What does the world of crypto hold? What is a cryptocurrency? What are NFTs? To keep up with the fast-paced world, we need answers. So let us jump in.
A Brief History of Cryptocurrencies
Cryptographic systems are used to stop double spending and to record each and every transaction. The decentralization of the system comes from a digital ledger distributed among all users of the cryptocurrency. And the transactions are logged in individual blocks inside a blockchain system and encoded with strong cryptography that makes it next to impossible to hack into.
The journey of cryptos has been interesting to say the least. The first decentralized cryptocurrency, Bitcoin, was released as an open-source software back in 2009. Within a couple years, more cryptocurrencies started to form, all attempting to improve the proof-of-work scheme used in Bitcoin. For example, Litecoin used a different hash function called scrypt in its cryptography and Peercoin used a proof-of-work and proof-of-stake hybrid.
But it wasn’t all sunshine and roses for cryptos. In fact, they have and are still receiving a large share of criticism. Many experts and critics think it is just a hype and the crypto bubble will burst soon. And many governments are skeptical of such a decentralized system. In fact, crypto currencies are not only illegal in Bangladesh but also in countries like China which was the largest market for cryptos.
Crypto Market in 2022
How to Invest in Cryptocurrencies
Now assuming your country has legalized cryptocurrencies, here’s how to invest in them.
Step 1: Find a Broker or a Crypto Exchange
A crypto exchange, on the other hand, is harder to use with a more complex interface. But they have lower fees and you will get complete control over which cryptos to invest in and when to do so. This amount of control is definitely not for everyone because it is not very convenient and you will need to constantly keep up with market knowledge.
Step 2: Create an Account
Step 3: Deposit Funds to your Account
Step 4: Purchase your Preferred Cryptocurrency
Step 5: Store your Cryptocurrencies
Firstly, you can keep it at the exchange you used to purchase it with. Exchanges usually have a ‘crypto wallet’ attached to it where you can store your currencies. But this might not be the safest option for you. If you want, you can transfer the currencies to a separate hot or cold wallet. Depending on the amount you are going to transfer, you may need to pay a small fee. The most popular options for crypto wallets include MetaMask along with eToro and Coinbase.
Hot wallets are stored online and work based on internet connectivity which means a higher risk with a higher convenience. Cold crypto wallets don’t use internet connectivity and are stored on a hardware device such as a hard drive. They are the safest as they are not connected to the internet. Don’t lose the keycode associated with them though, otherwise you won’t be able to access them!
The Adventures of Non-Fungible Tokens
Non-Fungible Tokens or NFTs are non-fungible units of data stored on a blockchain. Do you know that the times when you create a digital asset, such as a graphic or a video, it is difficult to enforce your ownership? Only because it is a file on the internet and anyone can download it, does not mean anyone should be able to own it. That’s where NFTs come in.
The first known NFT was a video clip created by Kevin McCoy and Anil Dash in 2014. It was registered on the Namecoin blockchain and later sold for $4. Non-Fungible Tokens started gaining popularity in 2017 with the development of CryptoKitties, an online blockchain-based game. Selling tradable cat NFTs of CryptoKitties brought people’s attention to the system. Video gamers are still one of the largest markets of NFTs selling their in-game creations and tradables.
Now, you can sell the token using an NFT marketplace. The leading marketplace for NFTs is OpenSea. Axie Marketplace, CryptoPunks and Rarible are also popular marketplaces for NFTs. But in this step, we need to keep the legal regulations in mind. As NFTs are reliant on cryptocurrencies and the transactions are based on them, you can’t buy or sell an NFT under governments that have not legalized crypto.
Selling an NFT will create a transaction on the blockchain and log the history on its distributed ledger. The transaction information will keep track of who the current owner is and how much the token has been sold for in the past. And of course, being on a blockchain, the transaction information is extremely hard to tamper with. Once the transaction is complete, you will lose the ownership and the buyer will own it from now on. They will have the bragging rights along with the selling rights. But you, the creator, will still retain the copyright and the reproduction right. Which means, if your NFT gets secondary sales, you will get a cut of the profit as long as royalty is specified in the smart contract.
Here is the more interesting part about an NFT. When someone buys a Non-Fungible Token, that is all they get – a token. They don’t get any physical or digital files. In fact, most of the time, the digital file is already available to be downloaded by anyone for free. All the token does is represent the ownership. Moreover, the original creator can still sell prints of the file they bought due to their reproduction rights.
Today, the world of crypto is bringing us the new opportunity for a completely different internet experience where the kind of decentralization we never thought possible, is happening. The dynamicity of blockchain technology is bringing us new and exciting knowledge every now and then. Knowledge that we indulge our readers into on a weekly basis. Wish to remain updated about the tech-news of tomorrow? Then stick around!
