#cryptoknowlogy

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White House Releases Framework on Regulating Crypto

The Biden White House just unveiled the first-ever framework for crypto regulation in the United States, outlining how the financial services sector should develop to facilitate borderless transactions and how to stop fraud in the market for digital assets.

Crypto companies have been anxiously anticipating a number of US government reports they anticipated would make clear what the Biden administration and regulators intend to do about digital assets. The majority of the documents are now open to the public, although the circumstances are still unclear.

The federal government recognizes several potential concerns associated with cryptocurrency, and the various agencies believe that stepping up enforcement operations may be a crucial step.

The framework comes after President Joe Biden called on federal agencies to investigate the advantages and disadvantages of cryptocurrencies and publish public reports on their findings in an executive order released in March.

Government agencies have been working to create their own frameworks and policy recommendations for the past six months to address the half-dozen priorities listed in the executive order, including financial inclusion, responsible innovation, countering illicit finance, promoting financial stability, and protecting consumers and investors. These suggestions make up the first “whole-of-government approach” to industry regulation.

The new regulations are intended to establish the nation as a leader in the administration of the digital assets ecosystem at home and abroad, according to national security adviser Jake Sullivan and head of the National Economic Council Brian Deese in a joint statement.

Digital Dollars:

Whether the United States will launch a digital currency (CBDC) issued by a central bank – Federal officials came to the conclusion that no digital dollar should be developed unless it is determined to be in the “national interest” despite the studies’ proposals and recommendations that the Federal Reserve “continue its continuing CBDC research, experimentation, and review.”

Who determines what is in the country’s best interest?

That’s a little unclear. Since the Fed will be in charge of managing it, the Fed will undoubtedly have a say in this. The government might also need to issue a decree, and Congress might also need to get involved. Future legal guidance from the Justice Department, which is anticipated to specify the credentials the Federal Reserve needs before it can issue a digital dollar, may provide the answer.

Although the Fed is independent, it will work with lawmakers, the government, and other federal agencies to determine the best course of action in the interest of the country.

Fighting Illicit Finance:

The White House’s new framework for crypto regulation includes a section on fighting illegal activity in the sector, and the suggested restrictions seem to have some actual impact.

A White House fact sheet states that the president will consider whether to ask Congress to amend the Bank Secrecy Act, anti-tip-off laws, and laws against unlicensed money transmitting to explicitly apply to providers of digital asset services, such as digital asset exchanges and nonfungible token (NFT) platforms.

The president is also considering whether to ask Congress to increase the fines for unauthorized money transmission and whether to change some federal laws to enable the Department of Justice to pursue crimes involving digital assets in any location where a victim of those crimes is detected.

The fact sheet states that Treasury will finish its assessment of the risk of illegal finance related to decentralized finance by the end of February 2023 and before the end of July 2023, it will have examined all non-fungible coins.

There is a lot of crime on the market for digital assets. The Federal Trade Commission’s investigation shows that since the beginning of 2021, more than $1 billion in cryptocurrency has been lost to fraud.

The SEC revealed 11 allegations against a fraudulent crypto pyramid and Ponzi scheme that raised more than $300 million from millions of retail investors worldwide, including in the US. Meanwhile, in February, in connection with the 2016 hack of the cryptocurrency exchange Bitfinex, U.S. officials conducted their largest-ever cryptocurrency seizure when they seized $3.6 billion worth of bitcoin.

National Security Advisor Jake Sullivan and Director of the National Economic Council Brian Deese stated in a statement that the various studies express concerns about consumer protections and illegal activity and offer solutions for the government to address these problems.

“Together, we are establishing the foundation for a smart, all-encompassing strategy to reduce the serious risks associated with digital assets and, when possible, to make use of their advantages. The future of this ecosystem will be shaped by our collaboration with allies, partners, and the larger community of digital asset holders.”, the statement stated.

A senior administration official told reporters that while the agencies are independent of the executive branch, the assessments urge that regulators “release new rules and advice” to fill in any gaps over how current financial regulations apply to cryptocurrencies.

