Article taken from Blockchain Observatory
In this post we will offer you the 10 key concepts to get you started in cryptocurrencies. All the advances of the human being involve new ideas and learning that we must take into account in order not to get lost and cryptocurrencies are no exception. So we have prepared ten key concepts that must be clear to take the first steps in the platforms of the crypto industry.
Blockchain, chain of blocks in Spanish, is a technology that allows the creation of an accounting book that is stored in a distributed way in a network of computers that can be all over the world and that communicate with each other using a network Peer-To-Peer (P2P). It is a network resistant to censorship and available at all times, without the need for a central server, company or government behind its operation. In addition, the blockchain is a very secure technology, because the record can only be modified under consensus. Something that is only achievable if all parts of the network agree to make the change.
Cryptocurrencies use this technology to carry all records of transactions and addresses to which they belong. In this way, every transaction you carry out or carry out in your favor will be recorded in the blockchain forever. Being able to verify the transaction at all times, with a block explorer and leaving a clear record of everything that has happened on the network. Of course, blockchain technology isn't just for economic records. Anything you can digitize is amenable to being stored on a blockchain and benefiting from the technology. Hence, many projects consider streaming systems, data storage, governance and voting systems. In addition to completely decentralized financial applications operating under this technology. This is why blockchain is considered one of the biggest technological revolutions since the advent of the Internet.
The token concept is one of the most recurring in the crypto industry. Thanks to them, you can transfer value or represent different objects within a blockchain. Initially, tokens were seen as objects that can only transfer value, but the evolution of blockchain technology and cryptocurrency has broadened this perception. Now, a token can be a cryptocurrency, its most basic initial use, as is the case with BTC and ETH. It can also be a representation of a real currency using tokens, to represent currencies like the dollar or the euro, thus creating stablecoins. Or even, it can be something as abstract as a work of art, a picture, a song, a book, a name record or an identity. All this can be represented in the well-known NFTs.
In any case, tokens have ceased to be just a representation of economic value, to become something much more malleable, universal and adaptable. In this way, they can respond to very specific needs of applications that wish to use them.
Mining and Staking
The concepts of mining and staking are well known in the ecosystem, but often misunderstood or misinterpreted by those who arrive in these spaces. First, mining is simply a computationally and mathematically intensive process, in which a group of computers try to solve a complex puzzle. If they get the answer right, they get a reward. The riddle is so complex that large machines must dedicate themselves to solving it, consuming energy and human resources to achieve it. It is all this work that is rewarded if the guess is correct and that in a certain way sustains the value of cryptocurrencies.
Mining is done with expensive and very powerful equipment, far from those deceptive offers where they tell you that you can mine cryptocurrencies with a cell phone or simply by visiting a Web. In these cases, be careful, most of the time they are traps and scams, so don't fall for them.
Staking is a process of accumulating wealth in cryptocurrencies, which is locked in a node or smart contract in order to receive rewards for this liquidity. Basically, staking works like a bank, in which your money is blocked to give power to the node or smart contract to generate blocks. Thus, you can earn your reward and finally distribute it among all the participants in the staking pool.
There are many platforms for staking, both centralized and decentralized, most of them very good. Just keep one thing in mind: the one that pays the most isn't always the best. Long-term stability is preferable to short-term risky gain.
The concept of HODL is a favorite of bitcoiners: take your cryptos, collect more and hold them for a long time until they give you the return you want. Basically, HODL is saving cryptocurrency for the long term, with the hope that this savings will turn into a significant asset for you and your family. The practice may sound a bit traditional, but it pays off in the long run. Many bitcoiners have experienced it very closely. A cryptocurrency that had no value 14 years ago is now around €36.
Bear and Bull Markets
These two concepts are closely related to each other. Being in a Bear Market means that the cryptocurrency market is in a bearish trend, with prices falling day after day. However, the trend is broken by a reversal and if the reversal recovers the market and exceeds its old mark, then you are in a Bull Market, or bull market, with prices growing day after day. Remember these concepts and pay attention to them when you see the markets and the news, you will know what to do in each case, to take advantage of the opportunities that both options allow you.
Shilling is implicit advertising of a cryptocurrency by someone with status or reputation who is trying to promote a project. A practice that is seen a lot in crypto, especially in coins that are just getting started. They try to dominate a market through a community dedicated to promoting it, regardless of whether the project is good or bad.
It is quite simple to identify the shilling. If you're facing a project that doesn't contribute to the community, but you see big influencers defending the project on social networks, that's shilling. If you see a community that does not understand reasons or accept criticism; yet he praises the project without giving reasons: that too is shilling. In any case, stay away from these communities, they don't usually bring anything positive.
DeFi (Decentralized Finance) or Decentralized Finances in Catalan is a revolutionary concept. This is a great trend that seeks to develop small decentralized and unique financial pieces. Their main value is that they offer financial instruments for savings or investment, without borders and which you can access from anywhere in the world. In the end, the entire ecosystem is a huge community that works in a very coordinated and transparent way, to make these new finances a reality. At present, it is impossible to ignore the huge impact that DeFi is having on the crypto world. DeFi is changing the global financial world.
A non-fungible token or NFT is a cryptographic token that has the ability to be a unique and unrepeatable token. It cannot be split, but it can be used to represent real or digital world objects alongside their own characteristics. As well as the ownership of this, while keeping all this within a representation in a blockchain by means of a smart contract.
This is a concept that has been radically transforming the way we see blockchain. Basically, it allows us to represent unique objects that are not divisible by their properties, without this meaning the destruction of that object, whether real or digital. Music, art, collectibles, anything with unique characteristics can be a blockchain NFT and that is what makes this technology powerful.
The metaverse is a virtual space where people interact with each other with their avatars. The idea of metaverses has been with us almost since the beginning of the internet, with spaces like Second Life or Habbo. However, the introduction of Blockchain technology and NFTs have taken the metaverse one step further, allowing individual ownership and the creation of economies and markets.
This is the new revelation of blockchain technology, a reality that is on the rise and also in a very early stage of construction. While many promising projects exist, metaverses are still in the experimental phase. It is a curiosity that is not yet completely defined and delimited and of which there is still much to be explored and known.
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