What is Cryptocurrency and Blockchain?

April 14, 2020
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What is a cryptocurrency?

A cryptocurrency is a form of digital asset. Cryptocurrency is a combination of the word crypto and currency. The word crypto comes from cryptography. Using complex math, cryptography secures your funds. You can use it for many things from buying coffee, flights, a car, or even just simply sending it to friends and family abroad.

You might think, you can also use Paypal for transaction, right? Well, there is more to cryptocurrency than what meets the eye. When you use a service like Paypal, you will need a central authority to approve your transaction. This authority also has the saying of whether you can or can’t spend that money. Some services can freeze your account if they deemed necessary. Cryptocurrency, on the other hand, works without a central authority. So the money that is transacted is actually between the users. No central authority means more freedom for you to store, send or receive money. Anyone in the world can access cryptocurrency by simply downloading free open-source software.

Why is cryptocurrency important?

The form of money continues to evolve over a long period of time: from seashells to beads, from gold to paper money. We are now entering the digital world and it is time for more advanced digital money. Cryptocurrency is important because it is:

  • Permissionless You can use cryptocurrency anytime and every transaction does not require any permission. Every transaction only being done from the sender to the receiver. There is no middlemen that can stop you from doing the transaction
  • Cheap and Fast Method of Payment When you are sending money to someone else in any part of the world using a cryptocurrency, the money will arrive within seconds and it is finalized.
  • Censorship-resistant No one can shut down the cryptocurrency because the software is free and anyone in the world can participate to make the network more secure.
  • Secure Because of its technology and the way it is designed, it is virtually impossible to hack and crack cryptocurrency.

What kinds of cryptocurrencies are out there?

There are many types of cryptocurrencies. The most popular and the original cryptocurrency is Bitcoin. The creator of Bitcoin, Satoshi Nakamoto, created a 9-page document in 2008, explaining about a new peer-to-peer electronic payment system called Bitcoin. Satoshi then started the first Bitcoin server in 2009.

Up until now, we don’t know who is Satoshi Nakamoto. Satoshi can be a man, a woman, a group of people, or even an alien from outer space. This is what makes cryptocurrency interesting because identity is not necessary to execute an idea. You can learn more about the history of Bitcoin here.

Since the appearance of Bitcoin, there are other types of cryptocurrency that have different purposes and provides different solutions. Some cryptocurrency is more private than other, faster than other, more programmable than others and many more. Up until now, there are more than 500+ cryptocurrencies out there. Some you can get it from the exchange, some don’t.

What is a blockchain?

A blockchain is just a database that can’t be altered or changed. You can only add data in this database but you can’t delete or alter it in the future. Each of these data is grouped into a structure called “block”, and then linked with the previous block. The blocks are connected through a digital fingerprint, called a hash, that makes it very easy to detect if someone tries to cheat / alter / modify past transaction. Because every block is connected like a chain, that is why it is called blockchain. Blockchain ensures nobody can manipulate past transaction history.

Invest in Cryptocurrency

When investors buy stock, they will look into the fundamentals of the company. Investing in cryptocurrency is almost the same but instead of looking at the company, investors will look into the technology and purpose of the cryptocurrency.

Some people believe in the fundamentals of cryptocurrency, they will hold (HODL) the cryptocurrency for a long time. The easiest to invest is through buying and collecting cryptocurrency bit by bit, a method called Dollar Cost Averaging.

The greatest thing about investing in Cryptocurrency is that you can start small. Even with only Rp 20.000, you can buy cryptocurrency easily using Pintu App.

To learn more about buying cryptocurrency in Pintu, read this

Trading Cryptocurrency

Many cryptocurrency users also use crypto for trading, which means they want to get profit in a short-term time frame. The most common way is a trader will want to buy a cryptocurrency at a low price and then when the price rises, a trader will sell its position. A trader will need to use technical analysis to look at the price history, charts, and other means of information to predict the price movement.

Trading cryptocurrency can be profitable but also comes with high risk because the price of each cryptocurrency is still volatile. Unlike trading stocks or forex, trading cryptocurrency runs 24/7 throughout the year without a down-time. It takes discipline and also hours of practice to master trading cryptocurrency.

Passive Income with Cryptocurrency

Apart from trading and investing, there are many ways to earn passive income with cryptocurrency. Some of them are:

  • Mining Mining is using a computer power to secure a cryptocurrency network such as Bitcoin, in an exchange of a reward. To receive a reward, every miners need to compete with each other to create a block by solving algorithm. These days, mining Bitcoin is getting very competitive so you will need an ASIC (Application Specific Integrated Circuits) to perform this task. Mining usually done in a large scale operation, but as an individual you can also join forces with existing miners in a mining pool
  • Staking Staking is an alternative to mining. Staking uses a less work-intensive processor than mining. Blockchains such as Ethereum 2.0, Polkadot, or Flow uses staking instead of mining. The difference between mining and staking is that to receive a reward, a staker needs to keep their funds in a wallet and then performs the functions (such as validating transaction). Staking can be an easier way to get cryptocurrency than mining.
  • Lending You can get interest by lending your cryptocurrency into a peer-to-peer lending program. The interest rates can be a fixed rate or based on the current market rate.
  • Affiliate/referral program Some crypto businesses and exchanges have affiliate/referral programs that can help you to earn more crypto by joining their program. Make sure to share your referral code in Pintu application to your friends and family.

Are you ready to learn more?

Hopefully by reading this introduction you will get an idea about the wonder of cryptocurrency. In Pintu Academy you will find plenty of articles that will help you to get a better idea on how to invest, trade and earn passive income through cryptocurrency. We have variety topics for any kind of level. Whether you are beginner or advanced crypto user, we got you covered!

Author
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Trading and investing in crypto assets is a high-risk activity. Past information does not reflect future performance. Historical performance, expected returns, and projected probabilities are provided for informational and illustration purposes. All decisions on trading crypto assets are independent decisions by the user.