What is crypto? all about crypto investment
Investing in Bitcoin also means that you are investing in a Crypto cryptocurrency, so this article is about all cryptocurrencies in general, so that when you have an investment of any kind other cryptocurrencies, the knowledge here is still useful to you.
What is Crypto?
Crypto (or cryptocurrency) is a form of electronic money issued by projects on the blockchain, used as a means of transaction on blockchains such as rewarding miners, buying project investment capital, …
Crypto uses cryptographic algorithms to secure transaction information in digital form and control the creation of new units through blockchain technology.
For those of you who do not understand, blockchain can be seen as an electronic ledger distributed on many different computers (decentralization), which stores all transaction information and secures it. cannot be changed in any way (transparency).
Differentiate between Cryptocurrencies and Cryptocurrency
What is electronic money?
By definition, a cryptocurrency is a digital currency, i.e. money issued in a digital form and used over the Internet, which can represent fiat money under a government guarantee such as a in Internet Banking, or e-wallets like Momo, Moca,…
Cryptocurrencies are formed when you put an amount of cash in the bank, then the bank will enter this amount into the user account, from which we can transact just by entering the number.
It can be said that electronic money is different from cash in that, it is the number of their assets, guaranteed by reputable places to transfer it to another place, and will be accepted by the other party.
What is Cryptocurrency?
Cryptocurrency is actually a form of electronic money, but instead of being issued or guaranteed by any Government or monetary authority in any country, Cryptocurrency is issued by Blockchain project creators.
Sometimes these people can be anonymous, write a few lines of code and create a lot of cryptocurrency.
But the value of cryptocurrencies is only accepted by the community when it is widely used, not by a bank or any reputable organization that guarantees that we can keep these coins in exchange for fiat money.
This problem creates coin memes, or coin scams, that make many people lose money because they cannot be sold to anyone. That creates a lot of bad reputation for cryptocurrencies.
So in a nutshell, cryptocurrencies can be seen as a small part of cryptocurrencies. In this article, I will use the words cryptocurrency and cryptocurrency to talk about crypto to make it easier for you to understand the content of the article.
Types of Cryptocurrencies
In order to have the most overview as well as understand what type of assets you intend to invest or hold, here we will learn each type of cryptocurrency circulating in the crypto market, to understand the potentials. capacity as its risk.
Currently on the market there are two ways to classify cryptocurrencies:
- Coins and Tokens.
- Bitcoins and Altcoins.
I will detail the functions of each type of crypto so you can see their differences below.
Coins and Tokens in Cryptocurrency
What is Coin?
Coin is a currency that is issued, developed on a separate blockchain and operates independently.
Coin was born with the purpose of solving the problems of payment, finance, security, application development, … of the blockchain itself. Each blockchain has only 1 unique coin.
- Bitcoin Network has a coin of BTC.
- Ethereum has a coin called Ether (ETH).
- There is also Cardano with ADA, Stellar with XLM, Litecoin with LTC…
What are tokens?
Similar to Coin, Token is also a coin issued on the blockchain, but it does not have its own blockchain, but must “live” on another blockchain.
- KONO (Konomi’s token) is a token because it is stored and traded on the Ethereum blockchain;
- MER (Mercurial token) is a token because it is stored and transacted on the Solana blockchain.
- Neither has a Konomi or Mercurial blockchain.
Some tokens, when the project grows strong enough, will aim to develop a separate Blockchain platform for the token itself, and then this Token will be considered as Coin.
Example: Before the mainnet, SOL (SOL’s token) was a token that was stored and transacted on Ethereum.
But after mainnet, Solana has a private blockchain, now SOL becomes a coin on Solana Blockchain, other tokens can be created on Solana blockchain.
Classification of Coins and Tokens in Crypto
Distinguish Coin and Token
To understand more about the difference between Coin and Token, we can take a look at the features and technical aspects:
In terms of features:
- Coin is considered as a medium of exchange and store of value for the purposes of payment, investment and development of a specific blockchain project, so each blockchain has only a unique platform coin.
- The token possesses all the features of a coin usually issued by projects built on the blockchain platform, and has more utilities depending on each project.
- Coins require a separate wallet platform and when a transaction is sent/received, the transaction fee will be deducted directly from the coin’s wallet.
