By: Umberto Canessa Cerchi, CEO and founder at Kryptomon
Cryptocurrency began in 2009, when bitcoin was created by Satoshi Nakamoto. In recent years we have seen this financial phenomenon really blow up, including when the global pandemic shook the world. Many people’s lives changed during this period, with spending more time at home and income losses across the globe. People turned to the likes of cryptocurrency to explore financial opportunities and for interest purposes too.
Cryptocurrency has revolutionised the traditional financial world as we see it. The mainstream introduction of NFTs (non-fungible tokens) have led to the creation of digital asset ownership and trading, as well as the emergence of new innovations such as crypto gaming (commonly known as GameFi).
For many, the world of crypto can almost feel like a members-only club that is difficult to access and navigate. Like anything new, along with it comes a series of unfamiliar terms, phrases and processes to learn. This FAQ covers some of the most common questions that any cryptocurrency beginner might have, and will help them to better understand the space and how they might get involved.
What is cryptocurrency?
Cryptocurrency is like any other currency but instead of being used in a specific country or being stored in physical banks, it’s used online and stored on the blockchain.
What is blockchain?
A blockchain is a system of recording data on servers all around the world that cannot be hacked or changed, specific to each individual cryptocurrency. By using this kind of technology, cryptocurrencies are decentralised from governments and external bodies, and the very nature of this is appealing to many people.
What are DeFi and CeFi?
DeFi means decentralized finance and CeFi is centralized finance. DeFi is a blockchain-based form of finance that doesn’t rely on central financial third parties or ‘middlemen’ like banks, exchanges or brokerages. It uses smart contracts on blockchains instead. CeFi offers some of the benefits of DeFi but with the security and ease of use offered by more traditional financial services. It’s important to know the difference when entering the crypto market so you can decide how you are going to buy your cryptocurrency.
How do I buy a cryptocurrency and what is a ‘crypto wallet?
You will need a crypto wallet, also known as a digital wallet or e-wallet, to buy, sell and store cryptocurrency. The easiest way to get a crypto wallet is by signing up to any CeFi crypto trading service such as Coinbase or Binance. Crypto wallets are free to create and easy to use. Once you have set up your crypto wallet you can add funds to it with your bank details and start buying and trading cryptocurrency.
What are Bitcoin and Ethereum?
Bitcoin was the first cryptocurrency created and is the highest valued. Ethereum is a decentralized, open-source blockchain with smart contract functionality, where it offers its own cryptocurrency, ether (ETH). Ether is the second most valued cryptocurrency.
What is mining?
Like how money gets printed, new crypto tokens get mined. Mining is the process where computers digitally mine new tokens at the end of the blockchain, and is essential to the existence of bitcoin as it maintains the cryptocurrency’s ledger of transactions.
Digital miners compete to be the first to mine the new token so they can solely own the new bitcoin available. Mining takes a huge amount of computing power – even crypto mining warehouses have popped up to get ahead in the race.
What is an NFT?
NFT stands for non-fungible tokens. An NFT is like a digital certificate that acts as proof of ownership for digital artwork and properties. For example, anyone could print a copy but only one person can own it, just like a piece of art.
What is GameFi (crypto gaming)?
GameFi is the new trend that combines decentralised finance (DeFi) and NFTs with blockchain-based online games. This opens gamers up to new experiences in which they can purchase and own their in-game assets (like characters), then proceed to use these digital assets to progress through the game, sell assets on, and earn money.
What are the risks to trading cryptocurrencies?
Like trading anything from stocks to Pokémon cards, there are two certainties in buying and selling cryptocurrencies; 1) the price will go up and down and 2) you don’t know when it will change or by how much. This is how the world of cryptocurrency works and it’s something you can’t avoid, so it is sensible for people to only invest what they can afford to lose. And don’t worry about FOMO.
What is FOMO?
FOMO is a slang word used in all walks of life, but is one that pops up a lot in the crypto world. It stands for ‘fear of missing out’. In crypto trading, FOMO comes when you may be worried about missing out on buying crypto when it’s cheap, and then it doubles in value overnight and you’ve missed out on doubling your money. Like everything in life, you can’t live worrying about what could have happened or if you could go back in time what you would do differently. All you can do is research and take the risk.
Kryptomon is an in-demand cryptogame that saw 100,000 people register its interest across its nine-day launch period. Kryptomons are digital collectible monsters built on the BSC blockchain and each one is connected to an NFT.