CRYPTOCURRENCY…basic things you need to know

What is Cryptocurrency?

Well, Cryptocurrency is a digital or virtual currency that uses encryption techniques to secure and verify transactions and control the creation of new units. It operates independently of a central bank and can be transferred directly between individuals without the need for intermediaries like banks.Cryptocurrencies are typically decentralized and are based on a distributed ledger technology called blockchain, which is a database of all the transactions that have occurred on the network. Each transaction is verified by a network of users, and once it is confirmed, it is added to the blockchain.The most well-known cryptocurrency is Bitcoin, but there are now thousands of different cryptocurrencies in circulation, including Ethereum, Litecoin, and Ripple. Cryptocurrencies can be bought and sold on exchanges, and they can also be used to purchase goods and services from merchants who accept them as a form of payment.While some people view cryptocurrencies as a revolutionary new form of money that can provide greater security and privacy than traditional fiat currencies, others are skeptical of their long-term viability and worry about their potential use in illegal activities.

Why do people invest in cryptocurrencies?People invest in cryptocurrencies for the same reason anyone invests in anything. They hope its value will rise, netting them a profit. If demand for a certain currency grows, for example, the interplay of supply and demand could push up its value. However, it’s important to note that to some, cryptocurrencies aren’t investments at all. Bitcoin enthusiasts, for example, hail it as a much-improved monetary system over our current one and would prefer we spend and accept it as everyday payment. One common refrain “one Bitcoin is one Bitcoin” underscores the view that Bitcoin shouldn’t be measured in USD, but rather by the value it brings as a new monetary system.

How are cryptocurrencies created?

One common way cryptocurrencies are created is through a process known as mining, which is used by Bitcoin. Bitcoin mining can be an energy-intensive process in which computers solve complex puzzles in order to verify the authenticity of transactions on the network. As a reward, the owners of those computers can receive newly created cryptocurrency. Other cryptocurrencies use different methods to create and distribute tokens, and many have a significantly lighter environmental impact. But over some time now, there have been an upgrade on how currencies are form…. Since the introduction of Ethereum Smart contracts, crypto can be easily created by deploying a certain lines on codes, compiled by a software. There are over 2 million cryptocurrencies in the market, each depicting its own importance and how it tends to solve a certain problems onchain. Some where created to lessen gas fees, others to foster fast transactions while the rest have one use case or the other. Cryptocurrencies are packaged and grouped based on their ecosystems and categories. Some of this categories of Cryptocurrencies includes:

Payment Tokens:

This are currencies that facilitate payment processes between two peers. They can be used as payments for goods and services purchased and the payment gas fee can be charged off the same network/technology the currency was created on. Eg… bitcoin, monero, bitcoin cash, ethereum. etc.

Utility Tokens:

This tokens are created to provide access to platform services where they reside. Utility tokens enable use cases that aren’t possible with the blockchain’s own native coin, it gives users certain rights over a project or decentralized autonomous organization or community. Eg..MATIC, BNB, CHAIN, MANA, BAT, UNI. etc.

Security Tokens:

Security tokens in the context of cryptocurrency refer to digital tokens that represent ownership of a real-world asset, such as stocks, real estate, or commodities. They are designed to comply with securities regulations and offer investors a way to invest in assets through blockchain technology. Eg.. ZERO, POLYMATH, HARBOR, SPICE VC, REALT.

Finance Tokens:

Finance tokens are a type of cryptocurrency that is designed to represent ownership or access to financial assets and services. These tokens can be used for a variety of purposes, including trading, investing, borrowing, lending, and more. Eg.. BTC, ETH, Compound, Yearn Finance, MakerDao, Aave. Etc.

Governance Tokens:

Governance tokens are a type of cryptocurrency that are used to facilitate decentralized decision-making within a blockchain network. Holders of governance tokens are able to propose, vote on, and implement changes to the protocol, such as changes to transaction fees, block sizes, or other features of the network. Eg..Aave, ICP, SNX, Maker, AMP, ANT. Etc..Stablecoins:Stablecoins are a type of cryptocurrency that are designed to maintain a stable value, typically pegged to the value of a specific asset or currency. They are called stablecoins because their value is supposed to remain relatively stable, unlike other cryptocurrencies such as Bitcoin, whose value can be highly volatile. There are several types of stablecoins, including fiat-backed stablecoins, commodity-backed stablecoins, and algorithmic stablecoins.

Fiat-backed stablecoins:

These are stablecoins that are backed by fiat currencies such as the US dollar or the euro. They are typically issued by a company that holds the equivalent amount of fiat currency in reserve to back the stablecoin. Examples of fiat-backed stablecoins include Tether (USDT), USD Coin (USDC), and TrueUSD (TUSD).

