Can you earn passive income through cryptocurrency & blockchain? Of course, there is a lot to catch and understand before jumping into the rabbit hole. One may say that this method is almost similar to stock trading, but you should understand the root of its process and how it works to understand the market and avoid scams.
So before you pour your first investment into the said method, the following information will tell all the necessary details of blockchains and cryptocurrency. Starting with the definition and how it works. The point is to make sense of every small detail of the said digital technology and investment. Here are things to know only for you.
What Is Blockchain Technology?
Starting with the technology, you can call it the grounding system that turns into the main brain of various digital applications, including cryptocurrency. To explain further, imagine that this system is a digital big book or ledger. It uses a decentralization method and safe functions to save any data in separated blocks linked through cryptography.
Every transaction or data renewal in the application will provide information allocated to a new block. That information is later verified with the distributed connection for every user before eventually making a new block link. This system allows all participants to confirm all details.
Imagine blockchain as an apartment complex with hundreds of units housing a family (data). Every unit is linked with cables that are provided to give decentralized management. If a new family comes, the system will verify the data through the linked distributions before it makes a new house and is linked to the system.
The key definition of the technology is the decentralized system. It also said that the tech is a ledger of all transactions that employ peer-to-peer networks. Thus, every participant can confirm new activities without needing a central clearing authority. So everyone has the same information, from the start to the end.
A decentralized system also means that no one or private individual can control the data in the blockchain. This system is supported by computer connections spread across the globe. The equivalent information and data shared will prevent any potential harm, including scams or data manipulations.
The transparent process in cryptocurrency makes everyone in the system know everything. All transactions, including the income, outcome, or whatever can be seen by everyone. To make it more secure, the technology uses encrypted cryptography. It makes everyone have a difficult time modifying data without changing all the linked chains or details.
What Is Cryptocurrency?
Blockchain serves as the backbone of cryptocurrency, providing a secure and decentralized approach to transactions.
If the technology is the system, cryptocurrency is the implementation of it. It is considered one of the functions or applications that focus on a medium of exchange, created, and stored digitally using blockchain technology. In other words, it uses the machine to make a working app for digital money trading or exchange.
With the rise of digital money and transactions, cryptocurrency is now one of the big things. People can gain money from this type of system. But it also has its downside as Crypto is a digital program. In other words, it is not redeemable for different commodities, has no physical form, and the supply is limited by the protocol.
Understanding how blockchain operates is essential for anyone looking to invest in cryptocurrency.
To make it simpler, you can call Cryptocurrency digital money or virtual money using blockchain technology to make safe and create trusted units. Crypto is running without central authority like a bank or government that takes control of the money. Thus, making it a decentralized money system.
It is best to highlight that cryptocurrency uses technology as a solution for a better, simpler, quicker, and safer transaction. It uses peer-to-peer transactions without intermediaries which provides a fast transaction. At the same time, it also uses encrypted technology to protect data security while still providing transparency on every transaction.
Can the Two Of Them Work Separately?
With blockchain, the security of cryptocurrency transactions is significantly enhanced.
Cryptocurrency & Blockchain are two different terms, but they do have a huge link or relationship. Blockchain is a basic technology used in various applications, including the cryptocurrency itself. In other words, cryptocurrency is one of the many applications of blockchain technology that focuses on digital money.
Blockchain technology provides all of the basic processes for any application. It can provide a basic feature of smart contracts, data storage, and many other capabilities to support application uses. What application? It can be for the medical sector as a medical data storage, logistics, business, and many more.
Meanwhile, the cryptocurrency is unable to operate by itself without blockchain technology. The digital or crypto money only works above or is supported by blockchain. It also means that cryptocurrency is just one of many implementations of blockchain. So don’t mix them up, as they are two different terms.
How Does It Work?
Still confused? Now, if you are going to invest in blockchain and crypto try to understand how it works and provide money. First, understand how the system works. In this case, blockchain is the basic. It functions as a distributed validation called a consensus mechanism. It needs agreement and detail to distribute to everyone.
This system and mechanism also means that every part of the blockchain construction should agree to validate every new transaction. So, the control is not in one person but everyone makes decisions. After validation has been made, the transaction will turn into a new block and be added to the already-established chain.
When implemented in cryptocurrency, the blockchain has a very important role in writing down every transaction made by the app. In this case, crypto mining is one of the common processes in Cryptocurrency & Blockchain. The blockchain will help verify all the crypto truncations, which help distribute an even, trusted, and quick process during mining.
How so? In the process of mining, the miner’s computer will solve complex mathematical calculations to validate the transaction and add it to the blockchain. The mining will affect the amount of coins owned by the miner. From there, they can trade the coin with different crypto or foreign exchange markets to gain real-life money.
What Are The Uses?
