Crypto’s journey to becoming an accepted part of today’s society began nearly 15 years ago. Nowadays, cryptocurrencies are ubiquitous as people seek an alternative financial solution to fiat currencies and central banks.
Learning as many of the shocking facts about cryptocurrency as possible is crucial because they’ll have more prominent roles in the financial industry soon. You can start with the 10 points regarding cryptocurrency that we have compiled for you below.
Bitcoin’s Creator is Anonymous
Bitcoin is the first cryptocurrency to enter the financial market. It first appeared in 2008 and immediately received a distinction as a decentralized alternative to fiat or paper currencies. The virtual currency brought a set of disruptive technologies like the blockchain to the fore. However, one of the shocking facts about Bitcoin is that its actual creator remains in the shadows until now.
Bitcoin’s genesis was on October 31, 2008, when a white paper circulated on a cryptography mailing list. The document had the title “Bitcoin: A Peer-to-Peer Electronic Cash System” and bore the author’s name, Satoshi Nakamoto. Aside from publishing the white paper, Nakamoto also mined the first 50 coins in 2009.
The white paper and the first transaction are the only instances that the decentralized finance (DeFi) world ever came across Satoshi Nakamoto. Since then, no other information has surfaced to shed more light on this enigmatic developer. Many people believe Satoshi Nakamoto is a unified pseudonym for a group of programmers behind Bitcoin.
Cryptocurrencies are Decentralized
The backbone of Bitcoin and other cryptocurrencies’ existence is decentralization. Decentralizing an institution means removing the intermediary that oversees the group’s operations and activities.
In finance, these intermediaries are the financial institutions, banks, and government institutions that dictate the rules and regulations governing transactions.
Proponents of DeFi point to the following as the most crucial drawbacks of a centralized financial system:
- Finance becomes limited to individuals and organizations that fit the criteria that have been decided by the central leadership. Unqualified people and groups become either unbanked or underbanked.
- Transactions between financial institutions are subject to bureaucracy. This translates to time-consuming fund transfers, especially when offshore banks are involved.
- A centralized command structure puts the entire system at risk for disruption. For instance, a severe cyberattack on one stakeholder could cripple the whole financial infrastructure.
However, decentralization itself has its own set of disadvantages. For instance, the lack of an intermediate entity overlooking transactions makes them irreversible. In other words, once the payments go through the peer-to-peer network, it is considered final and irrevocable. That’s why vital cryptocurrency facts describe how DeFi markets are vulnerable to scams.
Data on Cryptocurrencies Are Stored on Public Ledgers Called Blockchain
No matter what cryptocurrency you’re interested in, the blockchain will always be central to it. The blockchain is a series of data blocks holding information on individual transactions executed by the network. Blockchains are the crypto developers’ solution for data archiving that does not require an intermediary or a regulatory agency.
Instead of a financial institution maintaining analog and digital records, individual computers within the network contribute their processing power to execute and verify each transaction. Once a transaction is completed, the processing node creates a block containing its details. It then adds it to the existing chain in the network.
Blockchains lend transparency to decentralized finance. The chains are publicly hosted. Anyone can view the data of the transactions using a unique hashcode assigned to the block.
The Supply of Cryptocurrencies Is Not Unlimited
Many believe that crypto coins have an infinite supply because of their digital nature. However, one of the shocking facts about cryptocurrency is that their developers programmed a supply cap. Every coin has its own supply limit factored in.
Another of the shocking facts about Bitcoin is that it has a ceiling of 21 million coins only. The currency is yet to reach this limit, but it is drawing closer to that event since it has been 13 years since Nakamoto mined the first 50 coins. On the other hand, altcoin Litecoin is near the end of its fringe – miners have already minted 75% of Litecoin’s 84 million supply.
Ethereum, the world’s second-largest virtual currency, is the only exception. ETH coins have no implemented limit to their existence. This is because ETH has practical use in its network, which means coins keep circulating. Like fiat currency, new ETH coins may have to be minted to meet the continuing demand.
Crypto is Very Volatile
One of crypto’s weakest attributes is its volatility. While fiat currencies and foreign exchange are also volatile, they are more predictable and less prone to drastic value drops than cryptocurrencies. Trading real money is governed by closely regulated factors, minimizing the impact of speculations on each currency’s value.
On the other hand, crypto trading is easily affected by speculation. A well-timed remark from a prominent individual in the financial world could make the price rise or fall significantly. The most glaring example is Elon Musk, whose comments and news on Bitcoin and Dogecoin severely affected each coin’s value.
For instance, Dogecoin experienced a value spike in April after Twitter announced its ill-fated deal with Musk, jumping 27%. However, the gain was not sustained. The coin’s value plummeted 11% in just 24 hours, apparently caused by short-term traders dumping their holdings to make a profit.
China Has Tried to Ban Bitcoin
Banning Bitcoin and other cryptocurrencies is a complicated exercise. The use of cryptocurrency cannot be entirely eliminated because of the Internet. Anyone can create a cryptocurrency wallet and store funds they can use in transactions.
However, this hurdle does not make it impossible for nations to introduce regulations restricting or outlawing their use.
