What is meant by Cryptocurrency?

What is meant by Cryptocurrency?

Definition of Cryptocurrency

Cryptocurrency is a digital currency that goes through a process of creation with encryption techniques and is managed by a peer to peer network. What cryptocurrency to buy? There are currently hundreds of cryptocurrencies in existence and circulating around the world. One of the most well-known types of cryptocurrency is bitcoin. Bitcoin is the strongest digital currency in the world today with a value of millions of rupiah percoin. One of the advantages of digital currency is that it can be stored on a tablet, smartphone or PC, and is valid all over the world. The shipping fee is free and can be done anywhere and anytime because the transaction is done online.

12 common crypto terms which you need to know about in 2021 - UKTN (UK Tech  News)

Cryptocurrency has been around for ten years and is now becoming more popular, widespread, and causing a lot of controversy due to its highly innovative development. Until now there are 904 types of digital currency or cryptocurrency and the most famous is Bitcoin. Because Bitcoin has also succeeded in encouraging the increase of other digital currencies. In contrast to printed paper currency, cryptocurrencies are created by solving mathematical problems based on cryptography.

Digital currencies are decentralized, meaning they are more secure than centralized ones. The value of cryptographically based digital currency from its rarity, and also the process of its creation through complex mathematical number solving, so the encryption value is unique. Then the trust and use also comes from the entire user community.

Then How Does Cryptocurrency Work?

The cryptocurrency that first appeared and achieved success was Bitcoin, which was invented by Satoshi Nakamoto. One of the factors behind the success of digital currencies is the success of Bitcoin, which has driven many other digital currencies to emerge. The market capitalization of Bitcoin and several other popular cryptocurrencies such as Litecoin, Ethereum, Dogecoin, is rapidly approaching $100 USD billion, or equivalent to Rp. 1.334 trillion.

Satoshi Nakamoto also managed to find a system that functions to facilitate decentralized digital money transactions. A decentralized money system is a network capable of connecting its users without the need for intermediaries or third parties or central authorities such as banks or governments. Transactions or digital money storage only require an Android-based smartphone connected to the internet.

Meanwhile, it is different if using paper currency which has the nature of a centralized system is the need for more costs to pay for the services of a third party as an intermediary. In addition, the third party which is currently a bank or government has regulations that make the system less effective and efficient. This problem is the beginning of the creation of Blockchain technology. Blockchain is a cryptocurrency digital currency platform run.

Cryptocurrency Platform Known As Blockchain

Cryptocurrency, is a derivative word of cryptography or cryptography, which means it refers to an agreement from users and a storage process that is secured by strong passwords. The function of blockchain technology is to manage and maintain any additional data stored in each block.

The blocks that store the data will be connected to each other and form a decentralized network or peer to peer networks (P2P). In blockchain, any data stored or recorded cannot be edited or falsified. In simple terms, this system allows you to transact gold via email.

The P2P network is an agreement network, therefore this system is able to present a new and efficient payment system and transaction processing in the form of digital money. Cryptocurrencies like bitcoin consist of networks of their own. Each network has a complete record of the history of all transactions that have occurred as well as the balance held by each bitcoin account holder.

The Importance of Confirmation in Digital Money Transactions

At the end of each transaction and after confirmation, a transaction will be immediately known by all networks connected to the blockchain network. A transaction notification will always contain an explanation that a transaction has taken place between parties A and B, then digitally signed by A by providing a private key in the form of a numeric password into the system.

After being signed by party A, the transaction will be automatically announced on the network. The information is sent from one network to all other networks that are members of the system. Confirmation is the most important stage in the cryptocurrency system. When a transaction is not confirmed, there is a possibility that the transaction was faked. When the transaction has been confirmed, the transaction will be directly stored in the ‘blocks’.

Records of such transactions cannot be altered, or falsified. The record of these transactions has become a permanent record of the history of the entire transaction, this is what is called a blockchain. Blockchain may be said to be similar to a ledger available online or online, where every transaction is recorded and can be seen by all internet network users.

