What is Crypto is currently the most popular keyword among investors. In the context of the Covid-19 pandemic, new and unique investment channels are gradually becoming popular. Crypto is one of them and is very popular with young investors. However, there are still many investors who do not fully understand the nature of Crypto. Today’s topic, Top10mmo.com will help you clarify the question of what Crypto is and its related properties and applications. Let’s follow along!
What is Cryptocurrency or Crypto?
What is Crypto?
Crypto or Cryptocurrency is a general term, to define cryptocurrencies operating on the internet. This cryptocurrency is designed as a medium of exchange.
Crypto is not regulated by any bank or institution like conventional fiat money. Instead, this cryptocurrency is widely distributed to users through the internet.
For example:
Bitcoin is the leading cryptocurrency today, attracting many people to invest. Bitcoin transactions are performed in the form of stored and verified cryptocurrencies on the Blockchain. Because it is anonymous and not regulated by any bank or institution, Bitcoin is a cryptocurrency.
Compare Cryptocurrencies with Traditional Money
The following comparison table will help you understand the difference between the two currencies:
| Electronic money | Traditional money | |
| Manage | Managed by a network of open source computers | Government |
| Value | Priced based on the law of supply and demand | Mainly based on government issue |
| Assurance | By a network of computers that verify every transaction. | By a third party such as a bank or government |
| Matter or immaterial? | Non-physical (cannot print paper or coins) | Material (Can print paper or create coins) |
| Is it possible to trade with essentials? | Maybe (Depending on the country where crypto is legalized) | Possible (Depending on currency used in each country) |
Both currencies are used for payment and investment functions. However, there are still obvious differences.
What is the mechanism of action and specific properties of Crypto?
Like traditional currencies, Crypto also has its own operating mechanisms and properties.
What is Crypto’s mechanism of action?
Crypto is designed as a digital medium of exchange, so it will have the following operating mechanisms:
- Building on Blockchain Platform
Blockchain acts as a digital ledger that records all transactions. Data will be saved in blocks and linked together to form a giant blockchain. When there is a change on the blockchain, the consensus of all members of the blockchain is required.
- Proof of Work and Proof of Stake mechanism
To prevent fraud, every transaction must go through one of two authentication mechanisms:
- Proof of Work: This algorithm presents problems for the mining team to compete with each other. The system that solves it sooner will receive the same cryptocurrency of the participating system. However, this consumes a lot of computer power and resources.
- Proof of Stake: Through the staking mechanism, the parties involved in verification are limited. This solves the power consumption problem of Proof of Work. The parties to the transaction can stake cryptocurrencies for verification. Once enough stakes have been collected, the validation pool will be assigned to a new trading pool.
- Consensus in the Crypto World
Each individual participating in transaction verification must pass the checks of members participating in the network.
Just like if a hacker wants to cheat, he has to attract more than half of the consensus in the system. This seems impossible.
What are the unique properties of Crypto?
Unlike traditional money, electronic money has the following characteristics:
- Intangible properties: Crypto can only be stored on electronic devices and cannot be held or held.
- Decentralized nature: Cryptocurrencies cannot be regulated by any authority. They are distributed on a network of peer to peer computer systems. This computer network does not have a coordinating server.
- Peer-to-peer: All transactions are conducted directly by the buyer and seller. Without going through any 3rd party intermediaries.
- Anonymity: Cryptocurrency owners do not need to provide any information.
- No need to rely on trust: Not through intermediaries and buyers. Sellers also don’t need to trust each other because cryptocurrency trading is automated.
- High security: Each cryptocurrency when distributed to users is encrypted to prevent access by strangers.
- Cross-border transactions: Users can trade virtual currencies anywhere and are not controlled by any country.
What are the basic applications of Crypto?
Although only operating on the internet, Crypto can still be widely applied to things such as:
- Alternative to banking services: Electronic money transactions are completely online, the transaction speed is almost instant. This gives Crypto a chance to compete with banking services.
- Smart payment channel: For countries that allow payment in cryptocurrency, payment for goods can be done quickly.
- Investment channel: Bitcoin and Ethereum are two cryptocurrencies that are interested by many investors. However, the risks of cryptocurrencies are huge because they are not protected by any legal authority. In Vietnam, cryptocurrency investment has not been legalized because of the difficulty of controlling information and transaction activities.
Conclusion
Crypto is a cryptocurrency that is traded on the internet, so it has many differences from traditional money. The properties and applications of Crypto are also very diverse and rich. However, Crypto still has a lot of potential risks for investors because it has many difficult-to-control properties. In Vietnam, cryptocurrency is still not recognized by the government so investors need to be more cautious with this currency.
