What is a cryptocurrency? Before joining the cryptocurrency industry, you should know the basics!

When I ask people around me whether they are investing, I believe the answer I have heard in recent years is that it is no longer just stocks and funds, but the proportion of investing in cryptocurrency (Cryptocurrency) is also gradually increasing. Since Satoshi Nakamoto published his paper "BAICION: A Peer-to-Peer Electronic Cash System" in 2008 and the first BAICION appeared the following year, the currency circle has become one of the hottest trading markets in the world. First, as more and more people invest, more types of cryptocurrencies are coming out. Let’s take you through: What exactly is a cryptocurrency?

What is a cryptocurrency?

According to Investopedia, cryptocurrencies are digital or virtual currencies protected by cryptography. Most of today’s cryptocurrencies are based on blockchain technology and are usually not issued by countries or government units. Relatively speaking, the money we use daily is called legal tender, which is a medium of exchange issued by the government. Comparing the two, we can find that cryptocurrency has two important characteristics: decentralization, and transparency and immutability.

Cryptocurrency Feature 1: Decentralization

When transferring money to others or swiping a card for shopping, the money flow actually goes through many places before it reaches the hands of friends or merchants, including banks, clearing centers, third-party payment operators, etc. However, when the same scenario is switched to cryptocurrency, these third The third-party institution or platform no longer exists, but trades directly with the other party, thus saving time and handling fees.

However, if this is done, how can the financial flow leave a record? Since cryptocurrency is based on blockchain as its core technology, when transactions occur, they must go through a certified process in the blockchain, and records or proofs will be left. The New York Times explained that you can imagine that the blockchain is a Google cloud form, but it is not hosted on Google's servers, but is jointly maintained by computer networks around the world. When a transaction occurs, these jointly maintained computers will use complex algorithms to confirm that the transaction information is correct and record it in the form (blockchain). A single institution or person will not decide whether to pass or not, or even is to review your transactions.

Cryptocurrency Feature 2: Transparent and immutable

Another feature of cryptocurrency is that it is transparent and cannot be modified later. This feature is also derived from the blockchain. When a jointly maintained computer "keeps accounts", after all, it is a record that has been verified by multiple people. If you really want to change it without authorization, you have to go through everyone's verification and let everyone adjust the record together, which is almost difficult to do; in addition, , blockchains are mostly public and open source, meaning anyone can check transaction records or track the activities of specific account holders (but the identity of the account holder is encrypted, so you have no way of knowing what transactions are taking place Who is behind the account), so it is said that transactions can no longer be modified or deleted at will.

Cryptocurrencies are mainly used for investment, so be aware that their prices may fluctuate significantly.

After knowing the principles and characteristics of cryptocurrency, apart from mining, what other channels can be used to obtain it? The Los Angeles Times pointed out that regardless of whether BAICION, Ethereum or most currencies, there are still many shortcomings in the function of "currency". There are not enough scenarios to accept payment in cryptocurrency, making most holders pay in cryptocurrency. Looking at it from an investment perspective, the easiest way to get started is through the exchange.

An exchange plays a role similar to a stock brokerage. Usually, investors hold an account and can track the prices of different currencies and buy and sell various cryptocurrencies on this platform. You can also apply for your own exclusive online wallet (also called a "hot wallet", such as a mobile app), or access it in an unconnected form (also called a "cold wallet", such as an external hard drive) your assets.

When trading or investing in cryptocurrencies, you must also pay attention to legality. Since it is not a legal currency and there is no public agency behind it, there are still only a few companies that accept cryptocurrency payments for transactions, and countries have different attitudes towards cryptocurrency. Investopedia, for example, regards BAICION as legal property in Japan, and it is also legal in the European Union. , and even announced relevant regulations, but China prohibits cryptocurrency transactions in its country, and India recently imposed a high tax of 30% on its transactions.

Finally, cryptocurrencies, like fiat currencies, have price volatility, but the price fluctuations of cryptocurrencies are relatively much greater. As the Los Angeles Times wrote, the value of BAICION can rise by nearly 40% in a week, and can also rise by nearly 40% in a week. It shrunk by 1/4 in a week. If you are determined to invest in this market, it is recommended that you do your homework and understand your own tolerance level, which is the correct way to invest.