The difference with a bank, a bank ledger is stored and belongs to the bank itself and only certain people can access it. Whereas on the blockchain, everyone, even non-users, can access the transaction. This series of processes shows that cryptocurrencies do not require human labor or trust between users, and simply use security in the form of complex algorithms.

Cryptocurrency Miners Job

Everyone can become a digital currency miner, or commonly called cryptocurrency mining. People who do this are called miners or miners. Miners are needed because naturally in this decentralized network there is no central authority to do the division of tasks.

In addition, cryptocurrencies also need a system that can prevent any fraudulent actions or network abuse. For example, someone can create thousands of their own network (peers) and spread fake transactions, this can damage the system so that it will harm many people.

Therefore, these miners are made to act as if they are cooperating by confirming and verifying every record and transaction that occurs in the system. That way, if someone falsifies transaction data, the system can find out and the culprit will be immediately punished. The punishment is direct, precise, and accurate, in accordance with the mathematical logics that exist in the system.

To become a miner, you need to solve a cryptological puzzle that is a complex math problem. The math problem was set up by the creator of Bitcoin, Satoshi Nakamoto. If you solve the puzzle, you have built a block and can add it to the blockchain system.

Miners also have permission to add cryptocurrency transactions to the system which will automatically give them a certain amount of Bitcoin. That is the only valid way to earn Bitcoins. Bitcoins can only be generated from a miner who has solved the personal riddle of cryptology. The level of difficulty of the miner will follow the increasing need for electrical power owned by the miner.

How to Determine the Price of Cryptocurrencies

Simply put, the way to determine the price of cryptocurrencies is to depend on market mechanisms. The cryptocurrency market is a market that has a very fast and extreme rate of change and fluctuation. Within a few hours a cryptocurrency can reach a price increase of up to 1000%.

The price of each digital currency is the same as for products in general, depending on supply and demand. If there are many people who make demand for a certain currency, while in the market there are not many who offer it, then its value will increase.

Cryptocurrency Transaction Activities

Cryptocurrency can be used for several activities. Currently, there are only three transaction activities that can be carried out using cryptocurrencies, namely:
1. Buy and sell Bitcoin on the stock market
2. Personal expenses
3. Crowdfunding, or mass fundraising

Attention, These are Common Mistakes Often Made by Beginner Crypto Traders

It seems that the crypto world is increasingly being recognized by many people. The reason is, in this world you can hone skills to get more money. This is what sometimes makes many people tempted to jump into cryptocurrency. However, not all crypto traders are aware of the risks that will occur, especially when facing problems in digital asset exchanges. Not only that, the lack of knowledge about the volatility of the digital asset world will cause novice crypto traders to be shocked, even not ready to face reality. Well, to avoid losses, take a look at some of the following mistakes that are commonly experienced by beginner crypto traders.

Start Investing with Leverage

There are many cases related to cryptocurrencies around us, one of which is a fraud case committed by the founder of Grab Toko named Yudha Manggala Putra. Perhaps, you are one of the victims or have heard of this case. It turned out that the money from Yudha’s fraud was used to buy digital assets. Although the crypto world currently has a legal umbrella, Yudha still has to serve his sentence at the court.

Actually, the case of investing in the world of leveraged cryptocurrencies like Yudha’s is not the first to happen. There are many similar cases of novice crypto traders using borrowed funds or debt to buy digital asset investments. For example, someone is willing to pawn a house, a child’s education loan, to borrow debt to jump in and buy digital assets.

Then, what is the impact? You need to know, using leverage as initial investment capital is actually not the right choice. Because, this decision actually increases the risk of loss later when you make the wrong decision. How good? The use of leverage is okay, only for experienced traders. The reason is, experienced crypto traders already know their own calculations and strategies to get consistent profits. Meanwhile, for beginner crypto traders, you should learn first and start investing with a small nominal.

Lack of Research

Another mistake that beginner crypto traders often make is not doing enough research. A novice trader always misses in-depth information by accident before entering this world. Worse, they only learn about crypto after entering the exchange. Not to mention the decision to jump into a crypto exchange that is only influenced by hot issues or influencers, without considering the needs and level of risk of each.

