A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend.
Just like in the Bank, the address you see in the image above is like your bank account number.
The Bank keeps your money for you. The bank has the ability to tax your funds.
The government, your bank branch and the Central Bank has information about you and your funds because you need to add your detailssuch as name, address, fingerprint, social security number before opening a bank account.
In cryptocurrency, you are responsible for your funds, your cryptos are kept in a crypto wallet just like a bank account.
You might not need to fill in your information before owning a cryptocurrency.
Nobody can shutdown your crypto wallet or block you because you are responsible for your funds.
Cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers.
Decentralized Networks
Transfer of funds from one person to another without any third party intervention. I.e Banks.
Banks have no control over your money in cryptocurrency.
You have total control of your money. Government can not control it that is why Governments are seeing cryptocurrency as a threat to them because they can not tax your funds.
Note: If you loose access to your crypto wallet or you forget to write down your recovery phase to your crypto wallet, you loose your cryptocurrency forever.
The technology allows a secure way for individuals to deal directly with each other, without an intermediary like a government, bank or other third party.
Blockchain
A blockchain is a public digital ledger of transactions that records information in a way that makes it difficult to hack or alter.
It keeps information on every transaction that occurs in the blockchain and it is stored in every computer connected to a cryptocurrency network. It can be viewed by anyone.
Just like how Banks keep information on every transaction that occurs in the bank
The technology allows a secure way for individuals to deal directly with each other, without an intermediary like a government, bank or other third party.
There are thousands of cryptocurrencies such as Bitcoin, Dogecoin, Litecoin, Ethereum just like we have hundreds of regular currencies such as Dollar, Yen, Euro, Naira, Pounds and so on.
Every cryptocurrency is not the same, not all can be used for day to day transactions.
2. There are two types of cryptocurrencies such as Coins and Tokens.
Cryptocurrency Coins:
These Coins belong to cryptocurrency networks that are built from the ground.
Meaning, someone spent a lot of time and a lot of money putting together the codes that is required to create a safe and reliable cryptocurrency network.
For example Bitcoin, Ethereum, Litecoin, Monero and so on, because it is difficult to create a cryptocurrency network from scratch that is why there is a few dozens of them that are actually cryptocurrency Coins.
Cryptocurrency Tokens:
These can be easily created in a matter of minutes with little efforts, that is why there are tens of thousands of cryptocurrencies Tokens. Such as USDC, Shiba Inu, Uniswap and so on...
One thing you should know is that a lot of Cryptocurrency tokens are scams because cryptocurrency tokens are easy to create, all they need to do is to setup a Token, a fancy website, pay for adverts, setup social media accounts, pay a few news outlet, feature that shitcoin and get rich of the crypto overnight.
3. Security
Cryptocurrencies are safe especially the once that have stood the test of time such ad Bitcoin, Ethereum and so on.
A coin like Bitcoin has large number of computers that are connected around the world.
For an hacker to hack Bitcoin, he needs to be around the world where these computers are kept and hack them at the same time which is impossible.
There are hackers who hack Banks also which makes banks to tighten their security.
The easiest way for someone to hack your crpptocurrency account is if you let them know your login details, so you need to be careful with your details.
4. Volatility:
Cryptocurrency are extremely volatile meaning the prices can go up or down upto 50%in a day.
Cryptocurrency are very volatile based on these reasons:
1. The power of Demand and Supply:
When there is a limited supply of a coin, the demand is high, then the coin goes up, while the more the supply and less demand, then the coin falls in price. Example Bitcoin
Only 21million Bitcoin can be mined and 18 million Bitcoins have been mined already, the demand for Bitcoin is high, do the price goes up too.
Just like the case of regular currency like Dollar to naira, there is more demand for dollar over the Naira that is why Naira keeps falling.
Most cryptocurrency rely on Bitcoin that is why when Bitcoin fall, other Coins fall, when Bitcoin rises other coins rise too.
Note:
When prices go up, it is called the BULL MARKET
When prices go down, it is called the BEAR MARKET
2. Manipulation From the Whales:
The big guys that buy large sums of Bitcoins (1millions worth of bitcoins upwards) are called the WHALES in cryptocurrency.
These Whales like Elon Musk and the rest, manipulate the crypto market by selling off their cryptocurrency to enable the supply of Bitcoin to be more in the market, once the supply is higher than demand, then price of bitcoins goes down, they put fear into the market, then the newbies become scared and they start selling off their cryptos, then the Whales accumulate more cryptos for themselves at a cheaper price because bitcoin can only mine 21million Bitcoin and 18million Bitcoin are already mined, so they accumulate more bitcoins for themselves.
Then the market starts to go up again
3. FUD: Fear Uncertainty and Doubt
The media create fud about cryptocurrency such as China banning cryptocurrency. These make the newbies to sell-off their cryptocurrency out of fear, the price goes down because of this.
5. What is crypto trading?
Crypto trading is the act of making profit from cryptocurrency. It is similar to bonds, stocks, currency and so on.
Crypto trading is more volatile than any other investment, that is what makes it unique.
Onlike forex, that takes years to make a good profit from it, crypto trading can give high returns in a very short time.
In forex, you can loss your funds if you are not an experienced trader, in crypto trading, if you know how to select good Coins, the tendency that you might lose your money is little because the price fluctuates expect if you sell you Coins quickly at a loss.
6. How do you make money in cryptocurrency
⭐ Investors
⭐ Traders
⭐ Gamblers
Investors:
These are people that buy cryptocurrency and hold it for a long period of time for it to appreciate because cryptocurrency is a digital asset.
Traders:
These are people that buy cryptocurrency Coins at a lower price and sell it at a higher price.
A trading can be done daily or weekly.
Gamblers:
These are people that buy shit coins (coins that have no substantial value) based on the fact that the media is hyping these Coins, then the price goes up, after some time the price falls and never really go up because they not have substantial value.
People that fall under this category can make or lose their money here.
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