Understanding Cryptocurrency – Cryptocurrency is a hot topic today. The term cryptocurrency is nothing new, especially for Millennials and Gen Z, who are more familiar with technological developments and investments. Cryptocurrencies are commonly known as digital currencies and can be used for digital transactions and investments.
Prices and features of cryptocurrencies vary widely. To learn more about this cryptocurrency, let’s discuss the meaning, types, functions, characteristics, advantages and disadvantages, to tips and differences from the stock market. So, read this article to the end, friend.
Definition of Cryptocurrencies
Launching from Investopedia , cryptocurrency or crypto currency is a digital or virtual currency that is guaranteed by cryptography. With cryptography, this digital currency becomes almost impossible to counterfeit.
Records of all transactions made are stored on the blockchain. Blockchain is widely spread between one computer and another and is connected in a network that is widespread, so it is not centralized in one place, otherwise known as decentralization.
Simply put, crypto is a digital currency that can be used to make transactions between users without the need to go through a third party. In addition to using virtual currency as a trading tool, many users use virtual currency as an investment vehicle. This is due to fluctuations in the value of the virtual currency.
Again, the law of supply and demand applies. This means that the more people invest in cryptocurrencies, the more valuable they become. In Indonesia, crypto assets that are classified as digital gold have received legality through the Commodity Trade Monitoring Agency (Bappebti).
After we have heard the word crypto / blockchain, of course you will be a little confused by the new words. Buddy can read a book entitled ” Why? Cryptocurrency & Blockchain ” this book makes it easy for beginners to learn crypto from scratch with words that are very easy to understand.
Types of Cryptocurrencies
Many of you are probably familiar with Bitcoin. Yes, today’s popular cryptocurrency is one of the thousands of cryptocurrencies circulating in society.
According to nerdwallet , more than 2,200 cryptocurrencies and all of these are available for purchase, and the high interest in these currencies is the reason why cryptocurrencies are gaining popularity. Here are some cryptocurrencies that are often used.
1. Bitcoins (BTC)
The oldest and most popular cryptocurrency is Bitcoin. In fact, many people know the name Bitcoin before virtual currency. This digital currency was first introduced by Satoshi Nakamoto in 2009.
Since it first appeared, Bitcoin has become the currency of choice for many people because it can be easily exchanged with fiat currencies such as Rupiah and Dollars. In addition, the transaction fees offered are relatively low and many e-commerce companies accept this currency as an economic medium of exchange.
2. Litecoin (LTC)
This type is a hot topic besides Bitcoin. Without diminishing, the amount of LTC currently circulating in the virtual market has increased by around 84 million. This proves that people are happy with Litecoin’s performance. Introduced by Charlie Lee in 2011,
Litecoin is actually a derivative of Bitcoin Core QT.
In other words, this currency is an “extended” version of Bitcoin. There are several differences with Litecoin. It’s cheap, fast, and convenient.
3. Ethereum
In 2013, a 19 year old Russian developer named Vitalik Buterin started developing Ethereum. Two years later, in 2015, Ethereum officially entered the crypto market as a digital currency.
Ethereum is very popular among the general public due to its relatively easy and fast withdrawals. Apart from that, Ethereum also has a great feature called smart contracts. This feature is a contract that protects the seller and the buyer. These characteristics make Ethereum more flexible and allow it to be used beyond its function as a cryptocurrency.
4. Dogecoins
Dogecoin was created by Billy Markus. The original intention was a joke, inspired by the famous Doge meme. However, Dogecoin has managed to attract the attention of many investors.
Combined with support from Elon Musk, who accepts payments for some of Tesla’s products in Dogecoin. The price of Bitcoin is IDR 331,711,190.88 per coin, Ethereum is IDR 17,901,675.79 per coin, Litecoin is IDR 651,651.70 per coin and Dogecoin is IDR. 827.22 per coin.