China is one of those nations that have introduced measures that keep its citizens from using cryptocurrency. It began in May 2021 by restricting bank activity that used crypto. The Chinese government prevented its citizens from mining virtual coins by June 2021. By September, crypto became officially banned in China.
China cited the criminal underworld’s use of cryptocurrency in money laundering and fraud as instrumental to its decision to ban these coins.
Cryptocurrency Can Be Used to Pay for Goods and Services
Bitcoin and other cryptocurrencies are more popular as investment vehicles. For example, many investors who believed in Bitcoin during its infancy have seen their money grow more than ten times in the past decade.
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Nowadays, continued speculative trading and artificial price pumps have contributed to the volatility of the virtual currency.
However, one of the surprising facts about cryptocurrency you don’t know is that Bitcoin and its contemporaries were intended as money that can be used for transactions. Their use as investment vehicles was purely incidental. It took nearly a decade before cryptocurrency emerged from its stereotype as a store of value to being a medium of market exchange.
In Ethereum’s case, it functions as compensation for the right to develop and run smart contracts in its network. Despite obstacles from central authorities, several companies in the United States accept cryptocurrency as payment for goods and services. These include Microsoft, Paypal, Starbucks, and Etsy, among others.
You Can Earn Crypto Through NFTs
NFTs, or non-fungible tokens, are currently the rage in cryptocurrency. Non-fungible tokens are digital items that are one of a kind. An apt analogy is a limited-edition trading card. This trading card only has a finite number of individuals printed and, once the supply runs out, can only be bought second-hand from secondary markets.
Theoretically, the rarity of NFTs enables them to fetch a higher value in the exchange. However, several other factors can drive the price of an NFT. Practical value is a solid criterion, meaning the NFT must have a sustainable use to justify its exorbitant price.
In any case, NFTs are usually digital art that anyone can create and market on the Internet. Those tokens with striking characteristics that set them apart and make them valuable could net you a considerable income in cryptocurrency.
Ethereum Has a More Stable Value than Bitcoin
While it is still subject to speculation and volatility, Ethereum is a more stable cryptocurrency than Bitcoin. Case in point – ETH grew 61% in May 2020, while Bitcoin grew only 21% in the same month. One of the shocking facts about Bitcoin is that Ethereum also tends to shed less value during downtrends compared to it.
You can attribute the coin’s stability to its practical nature. ETH’s value is driven more by market movement within its network than trader activity. This is due to smart contracts, apps that automatically execute whenever pre-programmed conditions are met. Think of them as automated transactions.
There are developers working within the ETH framework creating smart contracts, which require a small payment of ETH to run. Thus, the network behaves closer to a real market that dictates value through demand and supply, albeit decentralized. This gives Ethereum a modicum of stability that is apparently absent in the Bitcoin network.
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You Can Develop Your Own Smart Contracts for Cryptocurrencies
One important fact about cryptocurrencies – if you have basic coding skills or even just an interest in developing talent, you can take a shot at creating your own smart contracts. Coding as a skill is in demand in today’s digital landscape, and DeFi is one of the most lucrative markets for programmers.
You’ll first need to learn Solidity, the language explicitly developed for blockchain transactions and contracts. Solidity is similar in structure and syntax to predecessor languages C and C++. The language’s documentation also cited the next-generation language Python as one of the makers’ inspirations for creating the programming language.
There are many reasons why you will want to learn Solidity programming. Salary might be a good motivator. According to Zero to Mastery, Solidity coders could earn up to PHP166,000. Despite the high salary, there is minimal competition in the workforce for this programming niche!
Final Thoughts About Investing in Cryptocurrency
One of the shocking facts about cryptocurrency is that there are multiple ways to invest and profit from them. Below are the three primary methods you can use to earn money from the crypto world.
Crypto Mining
Mining simply means helping to verify and confirm transactions and encoding them into the blockchain. In return for your help, the cryptocurrency network will pay you a specific number of coins. However, mining has some disadvantages.
These drawbacks include a finite coin supply and progressively decreasing rewards. Mining also ceases being a lucrative income source when the coin hits its limit. There’ll be more coins to mine or give away.
Trading
Mining can be expensive, so interested parties turn to another means of making money from cryptocurrency. This is trading. You purchase a specific number of coins at current value and bank on the crypto gaining in price in the future.
Like forex and stock trading, trading crypto requires extensive research and monitoring to be successful. You’d also have to be on guard for seemingly simple news that could result in a sudden price spike or drop.
Non-fungible tokens
Lastly, you can create collectible digital art and try to sell them as non-fungible tokens. While lucrative, earning from NFTs requires considerable planning and creativity, especially in conceptualizing the icon. Remember that the token must be unique and must have value for potential buyers. Without these features, your NFT will be another digital art in a landscape full of those.
Cryptocurrency demonstrates how technology and finances could go hand in hand. For instance, blockchain has transformed how transactions are carried out and how data is stored transparently. However, using crypto to earn money is a tricky endeavor.
Still, with enough research and planning, it could be an ideal source of residual income. Hopefully, the shocking facts about cryptocurrency listed above have helped you understand this new financial instrument even more.
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