- Token does not have its own wallet, it uses the wallet of the platform coin, and the transaction fee will be deducted from the platform coin (eg Ethereum).
Bitcoin and Altcoins in Cryptocurrency
According to this classification, we will divide cryptocurrency into 2 categories: Bitcoin and the rest.
- Bitcoin, you must have heard a lot, this is the first cryptocurrency in the world and laid the foundation for the development of the crypto market.
- Altcoin is a compound word of Alternative and Coin to form “Altcoin”, which refers to all coins/tokens other than Bitcoin, built as an alternative to Bitcoin.
With this classification, any Coin or Token except Bitcoin, is referred to as Altcoin.
Examples of Altcoins: Solana (SOL), Ethereum (ETH), Litecoin (LTC), Inverse Finance (INV), Chainlink (LINK),…
You can buy and sell cryptocurrency at exchanges, in Crypto there will be 2 types of exchanges:
- Centralized Exchange (CEX): An exchange that has a 3rd party to control and act as a bridge to exchange crypto assets. Usually, you have to create an account with an ID and password to log in to follow the government’s KYC (Know your customer) regulations. For example: Binance, Huobi, Bittrex, Gate.io, Kucoin, BitMax, etc.
- Decentralized exchange (DEX): An exchange built & operated in a decentralized manner based on the foundation of blockchain.
The most important difference of DEX exchange with CEX exchange is that users can trade and exchange coins right on their wallet, without having to move out, only when the user is licensed to trade just happen.
The private key is held by the user. For example: Uniswap, Sushiswap, Saber, Quickswap, Spiritswap, etc.
In addition, there are a number of other differences such as: control of assets, anonymity, intermediaries and the number of assets allowed to trade.
After understanding the basics of the definition and classification, the next thing is how to store cryptocurrency assets?
Just like other currencies, cryptocurrencies are also stored in wallets. A cryptocurrency wallet is a software that helps to store, send, receive and track the balance of cryptocurrencies such as coin/token inside it.
There are many ways to classify wallets in crypto, but for simplicity, I temporarily divide them into 3 categories: hot wallets, cold wallets and floor wallets.
A hot wallet is an online storage wallet in which users will hold a private key to secure their own assets.
- The advantage of this type is that it is convenient, can be installed on computers, phones, or installed as Extensions on the browser.
- The downside is that it is easy to hack if the computer or phone is infected with a virus. Some typical names for this type of wallet are: Coin98 Super App, Trust Wallet, MetaMask, etc.
Those are the characteristics of hot wallets when talking about 2020 and earlier.
However, until now, these wallets not only store crypto, but also integrate a lot of features, such as swapping directly on the wallet without connecting to a laptop, or creating a portfolio tracking portfolio, storage is not a few blockchains, but supports many different token standards.
Cold Wallets are physical wallets that can be held in the hand. Usually, cold wallets are suitable for long-term investors who rarely have to trade because each transaction is quite laborious. But in return, the security of cold wallets is extremely high.
Some of the names in this array are Ledger, Trezor, …
Exchange wallets are wallets created on exchanges and users do not directly hold Private keys, so there will be some risks such as scam floors, or suddenly being shut down, unable to withdraw money.
So why do so many people use exchange wallets?
It is due to the convenience of exchange wallets. Retail investors often buy coins by depositing stablecoins on the exchange and buying the coins they want, then they will leave the assets on there so they can sell them faster.
Or if the purchase is not too much, the fee to withdraw the asset to the wallet sometimes becomes unreasonable compared to the asset value.
Typically at the beginning of 2021, when gas fees are too high, withdrawing ERC-20 tokens to the wallet costs quite a bit, culminating in hundreds of dollars. This is an intolerable amount for the small capital investor.
Gas fee can be understood simply as transaction fee when you conduct a transaction to buy and sell a certain coin/token. The gas fee paid on each individual blockchain will be different, so the calculation will also be slightly different.
Current state of crypto
Unlike the years 2017 – 2018, when it comes to cryptocurrencies, cryptocurrency or crypto, the community will see it as a fraud tool for criminals, or more commonly associated with users will always lose money if invested in.
But the facts have proven, crypto or specifically Bitcoin has been around for 11 years, everyone says that Bitcoin will die. But now, Bitcoin is not dead, but the price is already at $33,000 (at the time of writing), even hitting $68,000 at one point.
