Welcome back to our series on understanding cryptocurrency! In part one, we tackled the basics of Bitcoin terminology, clarifying essential concepts like blockchain, digital wallets, mining, HODLing, and forks.
So, you’ve dipped your toes into cryptocurrency with our beginner’s guide to Bitcoin terminology. Armed with the foundational understanding, let’s dive deeper into advanced concepts that will further empower you to navigate the crypto seas confidently.
Bitcoin is the most popular digital currency known around the world; there are, however, thousands of other digital currencies, known as altcoins, each with its unique features and functionalities.
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Diving Deeper into Cryptocurrency Concepts
One popular altcoin is Ethereum. While Bitcoin focuses primarily on being a digital currency, Ethereum takes things further by providing a platform for decentralised applications (DApps) and smart contracts. These smart contracts are self-executing contracts with the terms of the agreement directly written into code. They enable various applications, from decentralised finance (DeFi) to non-fungible tokens (NFTs).
Speaking of NFTs, let’s look at this recent phenomenon. NFTs are unique digital assets representing ownership or proof of authenticity of a particular item or piece of content, such as artwork, music, or collectables. Unlike cryptocurrencies like Bitcoin, which are fungible and can be exchanged on a one-to-one basis, each NFT is one-of-a-kind and cannot be replicated.
Now, let’s talk about decentralised finance, or DeFi, revolutionising the traditional financial system. DeFi refers to financial services and applications built on blockchain technology, aiming to eliminate intermediaries and provide greater financial inclusion. From lending and borrowing to trading and asset management, DeFi offers a wide range of opportunities for users to access financial services.
Next up, let’s explore the concept of decentralised autonomous organisations (DAOs). DAOs are organisations governed by smart contracts and operated by their members without a central authority. Members of a DAO collectively make decisions about its operations, such as funding proposals and governance changes, through a voting process encoded in the smart contracts.
Finally, let’s discuss the importance of security in cryptocurrency. With the rise of digital assets, security threats such as hacking and fraud have become increasingly prevalent. That’s why it’s essential to take precautions to safeguard your crypto assets, such as using hardware wallets, practising good cybersecurity hygiene, and staying informed about the latest security best practices.
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Setting Sail into the Cryptocurrency World with Confidence
You’ve now equipped yourself with a deeper understanding of cryptocurrency concepts, from altcoins to DeFi and NFTs. With this knowledge, you’re ready to set sail in the crypto seas with confidence.
Stay tuned for the final part of our series, where we’ll provide practical tips and strategies to help you navigate the ever-evolving landscape of cryptocurrency and maximise your potential in this exciting new frontier. Until then, happy sailing!