So, what is the use of cryptocurrency? As the name says, this is a virtual or digital asset. You can buy the coin or the virtual money with real currency. Can you use it? Yes! Depending on the application, crypto can offer various functions and benefits. In several cases, crypto can be used to buy services and goods.
But the implication is that there is no physical coin or bill used and all transactions using virtual money take place 100% online. Blockchain technology provides a trusted online ledger with cryptography to ensure the security of every transaction. Is it a good investment? In one way or another, it can be a great investment with proper caution.
An easy example of a cryptocurrency is Bitcoin. It is the name of the most recognized crypto among many other things. It uses blockchain technology which later help creating a huge investment boom in recent years. People can use it (cryptocurrency) as a mode of payment or investment. With the help of blockchain, it covers greater benefits.
How To Make Money With Cryptocurrencies?
You can make money with cryptocurrencies. Some people use it as a method of investment. They buy when the price is low, keep the coin or the money, and let the price hike up before trading it for real money. Is it possible to gain a lot of money? Surprisingly yes, because some coin or digital currency can gain traction in certain years and price hikes.
Take the example of Bitcoin. The price can go up and down following the demand. When the demand is high, the price also goes up. Currently, based on tradingview.com, the price of Jan 30 reached around $105,000. But as for today, it went down to around $90K. People who have Bitcoin can trade their coins with real money using the trading app, and gain profit during buying and selling.
It works similarly to the stock exchange. People buy stock when the price is low and keep it until it gains more value in the future. As it is at its peak, people sell it to gain profit. So, the main possible way to make money with Cryptocurrency & Blockchain is by doing Trading. There are several ways in how which crypto allows people to gain income.
First, invest in promising new coins early to avoid higher costs, then wait until it gain traction in the future. Second, you can use the stake and interest method to earn passive income from the idle crypto tokens. Third, try day trading to make trading pairs. HODLIng is also an investment term for cryptocurrency for HODL long term.
Some cryptocurrencies also use unique methods to make users join the community and gain tokens for free. One is to play crypto games, you can also Yield farming and lending, do faucets, join Airdrops, buy a share in Decentralized Autonomous Organizations (DAOs), and of course, you should try mining.
However, crypto also has a lot of dark side. The virtual money investment world always faces a regulation challenge. There is no guarantee from the government, as they don’t regulate the investment. There are also high price violations, which means there is a huge risk of wrongdoing for illegal activities. To make it worse, the price can fluctuate or fall in no time.
Key Characteristics of Cryptocurrency & Blockchain Every Investor Should Know!
1. It Is Open Source And Transparent
The best point of blockchain technology for cryptocurrency is transparency. It means everyone can see the details and what happens in the system. Whether it is a transaction, airdrop, game, or pool, everyone knows anything. It helps spread information which prevents any miscalculation or misuse.
In this case, everything is written in code. The best example is Bitcoin, the web provide details on how much Bitcoin Supply was provided in the beginning. Then the inflation details including the demand are given to everyone in the circle. It is different from a conventional bank, in which every detail, planning, interest, and everything is only available for the inner circle (central).
2. Decentralized
All goes with the fact of decentralized technology. It means, no one has the exact power. The code and the operation are not centralized in one point (such as a company) but spread all over thousands of computers inside the blockchain network. You can also make a node, to get blocks and transaction details in your computer.
3. Clear Data For Supply And Inflation Rate
Since Cryptocurrency uses virtual money, a supply is used to control the value. The supply is highly maintained to ensure the value balance. Imagine a small supply but high demand! It will make the price skyrocket. On the other hand, when the crypto supply is overloaded in the future, it will lose its initial value.
The clear detail of supply helps you understand the inflation rate. It is similar to the stock market, where you need to understand how much the market capitalization of the company is so you can get the best profit margin. In the case of Bitcoin, you can find that the token had a price surge in 2021 ranging from $5000 in an hour to $37,299.
4. Almost Impossible To Hack
Blockchain cryptocurrencies are supported and used by a huge number of miners that also contribute to its network’s safety. How? By using high-end computers. Crypto miners compete with each other to win the calculation using highly priced computers. When they win, they will gain a new block and turn it into money. With more miners, the more complex its system and the possibility of hacking.
The synergy between cryptocurrency and blockchain creates a new era of financial transactions.
5. Immutable
While the transactions are guaranteed as secure, one mistake made by the users means permanent. It is immutable and you cannot cancel all the transactions confirmed by the blockchain. For example, you make a wrong transaction to a certain account. You won’t get back the money unless the account is kindly sending you back some amount.
So, do you want to invest in Cryptocurrency & Blockchain? If you are willing to spend a bit of money on the Internet and see it as an investment, do it! It can be a gold opportunity, similar to Bitcoin. But be aware that this investment also has downsides, including potential scams, limited growing tokens, or simply untrusted brokers.
