As technology develops, investing in digital assets is now easier for everyone. One of the digital assets that is now much in vogue is crypto. We often hear success stories from someone who invests in crypto. However, this asset is known to have a very volatile value and significant risk. But, because crypto is a digital asset that uses new technological breakthroughs, its value is predicted to continue to increase with the development of technology. Seeing that fact, more and more investors are interested in owning this asset. If you are a beginner, don’t worry. In this article, Tokenomy will explain crypto in detail so that you can start investing in this field immediately.
What is cryptocurrency?
For those of you who still don’t know what cryptocurrency is, it is a decentralised digital asset protected by cryptography technology. A decentralised system is best explained as a system where decisions are made by all users of the system. This technology is built on a computer network called blockchain, a data storage system (database) It is often referred to as a digital ledger, recording all crypto transactions that occur in it. In the blockchain, transactions of cryptocurrencies are recorded and accessible to everyone, so it has a high transparency value.
Unlike the fiat currencies we are used to; cryptocurrencies do not have a physical form. These assets can only be accessed and used as digital transaction tools in the internet world. Compared to regular currency, cryptocurrency has a fluctuating value because it is determined by market forces that traders or investors strongly influence.
Types of Cryptocurrency Assets
There are two cryptocurrency assets that you can find in the market. Here is an explanation of both:
Coins are transaction tools created by a separate blockchain system. In the market itself, the coins you can buy are Bitcoin and Altcoin. Altcoin is a term that describes blockchain-based cryptocurrencies other than Bitcoin. Altcoin stands for ‘alternative to Bitcoin’. Usually, most Altcoins are created to be a solution to problems that the blockchain of Bitcoin itself cannot solve.
Tokens are assets built on top of an existing blockchain, like coins. Still, they are another digital asset that can be programmed to perform the formulation of smart contracts. Outside the blockchain network, a smart contract is a tool used to establish ownership of assets. Tokens can be used as a transaction tool to represent money, coins, and digital assets. The transaction system will be based on a peer-to-peer network.
Terms in the Crypto World
An Airdrop is an event that gives free crypto assets to the recipient’s digital wallet. In general, crypto companies carry out airdrop events as marketing activities to get new users. In practice, if you want to get an airdrop, you must fulfil the requirements in the form of tasks or fill in personal data according to the applicable conditions. After that, you will get crypto assets through your crypto wallet.
Blockchain is an advanced data-driven mechanism enabling transparent sharing of transaction information within a business network. Blockchain data consists of blocks that are connected like a chain. All transactions in it will be chronologically recorded, transparent, immutable, and accessible to everyone.
Bitcoin is the first cryptocurrency created by someone named Satoshi Nakamoto in 2009. Initially, Bitcoin was created as a decentralised currency with a peer-to-peer (P2P) system that does not require third parties, such as banks, as intermediaries.
This term refers to a graphical display of stock prices or cryptocurrency values used in technical analysis. It letsyou see a cryptocurrency’s highest, lowest, opening, and closing market movements in a given period.
A crypto wallet is a digital wallet application that allows a cryptocurrency owner to store and send/receive digital assets. A crypto wallet is like an ‘account’ for your cryptocurrency assets.
DAO is an abbreviation of ‘Decentralised Autonomous Organization’ an organisation governed using smart contracts based on blockchain technology. The existence of DAO is a place for the crypto community to participate in its future management and development.
This term stands for ‘Decentralised Applications,’ a program or digital application decentralised in a blockchain system or peer-to-peer computer network.
Ethereum is the second largest crypto asset after Bitcoin. This asset was created as a cryptocurrency anda platform supporting blockchain-based activities such as creating other crypto tokens and the production of NFTs. Ethereum was conceived and created by Vitalik Buterin.
A term for legal tender issued by the government that has no intrinsic value. Examples of fiat money are the rupiah, dollar, Malaysian ringgit, etc.
FUD stands for Fear, Uncertainty, and Doubt. FUD is used as a strategy by investors to lower the price of a crypto asset. By speading FUD to the public, investors can buy coins at low prices.
FOMO is an abbreviation of the phrase, Fear of Missing Out. Novice investors new to investing in stocks and crypto often use this term. FOMO applies to those who follow the market and senior advice without prior analysis for fear of missing opportunities. Usually, investors who experience FOMO buy or sell an asset without in-depth analysis for fear of losing market momentum, which is not certain.
An anagram of the word ‘Hold’, meaning to hold. Crypto enthusiasts usually interpret Hodl as ‘hold on for dear life’ or referring to a strategy to hold or maintain the crypto assets owned.
Mining is the process of mining crypto assets by verifying new transaction blocks into the blockchain network to get coins as a reward. This verification process is carried out with the help of software run on a computer equipped with sophisticated hardware (GPU, ASIC) able to solve complex computational problems.
A Non-Fungible Token or NFT is a digital asset representing a valuable item with a value that cannot be exchanged. Each NFT has data in the form of transaction records in a blockchain system defined by who the creator is, the price, and the ownership history.
Private keys are secret keys used to encrypt and decrypt data in a crypto wallet. Users generally use private keys to access crypto assets stored in their wallets.
Unlike the private key, the public key is a series of codes that serves as the address of the crypto wallet.
The Gas fee is the term for the price charged for each transaction made through the Ethereum network. The amount of fees incurred will depend on the energy the Ethereum network must spend; therefore, the value can vary.
Peer to Peer
Peer-to-peer is a term for decentralised transactions where only the sender and receiver are involved without any intermediary.
Proof-of-Stake, often abbreviated as PoS, is a consensus that uses methods from blockchain activities to confirm transactions and prevent double counting. Proof-of-Stake relies on validators to check all transactions that occur.
Pump and Dump
This term is used to describe the behaviour of manipulating crypto prices for profit. Typically the price will be manipulated to rise and get a lot of people to buy, then the price is made to fall back down as the manipulators sell all the assets for a profit.