What is Cryptocurrency and its investment?
First and foremost, it’s worth mentioning that the word “cryptocurrency” is a combination of cryptography and currency.
Cryptocurrency is a digital asset utilized in conducting transactions, much like general currencies. However, the main difference lies within the technology and manner in which they are managed: blockchain and decentralization, respectively. The aforementioned two underlying points of uniqueness for cryptocurrency allow for the network to not be centralized, meaning the system functions through the connectivity of users (Nodes) without the need for an executive ruling from a central organization.
Furthermore, the system is open-sourced, which refers to the fact that all transactions and ongoings can be transparently viewed by users throughout the world, creating a sense of security supported by efficient and easy access systems that aid 24-hour transactions.
Who created Cryptocurrency?
The first figure involved in cryptocurrency and blockchain is the individual or, possibly, a group of individuals, called Satoshi Nakamoto who, in 2009, invented Bitcoin-- the technology that has now relatively become a household name.
After Bitcoin’s arrival, other crypto coins followed, with a range of functionalities and values, rendering blockchain networks in the modern age is not only involved in managing transactions but also in developing tokens and Decentralized Applications (dApps) through smart contracts as well.
Token v.s. Coin
Token are considered digital assets, much like Coin, they differ in terms of how they are created. While tokens are created from existing blockchains through Smart Contract, Coin are known to have their blockchain own networks.
How is Cryptocurrency created?
On a blockchain under the Proof-of-Work (PoW) consensus algorithm, cryptocurrencies are created from a process called mining, which uses the exerted energy consumption of computers to create new blocks through the verification process involved, resulting in new coins which are rewarded for the miners’ efforts.
As for Proof-of-Stake (PoS) platforms, new coins are created to reward users who have staked their coins on the platform, which is also the system’s method of validating and creating new blocks. In detail, users can lock their coins to receive the chance to be systematically selected to verify transactions. The selected candidate, after task completion, would receive rewards in the form of the network’s native coin.
Price and value
Just like how people in the past believed that seashells were valuable or how paper and metals are trusted to be precious in the present day, crypto coins derive their value from the trust behind creators and the technology supporting them.
A fitting example of the previous illustration is that Bitcoin is viewed to be a cryptocurrency with intrinsic value, along with potentially being the “digital gold” which can be a store of value.
Along with the same premise, cryptocurrencies’ prices are dependent on two factors; supply and demand. If a coin has a limited supply, its price is likely to be highly influenced by its buying current supply and buying demand.
Therefore, in light of this information, it is safe to say that a crypto coin’s value cannot be the determinant of its network value as well. However, its supply can be utilized to calculate the market capitalization through the multiplication of the coin’s price and current market supply.