Bitcoin is the cryptocurrency that laid the foundation for the development of the crypto market. It ranks first among cryptocurrencies by market capitalization.
4. Altcoin
A compound word for Alternative and Coin, Altcoin refers to all other cryptocurrencies except Bitcoin.
Ethereum, Tether, Litecoin, … are examples of popular altcoins today.
What is Altcoin? – Image: icoclone.com
IV. What is the crypto exchange?
A crypto exchange is a place where investors can buy and sell cryptocurrencies. Exchanges reflect the current market prices of the cryptocurrencies they offer. There are two main types of crypto exchanges:
- Centralized Exchange (CEX): This is a crypto exchange with a third party acting as an intermediary that controls cryptocurrency trading activities. Binance, Huobi, Gate.io,… are famous CEX exchanges in the world
- Decentralized Exchange (DEX): This is a blockchain-based crypto exchange that allows the transfer of various digital assets on a secure open market without middlemen
Conclusion
Thus, the above is an overview of crypto knowledge for newcomers. Through this article, hopefully it can help you better understand “What is Crypto?”. Although it is impossible to say for sure how cryptocurrencies will be used in the future. Is it as Rick Falkvinge (founder of the Swedish Pirate Party) said: “Bitcoin will eliminate banking the way email has done with handwritten letters.” But given its existing use cases and applications, there is no denying the popularity and future potential of crypto.
