Learned by 42 usersPublished on 2024.04.04 Last updated on 2024.10.15
Tokens
Introduction to Cryptocurrency
Cryptocurrency is a type of digital currency based on a decentralised peer-to-peer network, consensus mechanism, and open-source code, using blockchain as the underlying technology. It does not rely on a central authority to issue new money or maintain transactions; rather, it is conducted via blockchain, utilising digital cryptographic algorithms and a network-wide resistance to 51% attacks to ensure the security of assets and transactions.
Cryptocurrency trading is quite similar to other forms of trading (such as contracts for difference, stocks, or currency pair trading), with the primary distinction being that it uses cryptocurrencies as trading instruments. Traders earn profits by buying digital currencies and then selling them at higher prices. Typically, the same technical analysis methods used in fiat currency markets are employed to analyse the cryptocurrency market.
Cryptocurrency trading is a zero-sum game, with participants congregating within the same specific exchange. During the trading process, trading platforms charge a commission on cryptocurrency transactions. The value of digital assets constantly fluctuates; thus, if sold during a period of increasing cryptocurrency value, the seller may incur losses while the buyer profits. Conversely, the opposite holds true.
Mining is the process of acquiring Bitcoin and other virtual currencies. It involves solving cryptographic problems, and upon successful computation, a new transaction block is added to the blockchain, releasing a certain amount of cryptocurrency. Users participating in processing the blocks can receive a certain amount of newly issued Bitcoin, as well as associated transaction fees.
Cryptocurrency exchanges provide a platform for users to buy, sell, send, receive, and store cryptocurrencies. These exchanges can be custodial (holding customer assets) or non-custodial (not holding customer assets). They support fiat currencies and offer various types of trading (such as spot trading, futures trading, contracts for difference trading, etc.), while also charging transaction fees.
Cryptocurrency exchanges enhance security measures through multi-signature technology, cold wallet storage, and two-factor authentication. These measures ensure the safety of customer funds, even if the exchange is compromised, customer assets remain intact.
Cryptocurrencies are not only used for trading but can also function for payments and investments. They provide a decentralised payment system, enabling users to directly exchange goods and services globally without the need for third-party financial institutions.
The creator of cryptocurrency is Satoshi Nakamoto, who published the Bitcoin whitepaper in 2008, proposing the concepts of Bitcoin and blockchain, and established the Bitcoin network in 2009, developing the first block, known as the "genesis block".
According to the provided information, here are some venture capital firms that have invested in cryptocurrencies or related projects:
This information indicates that several venture capital firms have invested in cryptocurrencies and related projects, including NFT games and trading platforms.
The operation of cryptocurrency primarily relies on blockchain technology, which is a distributed digital ledger. Here are the key points on how cryptocurrency operates:
Blockchain technology: Blockchain is a vast digital database composed of multiple boxes (blocks) linked by a single chronological chain. Each box contains information about transactions, and the chain helps to keep everything organized and in sequence.
Transaction process: When you send cryptocurrency, the transaction is submitted to the network. Miners in the network verify the transaction and add it to the blockchain. Each block contains a hash value used to connect to the previous block, ensuring the integrity and immutability of the blockchain.
Private key and public key: Each cryptocurrency user has a private key and a public key. The private key is used to encrypt and decrypt transactions, while the public key is used to receive cryptocurrency. Only the holder of the private key can use the corresponding cryptocurrency.
Wallet: Cryptocurrency wallets are used to store, send, and receive cryptocurrency. Wallets can be hot wallets (online wallets) or cold wallets (offline wallets). Hot wallets are more convenient to use but less secure, whereas cold wallets are safer but less convenient for use.
Exchange: Cryptocurrency exchanges are platforms for buying and selling cryptocurrencies. Exchanges charge trading fees and offer various trading services such as spot trading, futures trading, contracts for difference trading, etc.
In summary, the operation of cryptocurrency relies on key components such as blockchain technology, private and public keys, wallets, and exchanges.