What is Crypto and Bitcoin?

f you’re here it’s probably because you have no idea or a very slight understanding of what Crypto is. You probably hear people saying it’s fake, it’s a scam or the future of currencies.

In this article, you will understand what Crypto is, how it works and why it will be the next generation of currency. Don’t worry, we will not bore you with all the dull and confusing information, instead, let’s have some fun and maybe you might kickstart your crypto journey from here!

What is Crypto?

Cryptocurrency is simply a digital currency designed to work as a medium of exchange without the need for any centralised entities such as governments, banks or corporations. Today we can bypass these authorities by using blockchains such as Bitcoin, Ethereum and Solana. On these blockchains, we can use digital currencies to buy, sell, trade and more just like we do in the real world with cash.

For those who think Crypto is the introduction of digital currency and transactions, think again. You have been softened to the idea since 1994 when the first ever digital transaction took place. Ever since, you have been using the Internet to buy things without the need for physical cash, even if you go to a store or restaurant you can pay using a card or your phone that can perform digital cash transactions.

Using Cryptocurrencies is no different, instead, it can be more beneficial. So far we have gone through two internet eras known as the Web and Web 2. Since the introduction of Bitcoin (BTC), we have swiftly started to shift into the world of Web3.

Now, surely if you’ve heard the term Crypto you would have heard of Bitcoin, but what do you know about this legendary cryptocurrency?

What is Bitcoin?

In 2009, an anonymous person or group called Satoshi Nakamoto introduced the very first blockchain we know as Bitcoin and its native network currency known as BTC.

Bitcoin is a blockchain that runs on the Proof-of-Work (PoW) consensus mechanism and explained simply, this is used to validate transactions, mine new tokens and secure the network.

What is Proof-of-Work?

The Proof-of-Work consensus mechanism requires users to use their computing power (GPU) to power the network, which in turn allows Bitcoin to run a fully decentralised network.

These computers also known as Miners are responsible for verifying new transactions and data which are then permanently added to the blockchain. In return, Miners are rewarded the native token to the blockchain, for example, mining Bitcoin, will reward you the currency BTC.

As we mentioned, mining requires users to use their computing resources, which can be very costly due to the energy requirements needed to mine Bitcoin.

Why was Bitcoin created?

Anonymous and heroic inventor, Satoshi Nakamoto created Bitcoin to create new opportunities for people to fight back against the dominating powers of the financial elites (banks, governments etc.). Today, we have thousands of different currencies and that is all thanks to the myth and legend, of Mr Nakamoto.

Bitcoin has created a payment system that destroys the need for banks and centralised authorities that have been taking advantage of us for centuries.

BTC, the native currency to the Bitcoin network is used to send/receive between users, pay for network and transactional fees and slowly, we can see large corporations starting to accept BTC as a form of payment. Oh, you were wondering which companies weren’t you? Well here’s just a short list:

• - Ferrari
  - Starbucks
  - KFC
  - PayPal
  - Twitch
  - Shopify
  - Tesla
  - Coca Cola
  - LionsGate
  

Believe me when I tell you there are many more that could be on that list and it is inevitable that more will follow…

Advantages & Disadvantages of Crypto

Crypto has opened up new opportunities that were never deemed possible, but not perfect. Nothing is. Without being biased, we’re going to look at both the advantages and disadvantages of using cryptocurrencies.

Advantages of Crypto

Decentralisation

For once, money can be controlled by the people. Governments and banks can say goodbye to monopolising the entire financial industry, today we can live in a fully decentralised financial economy.

If decentralisation is not enough of a reason for you, then why don’t we take a closer look at some other incredible benefits of cryptocurrencies?

Efficiency

I don’t know about you, but I’m fed up with expensive bank transfers and slow processing times. Banks, on average will take 3-5 days to process transactions and generally charge fees of up to 3% or more. Thanks to smart contracts and blockchain technology, we can now send/receive assets instantly and with almost zero costs. It doesn’t matter if you’re sending $1,000,000 or $1, the transaction will finalise instantly and cost you almost next to nothing (depending on the blockchain of choice).

Banks process trillions of dollars in and out, every year. The amount they make is ridiculous. No wonder the banks hate cryptocurrencies…

Accessibility

Do you have access to the Internet? What a silly question, you’re already on this website… So, good news, you can start your crypto journey right now, either on your smartphone or desktop! Crypto is accessible to anyone anywhere in the world and at any time of day. Unlike the banks and traditional financial markets, Crypto doesn’t sleep.

Privacy

Are you fed up with the questions from the bank when you try and spend your own money? That’s what drove me to crypto, personally. Using cryptocurrencies doesn’t require or use any personal information. When you set up an account on any blockchain, you will be given a unique wallet address which will look something like “0x……..defg”. As you may tell, no one in the world would guess this is “John Doe” behind this wallet.

The point is, we can make transactions effortlessly and in a completely private manner. For those who want to step up their financial privacy, you can even use dedicated Privacy blockchains such as Monero (XMR) and the Oasis Network (ROSE).