Functions of Cryptocurrency or Digital Currency
As a legal means of exchange, cryptocurrency has several features that are common or commonly used today. Here are some cryptocurrency functions that you need to know.
1. Purchase of Goods or Services
The first function of digital currency, of course, is a means of payment for the purchase of goods or services. So far, many shops and places of purchase, such as Overstock and Newegg, have implemented or accepted this digital currency as payment for the goods and services they sell.
In addition, this digital currency can also be used in various restaurants, hotels, travel applications and even now there are universities that accept this digital currency as a means of payment.
However, not all types of digital currency are accepted. So far, only Bitcoins have been accepted to do all of this.
2. As a form of investment
The second function of digital currency is as an investment vehicle or form of investment. This form of digital money investing is pretty much the same as a typical investment that you can buy if the price is cheap enough. After the price rises, it can be resold.
This digital currency is a fairly risky form of investment. At its inception, many people became rich by investing in this digital money while enjoying rising prices in the market. However, this form of digital investment is not as fast as it was a few years ago.
3. Mining
The next digital currency function is mining. Mining is a term based on the activity of “mining” for the value of this digital currency. This term refers to the activity of solving cryptocurrency puzzles to increase cryptocurrency assets.
Cryptocurrency Characteristics
This currency has several characteristics that you need to know about. One of the characteristics of cryptocurrencies is that they are digital and intangible. Apart from that, there are some characteristics of cryptocurrencies that you need to know.
1.Digital
Rupiah is different from this one currency if it comes in the form of leaves and coins. Because cryptocurrency is digital, there is no real physical thing to hold onto. It also affects the process of buying and exchanging cryptocurrencies. The whole process is digital.
2. Global
The second characteristic of cryptocurrencies is that they are global. This doesn’t affect the cryptocurrency if you are familiar with the exchange rate. The value of this digital money is the same in any country. Therefore, its value does not change even if virtual currencies are traded between countries.
3. Peer-to-Peer
Transactions using cryptocurrencies are peer-to-peer. This means that the transaction in question is between one person online and another person.
4. Encrypted
Go to the market and the seller will recognize your face right away. Or, if you shop online, for example through e-commerce, it will know your identity, at least in the form of your profile name, email address or phone number.
Unlike the two shopping styles above, cryptocurrency trading does not allow users to verify the identity of the person making the transaction. The real name is not disclosed because the user has a code to complete the transaction.
5. Decentralized
The fourth characteristic of virtual currencies is that they are decentralized. This digital currency can be accessed flexibly. Cryptocurrency trading is a transaction where there are no banks involved and each person is in charge of their own money.
6. Truthless
If you decide to trade using cryptocurrencies, then you should know in advance the dishonest nature of these currencies. This means that you shouldn’t rely too heavily on anyone in your system in your transactions.
The advantages of Cryptocurrency
Here are some of the advantages or benefits of cryptocurrencies that you should know about.
1. Faster and cheaper
Digital money speeds up the process of sending assets in just a few seconds with the help of computers and the internet. So, you don’t need a series of long processes. Plus, using cryptocurrency is cheap.
For example, if you want to send money abroad or vice versa, neither the recipient nor the sender will be charged a large fee.
2. Not bound by any country
The advantage of cryptocurrencies is that they do not belong to any country. There is no institution or government that prints this digital currency. Digital money is printed for physical use by users to carry out transactions such as transactions and transfers.
This is of course different from ordinary money in physical form, which is printed by Perum Peruri (Ministry of Monetary Affairs of the Republic of Indonesia) and is always controlled by the government.
3. Guaranteed security and anti-counterfeiting
With cryptocurrencies, you can make transactions without revealing your identity, just like with Bitcoin. Apart from that, this digital currency also helps prevent counterfeiting, which is common in traditional transactions.
Disadvantages of Cryptocurrencies
Here are some of the disadvantages of cryptocurrencies that you should be aware of.
