What Should Investors Consider Before Investing In Cryptocurrencies
Terms like “cryptocurrency,” “non-fungible tokens (NFTs),” and “decentralized finance” are on everyone’s lips. While using cryptocurrencies to buy a cup of coffee or a loaf of bread may remain a challenge for years to come, digital assets as a whole will continue to become more and more important in our lives as time goes on. This is because digital assets and their technical foundations are at the heart of the next technological revolution that will reshape the entire social and economic world—the era of Web 3.0. Let's enter this innovative field together!
A turning point in the financial world:
What we are witnessing now is an important watershed moment in the financial world, and the new development is likely to become one of the main drivers of global economic growth in the coming years.
The creators of digital assets have laid a key foundation in simplifying and "democratizing" the method of financial transactions. "Digital assets" is often used to collectively refer to various developments in the field of digital transactions, such as cryptocurrencies or tokens, which can be traced back to blockchain technology.
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What is blockchain?
To understand the origin of the blockchain, we need to know how the "primitive digital asset" bitcoin came to be. Its story begins in 2008, the year the world faced an unprecedented financial crisis. Confidence in the global economy and banking sector fell to an all-time low. how to analyze crypto market ?
Meanwhile, the Bitcoin blockchain white paper was released in October 2008 under the pseudonym Satoshi Nakamoto, and according to the author, he published a system that could render the entire existing financial system obsolete. In the white paper, Satoshi Nakamoto proposes a decentralized method of transactions that effectively eliminates the need for trusted third parties such as banks, and ultimately creates the blockchain. This helped to break through the blockchain concept that had existed for many years at the time.
who is satoshi nakamoto
no one knows. It could be a single person, a group of programmers, or even a secret government team. Adding to the mystery of Bitcoin's birth is the fact that its creator has managed to remain unknown despite living in the age of social media.
In slightly more technical terms: In a blockchain, transaction timestamps are added to the end of previous timestamps, (usually) based on proof-of-work, creating a history that cannot be changed.
In January 2009, shortly after the release of the white paper, the related software was launched and created the world's first bitcoin, and the bitcoin network was officially born.
Explain cryptocurrency : To explain how cryptocurrencies work, let's take Bitcoin transactions as an example. In principle, the mechanisms involved are the same no matter which cryptocurrency is used.
To trade bitcoins directly, both you and the person you wish to transfer money to need to have a bitcoin wallet address. This is a randomly generated unique combination of numbers and letters. By sharing your public address, others can send you digital currency.
Then you need your public key, which is equivalent to an account number, which can be freely shared with everyone, and anyone can send transactions to it. Your Bitcoin wallet address is a hashed version of your public key. However, to spend Bitcoin you need a private key, which is essentially a password or verification code, which, along with the corresponding public key, allows you to spend funds on the blockchain. A wallet is like an encrypted virtual keychain that contains all the information needed to spend funds on the Bitcoin blockchain.
Six key points to consider:
Real-world use cases :
Blockchain has the potential to revolutionize entire industries.
Sustainability:
Blockchain technology has the potential to have a positive impact on the environment over time. However, today the industry is still producing a negative ecological footprint.
Staking:
In the world of crypto finance, staking tokens is a way of earning interest for those wishing to borrow money — similar to traditional (fixed) income businesses.
Privacy:
Digital wallets consist of a unique string of random letters and numbers that are concatenated and displayed in every transaction involved on the blockchain ledger. Therefore, the information encoded on the blockchain is immutable and available to everyone. While this provides complete transparency, it can also threaten user privacy.
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Key:
Once you lose the digital key to your encrypted wallet, you will not be able to unlock your assets — it's gone forever. About 20% of bitcoins are permanently lost as owners lose their keys.
Regulation:
The world of digital assets and decentralized finance (DeFi) remains largely unregulated. We expect regulators will eventually seek to create a level playing field. Well-functioning crypto infrastructure is likely to hold the greatest appeal for countries with limited financial infrastructure, weak currencies, and high inflation.
Summarize:
While we can’t tell how big digital assets will ultimately grow in the future, we do see market recognition of the potentially disruptive power of blockchain technology, so the asset class will grow over time. However, we do not expect cryptocurrencies to rapidly develop into everyday currencies in private life anytime soon.
In the end, no matter how you think about digital assets, it will continue to impact our lives—probably more than we can imagine today.
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