Transparency

Blockchains never lie. Due to the decentralised framework of a blockchain, anyone at any time can view transactions that have taken place. No transaction (block) can ever be deleted or altered, it is set in stone. Although everyone can see your transactions, no one is able to put a name to it, unless they of course know you and your wallet address.

Security

You are your own bank with crypto. You have full control. You hold all the responsibility. Why? Well, when you get started, you will be prompted to set up a Crypto Wallet where you will be given what’s called a Private Key. This Private Key is known as a seed phrase which is made up of a minimum of 12 random words. These 12 words are the key to your wallet, if someone has your keys, they have your wallet. Therefore it is important to store them safely offline.

For those wondering, it is impossible to guess all 12 words to your wallet and therefore is extremely secure. A popular choice of wallet is a hardware wallet such as Trezor!

These are not the only benefits of Cryptocurrencies, but the ones that stood out most to me.

Disadvantages of Crypto

Now, it is also important to understand that there are risks when it comes to using, buying and interacting with Crypto.

Privacy Issues

There are some drawbacks when it comes to Privacy on the blockchain, this is because crypto transactions are not completely anonymous, but instead pseudonymous. To simplify it for you, this means that you basically leave a digital trail that can be traced by the government or similar authorities. As previously mentioned in the benefits of Crypto Privacy, you can use Privacy-focused blockchains if you wish to become anonymous…

Volatility

One main issue but also a blessing is the fact that cryptocurrencies are ultra volatile, meaning they can go up 1,000% in a matter of micro-seconds or down 100% in nano-seconds. Some cryptocurrencies are less vitalise than others, for example, Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP) are all known as Large Cap Cryptocurrencies as they have large Market Caps and solid liquidity to handle large amounts of transactions and volume!

Exploits

As the blockchain is fully decentralised, anyone can build and launch their very own decentralised applications (dApps) and cryptocurrencies. There are thousands of cryptocurrencies, blockchains and protocols out there, but some of them are built with weak code behind them. Weak codes are what hackers look for, they look for any slip-up within the smart contract. Long story short, if you have any assets within a dApp or blockchain or hold such a cryptocurrency, this can result in a loss of funds!

What are Altcoins?

Bitcoin was just the very beginning of the term crypto, now we have hundreds of thousands of different cryptocurrencies, which are also referred to as ‘Altcoins’. After Bitcoin, more blockchains started to enter the market with big names that still exist such as Litecoin (LTC), Ethereum (ETH), Cardano (ADA) and Solana (SOL). All of these are great alternatives to the leading cryptocurrency and blockchain Bitcoin (BTC).

There are hundreds of different types of cryptocurrencies, such as Stablecoins,  Gaming, Exchange and Network tokens/coins. All of these are Altcoins and to cut it short, anything that isn’t Bitcoin is an Altcoin.

Let’s go through our favourite categories and Altcoins:

Layer 1

I refer to Layer 1 as the foundation. Within Layer 1 blockchains such as Ethereum, Avalanche, Cardano and such blockchains are cryptocurrencies that would cease to exist without the Layer 1 network that they launched on. These are some of my favourite Layer 1 blockchain’s and their tokens:

• Ethereum (ETH)
• Solana (SOL)
• BNB Chain (BNB)
• XDC Network (XDC)
• Hedera (HBAR)
• Avalanche (AVAX)
  

Real World Assets (RWA)

One of the largest narratives and categories in the world of crypto is known as RWA. Protocols and cryptocurrencies in this sector focus on the tokenisation of tangible assets that exist in the real world. In short, we are turning everything into crypto…

Take a look at these top RWA-focused protocols:

• Avalanche (AVAX)
• Chainlink (LINK)
• AllianceBlock (NXRA)
• Maker (MKR)
• Internet Computer (ICP)
• Synthetic (SNX)
  

Gaming

This is without a doubt one of the most popular and thriving industries in the world. Gamers will love the future of gaming, as we enter the blockchain world and start our Play-To-Earn (P2E) Journey. Here is a short list of Gaming Cryptocurrencies:

• Axis Infinity (AXS)
• The Sandbox (SAND)
• Decentraland (MANA)
• Gala (GALA)
• Illuvium (ILV)
• Treasure (MAGIC)
  

Final Thoughts

Let’s face it, crypto will spread to every corner of the world whether you like it or not. The technology cannot be ignored. We are about to enter a major shift into the world of Web3. Major corporations, governments and countries are now utilising cryptocurrencies and blockchain technology to the point of no return.

That goes without saying that you cannot ignore the risks and disadvantages when using crypto. The main question to ask yourself is, do the advantages outweigh the disadvantages for you?

If you want to get started with crypto and need a bit more information, be sure to check out our ByBit Exchange Review to get started!

If the daring world of cryptocurrencies entices you, stay tuned for a future article where we will show you how to set up a Crypto Wallet so you can kickstart your crypto journey!

Disclaimer

The content provided in this article is strictly intended for informational purposes. Nothing said in this article is financial advice. It is important to proceed with caution and diligence when using cryptocurrencies. Always invest what you are prepared to lose and remember that you are entirely responsible for your assets and investments. The author and the publication do not endorse or recommend any of the cryptocurrencies, protocols or strategies in this article.