With the development of information technology, a variety of cryptocurrencies represented by Bitcoin have sprung up in recent years. Their roller coaster-like market has attracted the attention of the entire market. But at the same time, most people are still relatively unfamiliar with them.
So let us talk about cryptocurrency with everyone now!
01.Characteristics of cryptocurrency
First of all, everyone must be clear that behind the cryptocurrency represented by Bitcoin is divorced from physical assets. For example, when we buy bonds, we buy the credits of a company. This credit will give me the right to receive interest every year in the future, and there will be a stable cash flow in the future, so it has a specific value. The affiliated companies are profitable, have cash flow, and have potential dividends when we buy stocks every year. We can also correspond to a specific value through the discounted cash flow or dividend rate.
However, the cryptocurrency represented by Bitcoin is separated from physical assets and does not have a specific cash flow in the future. Therefore, its price fluctuation depends entirely on the transaction behavior and the expectations of the counterparty of its price. Lacking physical support is susceptible to mood swings, especially when influential people like Mr. Musk speak out.
02.The risks of cryptocurrency
Since this market does not have a clear regulatory framework and participants’ reporting, ordinary investors are very vulnerable. Many traders have more significant relevant interests, more robust capabilities, and more resources in the cryptocurrency market. These participants may manipulate the market in various ways, such as shutting down exchanges, such as through dominant market positions. The release of good news affects the transaction price.
03.What is the application value of the blockchain technology behind the cryptocurrency?
Here, I give you two examples of possible future application scenarios.
First, provide credit guarantees in the financial sector. For example, a small company may be a fifth-tier supplier of a major automobile brand, and it is only responsible for the production and supply of one screw in the tire. From the perspective of its customers, we cannot position it on the big car brands behind it. At the same time, due to its small scale and insecure income, the bank loan of 100 million yuan is meager. But if we link the supply chain to a transparent blockchain, the bank can clearly understand that the company’s ultimate supply target is the big brand behind it. Because the credit of the big brand is relatively strong, the bank may loan to this small enterprise at a lower financial cost with the endorsement of the big brand. There are already some companies doing similar business. The same is true for cryptocurrencies!
The second is electronic copyright. We can put audio and video works on the open blockchain, and everyone can see the electronic copyright ownership of the works. Once infringement occurs in the market, the copyright owner can sue through the electronic court, and the trial can be immediately conducted after the electronic court has checked and verified. Put everyone’s copyright on a decentralized third-party platform, no one can tamper with, so it provides better protection.
04.What is the difference between China’s heavily promoted digital currency and cryptocurrencies like Bitcoin?
China’s leading digital currency is legal, and we can approximate it as the renminbi in electronic form. It is understood that the trial is now open in cities such as Beijing, and you can go to the bank to consult related businesses. At present, digital currency payments are already available on some mainstream e-commerce platforms. Therefore, interested investors can also experience it.
05.What investment opportunities will the digital currency bring in A-shares?
First, the digital currency has been confirmed and established, and it will naturally generate many IT development needs. You can pay attention to the bank’s IT suppliers.
Second, the hardware aspect of digital currency may also require corresponding infrastructure construction, such as new POS machines, which is also a direction where we can focus our attention.
Thirdly, the digital currency may further generate some applications in scenarios, such as the use of digital currency in schools, the ability to bind campus cards, etc., which will have the opportunity to give birth to some related companies.
However, it is worth noting that the current digital currency is not the mainstream currency in the market, and the specific investment in the future still needs continuous observation.
06. How cryptocurrency works for beginners
When people think about how Cryptocurrency works, they often wonder what is behind the concept of “colored” coins and decentralized systems. Simply put, when you exchange between different currencies, you are exchanging money in the form of a transaction that took place on the network. Therefore, all transactions that were performed during the transaction were done so in the form of a transaction. This is why many people ask, how does Cryptocurrency work if there aren’t any miners or other central points where you can spend your coins? Simply put, there are no such entities because transactions are decentralized.
One great reason to use Ethical Currency is to trade Ethical Coins with another Ethical Currency, and to make profits off of it. An example of this would be if you had Ethereum, which is a highly valued Ethical Currency, and you wanted to invest it in a place where there are a lot of Ethereum exchanges. You would simply do searches on Google for places where you could find a large number of Ethereum exchanges, and you could then invest in those places. Therefore, this is how you can profit from Cryptocurrency exchanges and learn how to get started investing in Ethical Currencies.