Commodity-backed stablecoins:

These are stablecoins that are backed by a commodity such as gold or silver. The idea is that the stablecoin’s value will be tied to the value of the underlying commodity. Examples of commodity-backed stablecoins include Pax Gold (PAXG) and DigixDAO (DGD).

Algorithmic stablecoins:

These are stablecoins that do not have any underlying asset to back them up. Instead, their value is maintained through a set of algorithms and rules that regulate the supply of the stablecoin. Examples of algorithmic stablecoins include Dai (DAI) and Ampleforth (AMPL).

Media and Entertainment tokens:

Media and entertainment tokens are cryptocurrency token that are specifically designed for use in the media and entertainment industry. These tokens can be used to facilitate transactions between users and content creators, provide access to exclusive content, and reward users for engaging with a particular platform or community. Eg..Enj, Audius, BAT, Theta, Chiliz.. Etc

Data Analytics crypto tokens:

DAP are a type of cryptocurrency token that are designed to be used within data analytics platforms or decentralized applications (dApps) that involve data analytics. These tokens can be used to incentivize data sharing, reward data analysis, or facilitate transactions within the data analytics ecosystem. Some examples of data analytics crypto tokens include: Numerar(NMR), Golem(GLM), Streamer(DATA), OCEAN, Enigma(ENG)…etc. We have other with no preferential values which we call the shitcoins or Memecoin.

Other categories of cryptocurrency includes:

a.Central Bank Digital Currency (CBDC)

b. Gaming tokens

c. Wallets and Exchange-based tokens..eg TWT

d. Storage tokense. Privacy tokens

f. Lending/Borrowing…etc.So let’s talk about.

Some terminologies we use in Crypto.

Smart contracts:

Smart contracts are self-executing digital contracts that are designed to facilitate, verify, and enforce the negotiation and performance of an agreement without the need for intermediaries. They are programmable and operate on blockchain technology, enabling them to provide transparency, security, and decentralization.Examples/uses of smart contracts:

Smart contracts can automate the claims process by triggering payouts when certain conditions are met. For example, if an insured person submits a claim for a car accident, the smart contract can check if the policy covers the damage, and if so, automatically release the funds.

Real Estate:

Smart contracts can be used to facilitate real estate transactions, including the transfer of property titles and the release of funds. For instance, a smart contract can be programmed to transfer the ownership of a property to a buyer once the seller receives the agreed-upon amount.

Supply Chain Management:

Smart contracts can track the movement of goods and ensure that they comply with certain standards and regulations. For example, a smart contract can automatically release payment to a supplier once a shipment has been received and verified.

Crowdfunding:

Smart contracts can be used to automate the crowdfunding process, ensuring that funds are only released to a project when certain conditions are met. For example, a smart contract can release funds to a startup only if it meets certain milestones, such as developing a working prototype.

Voting:

Smart contracts can be used to facilitate secure and transparent voting systems, eliminating the risk of tampering or fraud. For instance, a smart contract can be programmed to ensure that each voter can only cast one vote and that the results are publicly verifiable. Here’s an example of how the SHA-256 algorithm works:Suppose we have a message “Hello, world!” that we want to hash using the SHA-256 algorithm. The output of the SHA-256 hash function for this message would be:“b94d27b9934d3e08a52e52d7da7dabfac484efe37a5380ee9088f7ace2efcde9”If we were to change even a single character in the original message (e.g., “Hello, world?” instead of “Hello, world!”), the resulting hash would be completely different. This property of hash functions makes them useful for verifying the integrity of data, as any changes to the data would result in a different hash value.Hashing:Hashing is a process of taking an input (message, file, or data) of arbitrary size and generating a fixed-size string of bytes that represents the input. The output of a hashing algorithm is often referred to as a hash or message digest. In cryptography, hashing is used for a variety of purposes, such as ensuring data integrity, creating digital signatures, and generating passwords. A good cryptographic hash function should be fast and deterministic, meaning that the same input always produces the same output, and it should be practically impossible to reverse-engineer the input from the output. One of the most commonly used hashing algorithms in cryptography is the SHA-256 (Secure Hash Algorithm 256-bit) algorithm. This algorithm takes an input of any size and generates a fixed-size output of 256 bits. The output is always the same size, regardless of the input’s size, making it useful for creating digital signatures, checking data integrity, and other cryptographic applications.

CRYPTOGRAPHY:

Cryptography is the practice of securing communication in the presence of third parties. It involves the use of mathematical algorithms to protect the confidentiality, integrity, and authenticity of data. Cryptography techniques are widely used to protect sensitive information, such as passwords, credit card numbers, and other personal data, from unauthorized access or theft.

NODES:

A node is a computer or device that participates in the network by running a full copy of the blockchain’s ledger and validating transactions. Nodes communicate with each other to maintain a consistent and up-to-date copy of the ledger.