1. Transactions are irreversible
Transferred currency has been transferred to someone else and cannot be earned or frozen. Refunds can only be made if the recipient is willing to return the digital money.
2. Limited quantity
It is known that the number of digital currencies issued is limited. So a currency tends to go up, but it can also go down. The ups and downs of this digital currency are also difficult to predict. It is better to use it only for urgent transactions.
3. Transactions that are pseudonymous
Due to its pseudonymous nature, you can see all the transactions that have been made, but you have no idea who the address is that holds the cryptocurrency account or where they are located.
4. Forgot wallet key
Having a wallet is an important consideration when investing in cryptocurrencies. Part of the technological revolution, but its use also depends on the actor.
If you forget your password while using the wallet, then you will not be able to access your cryptocurrency.
Tips for investing Cryptocurrency
Apart from being a trading tool, Crypto is a very popular investment option among the general public. The ease of payment and the promise of high returns attract investors, especially Millennials and Generation Z, to this digital currency.
Cryptocurrency is an investment alternative that has become famous since the 2021 pandemic. Of course, like other investment vehicles, you need to know more about Cryptocurrency.
Here are some tips for investing in cryptocurrencies.
1. Don’t panic if it drops
Cryptocurrency is definitely a high-risk, high-return investment vehicle that exhibits high volatility. Don’t panic, if your money suddenly decreases. Wait for the right moment to make a decision. This is due to the decrease in value, not the number of coins you have.
2. Long-term holding
Some people invest in cryptocurrencies for short term. This is not surprising as these virtual assets fluctuate rapidly. Cryptocurrencies actually have long term potential if you pay attention. Postponing is a wise decision, especially given the relatively high transaction costs.
3. Diversify
As with any investment vehicle, diversification is key. Don’t just focus on Bitcoin, look for other digital currencies that have the potential to invest. At least you have an alternative if one of your coins is lost.
4. Understand and know the product
As previously mentioned, there are more than 2,200 cryptocurrencies currently circulating in the virtual market. Choose from hundreds of thousands of coins that are properly arranged. Apart from that, make sure they are already on the blockchain system.
5. Diversification in investing
When investing, you can include cryptocurrencies as one of the tools to decorate your investment portfolio. However, don’t forget to diversify into more stable and secure products as a risk mitigation strategy.
Besides we understand the ways/tips for investing in cryptocurrencies, it would be nice to know the strategies needed when investing. Friends, you can read a book entitled “ Easy Strategy for Cryptocurrency Trading and Investment ”.
The difference between Cryptocurrency and the stock market
1. Between Digital Coin and Company Property
Cryptocurrencies or crypto assets are digital assets that are based on blockchain technology and are protected by cryptography. While shares are part of the company’s ownership.
Buying stock means that you are buying a small portion of a company. Buying crypto assets, on the other hand, means that you are investing in a particular currency or crypto asset, not a company. It is similar to investing in gold and forex, but on the digital and more modern side of technology.
Stock investment itself has been known for a long time and is more familiar to investors. Equity investing has a long history, which makes it more credible and reliable from the point of view of many investors.
Crypto assets, on the other hand, are a relatively new investment model. In fact Bitcoin, the first and greatest cryptocurrency created, only came out in 2009. This makes crypto assets a new and unexplored area, an area where experimentation and factors can be found that contribute most to price volatility. from crypto assets.
2. How to Get
Investors can buy shares directly from stockbrokers. Circulation of shares occurs on the stock exchange. The stock exchange is a place where company shares are marketed through a centralized system. That is, the distribution is regulated and supervised by certain parties.
On the other hand, crypto assets can be obtained through mining or purchased through exchange platforms such as Luno Indonesia. This crypto exchange platform is like a digital version of a broker.
Crypto assets give you full access to your investment decisions. The distribution of crypto assets can also be carried out without intermediaries by using a large number of computers connected to the blockchain network.