Understanding Crypto:

What’s Crypto?

Cryptocurrency is a type of digital currency that may be stored on many computers connected to the internet and is intended to be completely accessible by anybody without any limitations.

It is "blockchains" that enable this procedure. A blockchain is an enormous digital record that keeps track of transactions. The "chain," which is the lengthy list of blocks dating back to the first transaction, is filled with blocks one at a time.

Every transaction on the blockchain is visible to anybody, but don't worry—no personal information is included. The blockchain of a cryptocurrency is stored on thousands of "nodes," or computers. These global nodes are constantly adding to, recording, and verifying the cryptocurrency's blockchain.

Nobody can predict the future, so the economy may eventually shift away from crypto, but the current trends to look for are Ethereum Blockchain, NFTs, decentralized applications, and stablecoins.

Keep reading to learn more about each of these topics.

The Ethereum Blockchain

Bitcoin is the best-known cryptocurrency and the first to use blockchain technology. Developers built on Bitcoin’s ideas to create more advanced blockchains, leading to Ethereum, the second-largest cryptocurrency.

If you’re familiar with Bitcoin, you’ll notice some similarities:

• It is a decentralized blockchain, which means there is no single location where the record of transactions is kept.
• It has its own name for the cryptocurrency that is traded on the blockchain. In the same way, the US trades in dollars and England trades in pounds, Bitcoin trades in Bitcoin, and Ethereum trades in Ether.
• Several different computers keep track of and update the record, and all transactions are available to be viewed by anyone.
• It can run “smart contracts”, which are used to automate transactions.

Ethereum does have some key differences:

• Ethereum allows NFTs to be traded along with ether. NFTs (non-fungible tokens) are unique lines of code that can represent digital items like images or videos.
• Ethereum runs more advanced decentralized apps. These apps do complex tasks on the blockchain without a central server, often offering bank-like services publicly and without middlemen.

Why should I care about Ethereum?

Ethereum was designed to be the next evolution of cryptocurrency. It took the successful aspects of Bitcoin and added more functionality. Instead of just trading digital money, Ethereum supports tokens and decentralized apps. That means it can do more than speculative trading, though much of its activity is still driven by investors betting on prices.

Non-Fungible Tokens

NFTs, or non-fungible tokens are a popular feature of cryptocurrency. NFTs are unique lines of code that can be traded on a cryptocurrency blockchain.

NFTs often represent digital artwork and are traded online in communities similar to trading baseball cards or other collectibles.

NFT technology could one day store medical, government, or other personal records so they’re safely accessible, but right now privacy and reliability are major concerns. Although blockchains might improve how personal data is managed, no large government or organization has rolled out a widely used solution yet.

Should I pay attention to NFTs?

NFTs get a lot of attention, but so far, they remain mostly a trend rather than a stable technology. They might one day be a common way to trade digital items or store records, but practical, widespread uses are likely still years away.

Decentralized Applications

Decentralized Applications or DApps are another key feature of Ethereum and several other cryptocurrencies. These are complex applications that run using the blockchain.

Decentralized Applications vs. Smart Contracts

DApps link multiple smart contracts to build more complex programs. While a smart contract can run a single automatic action, a DApp combines many contracts to power things like social networks, finance dashboards, or full games.

Because DApps take processing power to run, people using the application can offer payment for more processing power to run the applications faster. This payment can provide a way to pay for running and maintaining the blockchain.

Advantages of Decentralized Applications

• Because the DApp is on the blockchain, it’s easy to accept payment from that blockchain’s cryptocurrency without having to use a third-party bank to process and verify the payment.

• DApps can be verified publicly so they can be trusted not to be tampered with, and that the information is secure.
• DApps can be used with varying levels of anonymity and don’t have to rely on making an account and providing identifying information.
• DApps are difficult for outside sources such as governments or corporations to censor or manipulate.

Disadvantages of Decentralized Applications

• Because blockchains are public, the code for a DApp is open source, which means it can be copied and modified by anyone for free.

• They are difficult to update and bug fix
• If the blockchain fails, the DApp fails.
• DApps rely on blockchain processing, so very complex DApps are hard to support and can slow down the whole network.

The most common types of DApps are those that mimic the banking system. These DApps value transparency and allow for bank-like functionality without centralized banks.

Why should I care about Decentralized Applications?

DApps can charge for services that help pay to run a blockchain. That means a blockchain like Ethereum could gain value from real services as well as from its currency. DApps might eventually drive how cryptocurrencies are valued, but so far, they haven’t gained wide use and remain highly volatile investments.

Stablecoins

Stablecoins are cryptocurrencies tied to regular money. Each stablecoin equals a set amount of another currency, like Tether being worth one US dollar. Being tied to real currency keeps their price steady and makes them easier to regulate.

Other things that can back stablecoins are precious metals, commodities, and even other cryptocurrencies.

The value of stablecoins follows whatever they’re tied to. If a stablecoin is tied to a steady currency, trades on the blockchain won’t see wild price swings, but those coins are still vulnerable to inflation and may not grow in value over time.

Why should I care about Stablecoins?

Stablecoins solve the big problem of crypto's wild price swings, but they have downsides. A stablecoin might lose its backing later, and using stablecoins often gives no extra benefits over just using the regular currency they’re tied to.

What does it all mean to me right now?

Treat crypto like any other investment, not a guaranteed way to get rich quickly. It may be popular now, but it could also turn out to be a passing trend.

Don’t chase trends without learning how they work. If you’re thinking of investing, research carefully and be prepared for risk.