There are many things you need to learn in cryptocurrency, one of which is knowing the advantages and disadvantages of each crypto digital asset. Not to mention, there is a lot of spam and scams that are rampant in this world. Without starting with in-depth research, you will be easily swayed and even fooled by scams like OneCoin. You need to know, OneCoin is a form of Ponzi scheme that was previously predicted to beat Bitcoin.

Well, with in-depth research, you will know the various movements that occur and market trends. Coherent information also helps you to make the right analysis and will not be easily carried away by the flow of incorrect information. After pocketing the research results, choose the asset that best suits the character and purpose of your investment. From here, a harmony will be created between capital, return, and tolerable risk.

Not Diversifying

Maybe you’ve heard the saying, ‘don’t put all the eggs in the basket. Well, this saying needs to be applied in the world of cryptocurrency investment. Every trader should diversify. The purpose of this diversification is a risk management strategy by investing in various assets. The goal is that when an investor experiences a loss in one asset, it will not have an impact on all of his assets. This is because each asset is invested in a different form.

Actually, this principle of diversification needs to be applied to various types of investments, both traditional and cryptocurrencies. Moreover, the crypto world is still fairly unpredictable. Although on the one hand you can take the opportunity to reap huge profits, on the other hand, you can also fail miserably. Well, with diversification, you can minimize the risk in your investment portfolio.

For novice traders, it is highly recommended to diversify into a minimum of five types of crypto assets and a maximum of 10 types of assets. Too much investment in asset types is not very recommended, as it makes it difficult for you to monitor news and information of various types of coins.

Trading without Strategy Guide

Crypto trading is tantamount to war. That is, you also need a strategy to survive. Armed with less robust information, novice crypto traders tend to go with the flow. They will keep trying to move from one coin to another. The desire to get a great desire instantly, actually makes the novice trader impatient. Finally, there is a delay in making a decision when buying or selling an asset too quickly when the price has not really gone up.

In contrast to experienced crypto traders, who have prepared a mature strategy before going to war. In fact, they already have a trick to make a profit even when market conditions are saturated.

Easy to get carried away by emotions

One important thing that a trader needs to have is calm during trading. Usually, a trader will feel uneasy when there is a volatility in the price of crypto assets. Plus the limited experience, a novice trader will easily be carried away by emotions to sell assets when conditions are not right. Well, panic selling is a trader’s mistake that needs to be avoided.

When investing in crypto and trading, one is encouraged to relax and be calm. Control your emotions so you don’t get discouraged easily when you hear unfounded negative news or rumors. When there is a movement of 10-30% in a day, in fact this is still normal in the crypto world. Keep monitoring with a cool head and rush to make decisions.

In addition to negative issues, a trader also needs to be aware of certain elements. Usually, cryptocurrency fluctuations occur because they are influenced by various things, such as price manipulation. To overcome this, do in-depth research so that the right decisions are made.

Buying Assets Based on Price, Not Market Capitalization

You need to know, cryptocurrencies are different from fiat currencies and are more similar to stocks. Therefore, the value of this currency is more appropriate when compared to market capitalization, not selling price. Market capitalization or market caps are a measure of the value of an asset in the market. The value of this cryptocurrency can be known by comparing its market caps, while comparing with similar sets. So, you can choose the most appropriate digital asset for investment. However, when one of the coins being compared is overvalued or undervalued, you can no longer rely on market caps.

Not Aware of Security Issues on the Internet

Remember, there are many crimes that can be committed through the internet. If you are not aware of internet security, your wallet could be hacked. Therefore, it is recommended to enable 2FA, a feature that can add a layer of security for email, wallet, and websites.

Now that you know what cryptocurrency is, and how to do it if you want to become a digital money miner, the benefits are huge. You don’t have to worry anymore if you want to start a cryptocurrency-related business. Because currently technological developments allow you to control your business expenses via a smartphone only.