Evolution, revolution, and innovations are key rulers in this world. And whether you like it or not, you will have to walk their way, or else you face the wrath of natural extinction. Its coming has a lot of force from cities to rural home set-ups. Talking of this, a financial innovation of all time is here with us, Cryptocurrency. When the subject of Cryptocurrencies is mentioned, a state of confusion sets in place. You may ask yourself several questions which may seem basic to someone who has deep knowledge of it. Such questions as;
How can one transact or own crypto when several banks across the globe have been denied by their regulators not to do such?
Given that the whole crypto ecosystem does not have a central governing body, what are the risks?
Who do I reach to should I need clarification or a solution on something relating to cryptos?
These are some of the very many questions which people ask in an endeavor to understand the tokenized financial markets. The fact that there is no academic institution to help in shedding light on this should not make it look like there is no future in it. Entities should take this as a challenge to incorporate into their plans. This article explains in the easiest terms possible and explores how cryptos work, and some of the developments in the industry.
To start with, what is Cryptocurrency?
You may have heard or read about this several times and the idea is not sinking well due to some confusing terminologies around it. Simply put, cryptocurrency is a form of digital currency which you do not have in hand but stored in strong cryptography. It is nearly equal to having a bank account with money in it but you do not have cash in your pocket, however, this does not take liquid currency form. Cryptocurrencies are designed to be used as a medium of exchange or generating some income through speculative ways.
The development of Cryptocurrency has come a long way from the time American Cryptographer David Chaum conceived the idea in 1983 into being an achievement in 2009 when pseudonymous developer Satoshi Nakamoto developed the first decentralized cryptocurrency called Bitcoin. Thereafter, a lot of developments have been realized leading to the creation of many other digital currencies.
Examples of digital currencies in cryptocurrency market
- Ethereum
- Litecoin
- Cardano
- Polkadot
- Bitcoin Cash
- Stellar
- Chainlink
- Binance Coin
- Tether
- Monero
- Dogecoin
- Ripple
- Solana
- USD Coin
- Terra
- Uniswap
In the Crypto market, Bitcoin transacts the most. As of the date of writing this, there is a supply of 18,855,962 BTC according to Coinmarket pricing over $ 58,000. This is followed by Ethereum, Binance Coin, Tether, and Cardano with a wide gap between the first and second digital assets from $58,000 and $3,900. This indicates how Bitcoin performs in the market. Interestingly, the current price of Bitcoin despite the high volatility has undergone tremendous changes in a short period. In 2010, the price was a mere $ 0.08 representing a 725,000 % change. Recently, the price reached its all-time high price of $ 67,000. As the miners continue, market demand and supply forces keep the asset moving in different directions. This trend is gaining a lot of interest from different parties from all quarters of the globe.
Terms Used in Cryptocurrency
To bring you to speed with terminologies frequently used in the sector, I have listed a few below;
NFT-Non-Fungible Tokens
Value units representing ownership of unique digital stuff like art. It is in many cases used in Ethereum.
Mining
This is the process of creating new cryptocurrencies by solving computational equations
KYC-Know Your Customer
This is a term meaning to know your customer as they claim to be to avoid a lot of illegalities like money laundering, tax evasion, or terrorism. Interestingly, the term appears in many situations where customer interacts with businesses.
Wallet
It is a platform for storing your crypto holdings. They could be hot(online) or cold(offline)
Fiat Currency
Although this term is not for cryptocurrency, you will find it in many pieces of literature as a result of explaining other crypto terminologies. It refers to those currencies issued by the government but not backed physical commodities like gold or silver but by the government that dispensed it.
Blockchain
This is a digital way of keeping crypto records which results from sequential blocks building upon one another that create unchangeable data
Hash
A unique serial of letters and numbers used during the exchange of cryptocurrencies.
Gas
Fee which you have to pay to transact in a digital asset.
Whale
Used in Bitcoins to mean individuals or entities who hold huge amounts of bitcoin
DeFi (Decentralized Finance)
Financial activities are done without involving intermediaries such as the government, banks, and financial institutions.
HODL (Hold on for Dear Life)
This is a passive investment strategy whereby people buy a cryptocurrency and hold it instead of trading or using it as means of exchange in the hope it will increase in value.
Halving
This is a feature written in the code of Bitcoin whereby the number of blocks mined is cut by half which affects the price of Bitcoin.
These terms are not exhaustive but as a crypto learner or knowledge enthusiast, there is a need to have foundational terms that will propel you towards knowing much more.
Regulation of Cryptocurrency market.
Different from other forms of currencies, cryptocurrencies do not have a central government that regulates them. Rather, there have been different approaches in the regulatory landscape. With the diverse approaches, there is the gradual recognition of the cryptocurrencies and that several countries are adopting mechanisms and bodies relating to this. The challenge that governments face in regulating cryptos is that they are transacted P2P making it hard because there is no third party.
Even though there is no regulating body, there are several platforms that have been created to aid in doing crypto business among other financial services. Such are;
- BlockFi
- Coinmama
- eToro
- Coinbase
- Binance
- Cash App
- Bisq
- Kraken
- Robinhood
- Trade Station
- Gamini
These platforms give users options of how they can deposit funds into their digital wallets. Each has different customizations varying on the scope of business and methods of payments available for use. How one selects it depends on user-friendliness, fees charged on transactions, customer service, and security. What is very important is ensuring the security of personal data when transacting.
Industry regulations fueled by the fact that its online, comes with a lot of fraud, and scamming in the entire crypto ecosystem. Detecting and flagging scammers is a daunting task leading to the loss of a lots of funds for people. As such caution should be exercised when registering and transacting.
At maxbriefs.com, we shall keep you updated on this among other developing stories in the world.
