Over the years you have undoubtedly heard the term “Cryptocurrency”. Nowadays, the trending market for “NFTs” has most definitely caught your attention. However, what is a Cryptocurrency? How does it work? Is there really a point to trading digital coins? Does this currency have a future? As a teenager, one should know the definition and mechanics behind Cryptocurrency. After all, who isn’t talking about it?
Cryptocurrency is a digital currency that has been gaining popularity since late 2010, this new market is secured by something called cryptography. Cryptography is the study of secure communication so that only the sender and the intended recipient of a message can view the message. In the digital currency market, cryptography is used so that the security of transactions and their participants is ensured. Furthermore, cryptography makes sure that the trades are independent of a third party, and gives protection from double-spending.
Anyway, back to cryptocurrency. An overwhelming majority of cryptocurrencies “are decentralised networks based on blockchain technology” (Investopedia), what this basically means is that transactions are recorded, and logged by individual computers. This is what it means to be a “Crypto-miner”. This is a resurrected idea from around 500 years ago.
Some 500 years ago, on a group of islands named Yap, the natives had invented a unique economic system. For currency, they used large, carved stone disks called “Rai”. These stones were taller than a man and heavier than a car, and since they were too big to carry around, they lay scattered on the island. So how did trade occur? Transactions followed a simple protocol: If two natives wished to transact, they would assemble the entire tribe, and formally announce the transfer of ownership. The tribe would note the trade, and confirm the transaction. If however, a tribesman attempted to transfer a stone that was not under their ownership, the tribe would not permit it.
This economic system has been put to use in the 21st century, and this helps decentralise the market so that there is no single organisation that runs it. However, in order to carry out crypto mining, miners require sophisticated hardware, so that the computers are able to carry out the task. The miners are rewarded with a small amount of bitcoin, for their contribution to the crypto market.
Over the years, more and more countries have begun to take an interest in cryptocurrency. Furthermore, there have also been countries to ban the crypto market. While looking at the involvement of entire countries in this unique market, we ask ourselves is investing in this market worth it? Should I begin?
The most obvious fact is that when beginning to invest in cryptocurrency, we must be prepared to lose money. After all, investing in anything carries the risk of loss. We can always imagine the growth of the crypto market, but we must realise that it is a very new market with barely any history to base our knowledge on. Therefore, all we can do is invest in it as a hobby, we cannot put this market above other financial goals, saving up for a house, retirement, or paying off some sort of high-interest debt.
The market is new, and if for some reason it was banned in developed nations, the market would be worthless, and so will your NFTs. Therefore, we have to remember to invest in small amounts, amounts we are ready to lose.