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In the upcoming articles, we are going to explore the exciting topic of cryptocurrencies. While blockchain technology spreads much further in possibilities, digital currencies are the first real use cases. Their advantages and shortcomings have shown great insight into the opportunities of blockchain applications.
It All Starts With Bitcoin
The journey of cryptocurrencies started with Satoshi Nakamoto, an unknown inventor, proposing Bitcoin in 2008. His idea was to create a secure, verified and immutable electronic payment system based on mathematical proof, without any intermediaries.
In the coming years, Bitcoin has started to spread in peer-to-peer online payments slowly. Along the way, new cryptocurrencies began to appear either created on the base of Bitcoin (such as Litecoin), or with an entirely new code. In 2014 Ethereum held one of the first ICOs and developed the first decentralized application development platform. Since then the market has shown exciting growth with new entrants, increased attention and exciting turns.
The crypto market is the place for all digital currencies built on blockchain technology. In this market, we can find all the tokens, altcoins, the companies that issued them, crypto-exchanges and cryptonomics: the economy of crypto markets. At the moment there are over 2000 digital assets sold.
What makes this crypto market special is that pretty much anybody with an Internet connection can enter. Besides the applicable country regulations, there are no huge restrictions yet. The easy entry and huge waves in the market make it an appealing investment opportunity for the bold ones, and a risky deal for the more cautious crowds.
What is being sold in the crypto-market?
In the crypto market, we can buy and sell two types of assets: coins and tokens, which have more differentiation within.
We differentiate these based on their use:
- Coins: a digital currency, which possesses a store of value or method of value transfer, for example, Bitcoin. Their primary function is payment, just like a fiat currency. Altcoins are coins that are similar to bitcoin and function as a digital currency but are built on a different blockchain, with diverse characteristics.
- Token: token gives you access to a service or asset on a certain blockchain. We differentiate between utility and security tokens.
- Utility tokens give you access to services in a blockchain-based ecosystem. It means that in the future network I will be able to purchase a service with these coins. Utility tokens were commonly distributed on ICOs, although in many cases buyers bought them for investment purposes and not platform use. A great example is the Binance coin, which you can use for a discounted transaction fee on the Binance exchange.
- Security tokens: or asset tokens represent participation in a company or real-world asset: such as equity, stock, real estate, or even fine art. These are the newest types of tokenized assets, which open the door to a brand new possibility of handling wealth and investment. The market is still in its infancy; the regulatory environment and exchanges are still under development.
All of these currencies and tokens are tradeable, and market dynamics define their value.
Stay tuned, as next week we examine the volatility of the crypto-market and the main market moving effects.
Meanwhile, feel free to ask questions, submit a comment and let us know what you would like to know!