What is crypto? Complete knowledge for newcomers to investing [Part 1]

What is Crypto? What is cryptocurrency? If you are new to these terms, you are probably wondering what it means. Why are so many people involved in investment and rapidly increasing wealth. Now with cryptocurrencyin4.com learn about crypto !

What is Crypto

1 – Distinguish paper money, virtual money, electronic money, crypto

First, you need to distinguish the difference between the types of money in society.

1.1 – What is paper money?

What is Crypto

Each country has its own currency such as the US dollar, VietnamDong of Vietnam or the Chinese yuan. However, because it is paper money, countries can print money themselves and lead to inflation problem.

If a country prints too much money, it will lead to inflation. Typically in 2008, the US printed a lot of money, which caused inflation, many banks ran into debt and individuals also had difficulties.

Or typically Zimbabwe country also met hyperinflation in 2009, 100 billion of zimbabwe can only buy 1 loaf of bread.

So you can see that banknotes are potentially inflationary due to too much money printing.

1.2 – What is virtual currency?

What is Crypto

Virtual currency is a separate currency of a certain platform used for those participating in the platform to accumulate points or exchange transactions on the platform.

For example, an owner of a fried chicken shop offers a virtual currency for customers who come to eat fried chicken. This virtual currency will be used to exchange for other items such as: fried chicken combo, soft drink, discount voucher, or 1 other item.

When customers buy fried chicken, after each payment will be + bonus points accumulated to their account information. When they reach a point accumulated at a certain item redemption milestone, they will be redeemed.

Another example you can see in games has its own virtual currency to use to buy in-game items.

As such, this virtual currency will only be usable within those platforms, not usable for payments in other platforms.

Virtual money can be created unlimited and not through any management unit.

1.3 – What is electronic money?

What is Crypto

Electronic money is often used in banks. Those are the numbers shown in each customer’s account.

For example, if you deposit $ 1000 in banknotes, the bank will display your $ 1000 statistics on the account you manage in the app.

1.4 – What is Crypto?

What is Crypto

Crypto is a cryptocurrency using blockchain technology. This is a currency that reduces the risk of inflation and is used by the whole world.

Coins like bitcoin, ethereum, binance coin, … are crypto. These cryptocurrencies in the future all have the potential to increase in value. If you already know that bitcoin in 2017 was priced at 7,000 USD 1 Bitcoin, then by 2021 1 Bitcoin was worth more than 50,000 USD.

The difference of crypto among the coins above is that it is created on a decentralized blockchain platform.

Decentralized means not subject to anyone’s control. Means that inflation is low and is seen as an asset.

Big companies in the world have applied to pay in bitcoin such as: domain name service company Namecheap and hosting company Hawkhost.

What is cryptocurrency

What is cryptocurrency

2 – What is BlockChain?

Blockchain is a decentralized data recording platform, this platform has a long history of the same time as microsoft, and blockchain is also a friend of the server. But the server is storing data centrally.

Today’s BlockChain technology is evolving and being used for different purposes, not just crypto.

When crypto is run on the blockchain platform, data cannot be changed, meaning that the amount of crypto is limited. This is the premise of reducing the inflation rate of cryptocurrencies.

Example difference between server and blockchain.

#Server

What is cryptocurrency

For example, a company A has a server located in its office, which is used to store data of all employees in the company. One fine day if the server goes down, the data will be lost.

Thus, you can understand “centralized data storage” means that all data is stored in a certain place.

#BlockChain

What is cryptocurrency

For example, a company B uses blockchain technology to store employee data. The blockchain system will place servers scattered in many other countries such as the US, Japan, Korea, …

When data is stored on 1 block, it will automatically sync to other blocks.

Thus, you can see, if one server has problems, your data still exists on other servers.

2.1 – BlockChain versions history

#BlockChain 1.0:

Only currency transaction function.

#BlockChain 2.0:

There is a currency transaction function.

