You’ve probably noticed the words Crypto, NFTs or blockchain trending almost everywhere on the internet for a couple years now. Let’s have a chat on these topics and shed some light on why these topics have stolen the spotlight.
This article is very important to anyone living on planet earth right now, even if you are an alien living here. The reason you need to get a hang of these trends is because everybody is trying to invest and make money off cryptos and NFTs. They’ve had massive impacts on how people see and do monetary transactions . However, no one is telling you the real deal with them, how they work, the risk you might be taking with them and how much control you have. I’m no financial expert and all but we both can agree that you have to do your due diligence before investing money into any opportunity.
If you are new to these concepts or not a techie, worry not cause I will try as much as possible to explain and give you insights on what they are all about. Skip to the next section if you are already familiar with the basics of the above.
Cryptocurrencies are simply currencies that exist in virtual form and offer secure and encrypted transactions. Blockchain on the other hand is a decentralized network on which cryptocurrencies are built and operate. You still don’t get it? Worry not, I will get into more details in the sections below. Another term I want to define is NFT Which stands for non-fungible Token and the simplest way I can put it is emmm – an NFT is a unique Token (identifier) registered on the blockchain as a key to a digital item that can be bought and sold. Again more on that below
Let's start with blockchain, simply because it is the core idea on which crypto-currencies and NFTs are built upon. I will try to explain it as clearly as I can just so you get how it works and why it matters so much. I think the best way to explain the blockchain is to highlight the difference in the way transactions and data are handled against the traditional way on the internet. The internet is made of servers, most of them privately owned and managed. These servers store and manage public transactions, track, block, access and set conformity rules for transactions at will. This means that banks, big corporations and governments can access and control just what transactions can be performed, by whom and by what amount.
Blockchain on the other hand offers a publicly controlled mechanism for sensitive transactions like monetary transactions or others. The blockchain is a network of highly encrypted blocks of data registered on a publicly accessible ledger. The data stored on blocks are immutable (unchangeable) and encrypted using high-end algorithms. The blocks are then chained together (thus the term chain in blockchain) using references to their precedents. Everything is then registered on a publicly accessible digital ledger and distributed to everybody on the blockchain network. This ledger of records is used by special nodes called miners to validate future transactions carried out on the blockchain.
The takeaway here is that there is no middle man between transactions on the blockchain and the security mechanisms makes it almost impossible for hackers of any government to tamper with transactions. Everybody on the blockchain can view and monitor all transactions happening on the blockchain for transparency purposes. This by no means suggests that anybody can carry out transactions on your behalf or from your personal wallet. As a matter of fact, assets stored using the blockchain are most secured, safe and almost impossible to trace back to you personally. This very complex technology that is blockchain opened the door for new decentralized assets such as cryptocurrencies and NFTs.
While blockchain may be relatively new to you, Cryptocurrencies and most especially bitcoin will sure sound familiar. As said in the introduction, cryptos are decentralized forms of virtual currencies. The keyword here is decentralized and is the reason why many people are so obsessed with it. A decentralized currency simply means that there is no one person controlling the flow of liquidity or transactions. No government or banks can control transactions carried out with these virtual currencies.
Crypto currencies became popular when the value of bitcoin suddenly started to spike in 2011 reaching a unit value of up to $30 per coin that year. The value kept going up with time reaching $1000 in 2013 and $2000 in 2017. So many early holders became rich overnight and bitcoin became the number one trend all around the world. So many other coins were created including Ethereum, Ripple and as today there are about 4000 different crypto currencies listed on coinmarket cap. Bitcoin is the first virtual currency built on the blockchain and is still, as of today, the most popular. It has the highest liquidity and its market cap is over $2Trillion at the moment of writing this article.
The most interesting thing about bitcoin and the other cryptocurrencies is their high volatility and the opportunities they offer for investment. With the surge in price of bitcoin, a lot of exchanges were born to help people buy and hold coins, expecting an increase in value. Anybody has the ability to buy and own any crypto they deem promising and there are alot of promising projects out there to invest in. However, ponzi schemes and exit scams also joined the party and have ripped people of billions of dollars and counting. The puzzle here is to know which exchange or wallet provider to trust and how to identify crypto investment scams. You will do a lot of background checks on anyone or company asking you to invest in their project. The internet is open and holds all the info you need to know. There are a lot of trustworthy exchanges and wallets out there so you have no excuse to fall for a scam just do your due diligence.
Scams are not the only way you can lose money in crypto, the high volatility also means the value could drop depending on some market conditions like news. A lot of individuals and businesses have gone bankrupt because they had no clue on what's going to happen next with the price of coins. This means you need to have a minimum understanding of what drives the price of coins and how to minimize risk.