If users unfortunately “swing to the top” in the years 2020 and earlier and still persist in staying, 100% are already profitable. So is this really a venture capital channel?
Also, the difference between previous years and 2021 is that large funds have started to see profits in Crypto investments, typically Grayscale, Square, Microstrategy have bought a lot of BTC and large Altcoins cap like LTC, ETH, ADA, etc.
That is the investment perspective, and in terms of application, many big banks such as JP Morgan, Morgan Stanley or even Tesla, Paypal, Apple Pay have also supported payments in Crypto.
The world began to have many countries officially accepting Bitcoin as a means of payment, the first being El Salvador.
Cryptocurrency investment need what?
Equip knowledge about Cryptocurrency
If you have read this far and you want to start with cryptocurrency investment (which people often call virtual currency investment), the first thing you need to prepare is knowledge.
Like all other professions, knowledge in Crypto is huge, it cannot be measured in days, months, or even years.
Learning also needs to be honed every day by the rapidly changing nature of the market. The knowledge that is known today may become obsolete tomorrow.
The current Crypto market is heavily focused on DeFi, and besides, it should be noted about the development of each ecosystem. Some current prominent ecosystems are Solana, Near, BSC, Terra,…
In crypto, there are always countless forms of fraud, from enticing users to provide private keys, to scam projects, making users lose money unjustly. This is also one of the bad points for crypto.
Therefore, the advice is to be very careful with all your actions before doing anything with the property.
- If trading, it is necessary to carefully check what the exchange is and how reputable it is.
- If you want to buy tokens, you need to check what the project is, what risks can be encountered when buying tokens of this project, etc.
How much is crypto investment capital?
The next thing that many people often wonder: Investing in cryptocurrency requires little or a lot of capital?
In fact, there is no exact answer to this, because what one person considers a lot, to another, is just a grain of desert sand.
There is only one general advice, that is, any investment has a risk of loss, so you must use your idle capital, if you lose it unfortunately, it will not affect your life, although it will be a bit sad.
But which market is so easy to eat, no one knows what tomorrow will be, so maybe you have invested in the right project, but it took nearly a year to start making a profit, and before that, it fluctuated, sometimes split 3, split 5, can’t stand the pressure and cut loss.
This not only affects your capital, but also your spirit and life, so be really careful with your capital.
The advice is to use a small amount of capital, then if it is kept, or profitable in half a year, or a year, then consider pouring more money into it. At this point, the knowledge is probably quite okay for a larger amount of money.
Popular ways to invest in cryptocurrencies
There are 2 popular ways to invest in cryptocurrencies as follows:
Trade or simply put, buy and sell continuously. The characteristics of this form of investment are:
- There is no standard time between buying and selling, which can be hours, days, or months. But the common point is not to hold for too long and eat short.
- Players of this system often use technical analysis and trade margin as the main, looking at the chart to analyze the entry and exit points, the profit level can fall in 50% – 100%.
Users buy assets by mainly fundamental analysis, evaluation, prediction of the future of the project, not using technical analysis (or very little).
- Fundamental analysis can be an assessment of the market, compared to competitors in the same segment, based on metrics. From there, make a judgment about potential projects or not to invest.
- The holding is usually quite long, most of the lowest is half a year to a year, but the profit is usually very large, the target can be 500% – 1,000%, some projects can be up to 10,000%.
Reputable cryptocurrency information sites
So how to make the right crypto investment decisions among thousands of projects in Crypto – a market that is constantly growing at breakneck speed?
The answer is that you need to constantly update information and knowledge about the market.
Now we have another problem that on the Internet there are many pages providing information, how to choose the latest and most complete information sources? Here are some reputable crypto websites:
- Latest news updates: Telegram, Twitter, Facebook.
- Update market information: Coindesk, Congecko, Coinmarketcap.
- Provide in-depth research information: Coin98 Insights, Messari, The Block, Dephi Digital, Medium, Binance Research.
idolmeta hopes that after this article, you have helped you answer the 3 main questions at the beginning of the article: What is cryptocurrency, what is Cryptocurrency & what is Crypto, and at the same time distinguishing different types of cryptocurrency like that What to do and what to prepare before investing in cryptocurrencies.
Thank you !