Vote national election.

Message.

#BlockChain 3.0:

Integrated payment application in life.

Has all the features of blockchain 2.0.

3 – What is Minning?

Minning is a crypto mining term with 2 forms of “Proof of work” and “proof of stake”.

You can see 2017 the bitcoin mining movement blossomed. To be able to participate in mining, you need to have a very high configuration computer.

3.1 – Mechanism “Proof of work”

This “proof of work” mechanism works as follows:

1. Person A wants to transfer 1 Bitcoin to person B.

2. The participants of bitcoin mining will be those with highly configurable computers, their task will be to “verify” and “decrypt” transactions between people A and B.

3. If the participants digging bitcoin “confirm” and “decrypt” the transactions of people A and B successfully, they will receive the specified bitcoin reward. The amount of bitcoin bonuses is more or less based on your computer configuration and the average number of miners.

3.2 – Mechanism “Proof of stake”

Because the “proof of work” mechanism consumes too much energy and if the whole world participates in crypto mining under this mechanism, it will cause negative issues that cause global warming. So the upgraded “proof of stake” version is born and improved based on “proof of work”, eliminating the “decoding” in the transaction.

The mechanism of action of “Proof of work” is as follows:

  1. Person A wants to transfer 1 Bitcoin to person B.
  2. The computer system of people participating in bitcoin mining will be in charge of “confirming” transactions of people A and B to record them in the ledger and receive bitcoin rewards.

The important thing in the “proof of stake” mechanism does not need highly configurable computers to mine crypto. Only a computer with a normal configuration can mine crypto.

4 – Where are the cryptocurrencies generated?

As you have read above, every time the participant mining crypto on blockchain technology confirms a successful transaction, they are rewarded with the corresponding crypto currency. Therefore, the amount of 1 cryptocurrency is generated from the need of trading transactions, not by someone arbitrarily generated.

With each cryptocurrency there is a limit to the amount of money. For example, bitcoin has a limit of 21 million bitcoins. If someone keeps a large amount of bitcoins in their wallet and forgets their wallet password, it is considered that the amount of bitcoins is lost => that means that bitcoin’s inflation returns to negative numbers.

5 – Factors that determine the value of 1 Crypto coin

Here are the factors that determine the value of any cryptocurrency:

There are users and transactions.

Use a good technology foundation like blockchain.

What is the application of crypto in the future.

6 – What are ICOs and tokens?

ICO is a form of fundraising of a certain crypto project on blockchain technology.

When the project’s blockchain system has not yet launched, crypto is called a token. The project owner will sell tokens at a low price to attract investment capital for the project.

After the project is completed, the project owner will launch the blockchain system, at which point the tokens are converted to crypto and its value will also increase compared to the beginning.

On the contrary, if the ICO project is unsuccessful then token holders will have no value.

7 – Should we invest in crypto?

No matter what field you invest in, there will be 2 sides of profit and the risk of losing assets. A lot of winners have x2 x3 even x10 of the amount they invested in crypto. Besides, there are also people who lose all their assets, the reason is that they do not have knowledge in this market.

In the fields of investment such as real estate, gold, … you need to have a large amount of money to invest. But for crypto, you only need 100$, 200$ and you can still invest.

To be able to safely start participating in the crypto market, take the time to learn carefully to avoid being scammed and lost assets.

8 – Where to start crypto investment?

The newcomers certainly do not know where to start to enter this crypto market. So cryptocurrencyin4.com offers you a new class of lessons here: https://cryptocurrencyin4.com/beginner/

Next, you need to learn about how to create an account and how Binance exchange terms are.

>> How to create Binance account and how to trade Bitcoin
>> How to play Binance effectively for newbies

9 – Conclusion

At the end of part 1, you can distinguish between cryptocurrencies and cryptocurrencies as well as the concepts of blockchain, minning, ico and tokens. Please continue to read part 2.

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