If you've recently been hearing about 'Bitcoin's wild fluctuations,' 'Musk promoting Dogecoin,' and 'NFTs selling for astronomical prices,' but feel confused, then this article is for you!
Today, we will unveil the mystery of the 'crypto world' using the simplest language.
The crypto world is, simply put, 'the world of cryptocurrencies.'
It resembles a vast online 'community,' where people trade, invest, and work on technology with digital currencies (like Bitcoin and Ethereum), and even 'mine.'
Here, 'coins' are not the paper money we usually use, but virtual currencies created with code, with all transactions recorded on a public ledger called 'blockchain,' which cannot be tampered with.
Who is in the crypto world?
Bitcoin (BTC)
The 'big boss' of the crypto world, invented in 2009 by a mysterious person named Satoshi Nakamoto. It is characterized by a fixed total supply (21 million coins), making it scarce like digital gold, with large price fluctuations that frequently make headlines.
Altcoins
Bitcoin's 'little brothers,' such as Dogecoin (DOGE), Shiba Inu (SHIB), and Ethereum (ETH). Some mimic Bitcoin, some focus on technological innovation (like Ethereum's smart contracts), and some purely rely on influencers to promote them (like Musk promoting Dogecoin).
Miner
Someone who 'mines' using computers. Mining is essentially using computational power to solve mathematical problems, maintaining the security of the blockchain network, and successfully solving a problem earns Bitcoin as a reward (but it has become difficult for ordinary people to make money from this now).
Retail investors and big players
Retail investors are ordinary investors like you and me, while big players hold large amounts of coins and can manipulate the market. A popular saying in the crypto world: 'Retail investors provide the faith, big players do the harvesting.'
What’s special about the crypto world?
24/7 operation
The stock market has opening and closing times, but the crypto world operates year-round, allowing trading at 3 AM, with prices potentially rising or falling by 20% in a minute, providing a thrill comparable to a roller coaster.
Decentralization
Traditional banks are regulated by the government, while transactions in the cryptocurrency world rely on blockchain technology to operate automatically, without intermediaries. For example, when you transfer Bitcoin to a friend, it goes directly to their account without going through a bank.
Wealth and loss coexist
Some people become millionaires by spending a few thousand on Dogecoin, while others go all-in on a coin and lose everything overnight. A famous saying in the crypto world: 'One day in crypto is a year in the real world.'
Novel concepts abound
DeFi (Decentralized Finance): Saving, borrowing, and earning interest on the blockchain without going to a bank.
NFT (Non-Fungible Token): Uses blockchain to prove ownership of a particular image, music, or video, such as a tweet sold for 2.9 million dollars.
Metaverse land: Buying a piece of virtual land, waiting for it to appreciate, and then selling it.
The risks and challenges in the crypto world
Prices rocket like a rocket
Bitcoin may rise 10% in one day or be cut in half in a week. Dogecoin rose 100 times in 2021, then fell 90% in 2022, making it hard for ordinary people to handle such volatility.
Fraudulent projects are rampant
Some coins are actually 'air coins,' where the founder makes up a story to raise money and then runs away. For example, a coin claiming to 'use blockchain to raise cats' ends up with no cats and a price of zero.
High technical threshold
Losing your wallet's private key, entering the wrong address for a transfer, or exchanges being hacked... In the crypto world, a small mistake can lead to complete loss.
Can ordinary people enter the crypto world?
This might be a question for many; if you're curious, you can dip your toes with spare funds, but always remember:
Only invest spare money: Assume that losing this money won't affect your life.
Don't believe in 'guaranteed profits': there are no miracles in the crypto world, and influencers promoting coins might have already set their positions in advance.
Learn the basics: At least understand what blockchain, wallets, and gas fees (transaction fees) are.
Stay away from leveraged contracts: Using leverage can double your investment in a day but can also lead to instant liquidation.
The crypto world is a 'new world' full of opportunities and risks, challenging traditional finance with technology and testing human nature with volatility.
Some achieve financial freedom here, while more become collateral damage when the bubble bursts.
If you want to enter the crypto world, remember: don't invest what you don't understand, stay alert, and the bigger the waves, the tighter you should grip the steering wheel.
