Origin of Cryptocurrency, Types, Functions & Tips for Investing

Cryptocurrency are a type of digital currency, which are those that do not exist physically, but that serve as exchange currency, allowing instant transactions over the Internet and regardless of borders. Other types of digital currency are virtual currencies (usually controlled by developers), electronic money, and Internet coupons.

In 2009, the first completely decentralized cryptocurrency appeared, Bitcoin, which was created by Satoshi Nakamoto together with the software that supports it (blockchain). To this day it is not known who is behind the name of the creator. The appearance of bitcoin was so innovative that the terms cryptocurrency and Bitcoin merge into one and it is indistinct to talk about one or the other.

In our days, more cryptocurrencies based on the pioneer Bitcoin have appeared, which are known as altcoins.

Origin of Cryptocurrency

Origin of Cryptocurrency, Types, Functions & Tips for Investing

Throughout history, there have been multiple means of exchange for goods and services. All of them have undergone evolutions and changes or, directly, have disappeared. This is the case of barter or the use of precious materials, which gave way to the system that has worked until now, bills and coins.

However, at a time when technology is gaining more and more ground every day, a means of exchange more adjusted to the times is necessary: ​​cryptocurrency.

In the wake of the cypherpunk movement in the 1980s, cryptocurrency emerged. This art defended the widespread use of writing with secret keys that could only be understood by those who knew how to decipher them.

A decade later, David Chaun created Digicash to provide a centralized electronic money system that allowed for more secure and anonymous transactions. In the same period, Adam Black proposes Hashcash, a system to control spam and denial of service attacks.

Although it would not be until 2009 when Bitcoin emerged, the first completely decentralized cryptocurrency.

Characteristics of a Cryptocurrency

The main characteristics of cryptocurrencies are:

  • Cryptography: They use encryption techniques to carry out secure collections and payments.
  • Decentralization: They do not need to be controlled by any institution.
  • There is no possibility of counterfeiting or duplication: A cryptographic system protects users.
  • There are no intermediaries: Direct person-to-person contact.
  • Transactions are irreversible: Once the payment is made, there is no possibility of cancellation.
  • They can be exchanged for other currencies.
  • Privacy of use: It is not necessary to reveal your identity when doing business.

Advantages and disadvantages of Cryptocurrency

The main advantages that characterize cryptocurrency are:

  • Low transaction costs, as a consequence of the absence of intermediaries.
  • Security, because each coin belongs only to its owner.
  • Transparency, since the transactions are included in a freely accessible registry.
  • It accumulates in a tiny space such as a USB.

On the other hand, the disadvantages are:

  • volatility of its prices.
  • Lack of current acceptance by some companies.
  • By not needing a regulator such as the Government or the Central Bank and providing privacy, they can be used for illegal transactions.

Types of Cryptocurrency

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.

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. Grameds 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. Even 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.

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