If you've recently heard news like 'Bitcoin skyrockets and crashes', 'Elon Musk promotes Dogecoin', or 'NFTs sell for astronomical prices' and feel confused, then this article is for you!
Today, we will unveil the mysterious veil of the 'crypto world' in the simplest terms.
The crypto world, simply put, is 'the world of cryptocurrencies.'
It resembles a vast online 'community', where people trade, invest, develop technology, and even 'mine' using digital currencies (like Bitcoin and Ethereum).
Here, 'currency' is not the paper money we usually use, but virtual currency written in code, with all transactions recorded on a public ledger called 'blockchain', which no one can tamper with.
Who is who in the crypto world?
Bitcoin (BTC)
The 'big boss' of the crypto world, invented in 2009 by a mysterious figure known as Satoshi Nakamoto. Its characteristics include a fixed total supply (21 million), making it scarce like digital gold, with significant price volatility that often makes headlines.
Altcoins
Bitcoin's 'younger siblings', like Dogecoin (DOGE), Shiba Inu (SHIB), and Ethereum (ETH). Some mimic Bitcoin, some focus on technological innovation (like Ethereum's smart contracts), and some rely purely on influencers (like Elon Musk promoting Dogecoin).
Miner
A person who 'mines' using a computer. Mining is essentially using computational power to solve mathematical problems to maintain the security of the blockchain network, and successfully solving a problem grants Bitcoin rewards (but it's now very difficult for ordinary people to make money this way).
Retail investors and big players
Retail investors are ordinary investors like you and me, while big players hold large amounts of currency and can manipulate the market. A popular saying in the crypto world is: 'Retail investors provide the faith, and big players do the harvesting.'
What's special about the crypto world?
Open 24 hours a day
The stock market has opening and closing times, but the crypto market operates year-round without breaks, allowing trading at 3 AM, where prices can fluctuate by 20% in just a minute, comparable to a roller coaster.
Decentralization
Traditional banks are regulated by the government, but transactions in the crypto world run automatically via blockchain technology without intermediaries. For example, when you transfer Bitcoin to a friend, it doesn't go through a bank; it arrives directly.
Wealth and loss coexist
Some people turn a few thousand into millions with 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): Save, loan, and earn interest on the blockchain without going to a bank.
NFT (Non-Fungible Token): Uses blockchain to prove your 'ownership' of a specific image, music, or video, such as a tweet sold for $2.9 million.
Metaverse land: Buy a piece of virtual land, wait for it to appreciate, and then sell it.
Risks and challenges in the crypto world
Prices soar like rockets
Bitcoin might rise 10% in one day or be halved in a week. Dogecoin rose 100 times in 2021, then fell 90% in 2022, making it hard for ordinary people to bear such volatility.
Fraudulent projects abound
Some coins are actually 'air coins', where the founder spins a story to raise funds and then disappears. For example, a coin might claim to 'use blockchain to raise cats', but when no cats are raised, the coin's price drops to zero.
High technical threshold
Losing your wallet's private key, entering the wrong address for a transfer, or being hacked on an exchange... In the crypto world, a small mistake could lead to total loss.
Can ordinary people enter the crypto world?
This may be a question for many; if you're curious, you can dip your toes with spare funds, but always remember:
Invest only with spare money: Assume this amount is lost, and it won't affect your life.
Don't believe in 'guaranteed profits': There are no miracles in the crypto world, and influencers shouting out trades may have already set up their positions.
Learn the basics: At least understand what blockchain, wallets, and Gas fees (transfer fees) are.
Stay away from leveraged contracts: Using leverage can double your investment in a day, but it 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 more turbulent it gets, the tighter you should grip the steering wheel.