TYPES OF NODES IN A BLOCKCHAIN NETWORK

Full nodes :

These nodes download and store a complete copy of the blockchain ledger and validate transactions. They maintain the security and integrity of the network.

Light nodes:

These nodes download only a portion of the blockchain data, relying on other nodes to provide the rest of the information. They can be faster and use less storage space, but may not be as secure as full nodes.Mining nodes:These nodes are responsible for adding new blocks to the blockchain by solving complex mathematical problems. They compete with other mining nodes to solve these problems and receive rewards for adding new blocks.

Masternodes:

These nodes are typically used in a Proof-of-Stake (PoS) blockchain and are responsible for validating transactions, and can participate in governance and decision-making processes.

Let’s look at some of the terminologies in crypto space.

Market Cap:

This refer to the total value of all the coins or tokens in circulation. Market capitalization can be for a certain currency which you intend to purchase or for the entire market. Total market Cap = supply x price.

Whale :

Is an individual or entity that holds a large amount of a particular cryptocurrency.

DAO:

A DAO, or decentralized autonomous organization refers to a business entity that is represented as transparent rules in a number of smart contracts. They aim to reduce centralization as much as possible, typically giving the community the ability to govern the future of the DAO and its products by voting for or against any proposed changes or updates.

DYOR:

Which stands for “Do Your Own Research”. This is often used as a warning by cryptocurrency influencers to other investors, reminding them that there is no better substitute for due diligence than our own research. It is worth remembering that cryptocurrency influencers and media outlets can have different incentives and goals.

Fork :

A fork describes a situation where a blockchain experiences a change in the protocol that produces two parallel chains. Forks typically occur when crypto developers or communities decide that the protocol must be changed or updated in some way. There are two types of forks: hard forks, which break backwards compatibility and cause a new currency to be issued, and soft forks, which update the ruleset, requiring support from a majority of the network’s participants.

Gas fees:

Refers to a fee charged for performing operations on Ethereum network sending transactions and deploying and interacting with smart contracts.

KYC or Know Your Customer:

Refers to the process by which a financial service provider must gather and verify information about their customers on registration for security maintenance and easy access to services.

Network fees:

A network fee is required to ensure your transaction is processed on the Bitcoin or Ethereum network.White paper:White papers are documents that are typically academic in nature, proposing a new technology and outlining the exact details of its implementation.

Addresses:

A unique address that identifies where a cryptocurrency sits on the blockchain.

Airdrop :

A marketing campaign that refers to the expedited distribution of a cryptocurrency through a population of people. It can occur when the creator of a cryptocurrency provides its coin to low-ranked traders or existing community members in order to build its use and popularity.

BTFD:

It is an acronym for “Buy The F$%king Dip”. It means buying crypto as the market keeps plunging down.

Burned/Burning :

It is the process of removing tokens of a particular crypto currency and sending it to an unspendable wallet (Dead Wallet). If a coin in any particular cryptocurrency has been made unspendable, it is said to be burned.

Circulating Supply :

This refers to the total number of coins in a cryptocurrency that are in the publicly tradable space is considered the circulating supply.

Deflation:

When the demand for a particular cryptocurrency decreases, bringing down the price of its economy.

#ALTCOIN = Any crypto currency other than bitcoin.

#ASHDRAKED = A situation where you lost all your money.

#BAGHOLDER = A person who buys and hold a particular coin(s) in large quantity hoping to make good profits in the future.

#BEAR/BEARISH = Negative/downward price movement

#BULL/#BULLISH = Positive/Upward price movement

#DILDO = Long green or red candles on the chart

#DUMP = To Sell off a coin or when a coin price drops suddenly

#DUMPING = Downward price movement

#FA = Fundamental Analysis (Any positive or negative news that can affect price of a coin)

#FOMO = Fear Of Missing Out (A coin is pumping/going up and you get the feeling it’s gonna pump more, so you buy even when you see it’s high, hoping to make profit because of your fear of missing out on the ride)

#FUD = Fear Uncertainty & Doubt

#HODL = Hold/Hold a position, hold a coin and not sell

#JOMO = Joy Of Missing Out (When you express happiness for not buying a coin that is currently doing poorly)

#LONG = Predict upward price movement and Take position by buying.

#MOON = Continuous upward movement of price

#OTC = Over The Counter

#PUMP/ PUMPING = Upward price movement

#SAJ #CANDLE = Huge green candle

#SHITCOIN = A coin with no potential value or use

#SHORT = Predict downward price movement and Take position by selling.

#SWING = Zig zag price movement (Upwards and downwards)

#TA = Technical Analysis

#REKT = When you have a bad loss

#REVERSE INDICATOR = Someone who is always wrong predicting price movements.

#RSI = Relative Strength Index

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