The official stated, “The advice is for the agencies to evaluate, clarify, and coordinate their policies, and I believe that the view is just saying… they have the required authorities… for corporations who are not complying.”

Other Recommendations:

Senior administration officials stated that they are looking for a “redoubling” of investigations and enforcement activities against the industry in response to the question of what other practical next steps the reports propose. The SEC and Commodity Futures Trading Commission were singled out in a document released by the White House on Friday.

The Consumer Financial Protection Bureau and Federal Trade Commission, two federal regulatory bodies that have not been as active in the crypto sector as earlier regulators, should “redouble their efforts to monitor consumer complaints and to enforce against unfair, deceptive, or abusive practices,” the White House added.

Biden would advocate a federal license or oversight scheme for nonbank payment firms, according to the White House memo. One of the Treasury papers elaborated on this, stating that a legal framework for payments would reduce risks while assisting these kinds of businesses.

“Nonbanks are increasingly offering payment services, such as processing payments and issuing liabilities with a monetary value. Nonbank payments companies’ involvement could, on the one hand, promote greater levels of competition, inclusivity, and innovation. On the other hand, there may be dangers to customers, the financial system, and the whole economy if these enterprises are not effectively regulated and overseen.”, according to a Treasury report.

The report did not, however, describe a potential design for this structure. The federal regulatory framework that would allow crypto exchanges to operate nationwide with just one license, as opposed to needing to apply for a money transmitter license in each state where they wish to conduct business, has long been sought after by the industry.

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Top 5 Crypto Picks for 2022

Cryptocurrency is digital money that isn’t controlled by a centralized system, like a government. Instead, it’s built on the most widely used blockchain technology. As the use of digital currency on Wall Street keeps rising, more opportunities are becoming available. Currently, there are over 20,000 cryptocurrencies in the market.

Cryptocurrencies can be used to make purchases, but most people see them as long-term investments. The recent freefall across cryptocurrencies, including stablecoins linked to the U.S. dollar, illustrates how volatile cryptocurrencies make investing in them risky. Before you invest, it is important to understand what you’re getting into.

A fresh “crypto winter” may be about to hit the cryptocurrency market. However, following every previous bear market, cryptocurrencies have roared back stronger than before.

Therefore, risk-taking investors should be on the lookout for chances and make informed judgments to buy when the market is down.

I will show you the top 5 new cryptocurrencies to buy in 2022 in this guide.

Bitcoin (BTC):

Bitcoin (BTC) is the first cryptocurrency, having been developed in 2009 by a person using the name Satoshi Nakamoto. BTC operates on a blockchain, which is a ledger that records transactions and is shared across a network of thousands of computers, just like the majority of other cryptocurrencies.

Bitcoin is maintained secure and guarded against fraudsters because additions to the distributed ledgers have to be validated by resolving a cryptographic puzzle, a procedure referred to as proof of work.

Bitcoin is a wise investment because so many companies currently accept it as payment. For instance, Visa accepts bitcoin transactions. Additionally, after a four-year absence from cryptocurrencies, Stripe will now allow users to accept bitcoin payments. Even the bigger banks have started to include bitcoin transactions in their services.

Tesla only briefly took bitcoin, but if its mining becomes more environmentally friendly, it might do so once again.

Ethereum (ETH):

The second name you’re most likely to remember in the cryptocurrency world is Ethereum. The currency, Ether, is often used in the system for a variety of tasks, but Ethereum’s smart contract feature contributes to its popularity.

Ether (ETH), which serves as a means of transportation on the Ethereum network, is sought after by developers who want to create and run apps on the Ethereum platform as well as investors who want to acquire other digital currencies using ether.

It may have been introduced a little later than some other cryptocurrencies, but thanks to its cutting-edge technology, it has outperformed them all. It is currently the blockchain with the highest level of popularity and the second-largest cryptocurrency after Bitcoin.

Once an upgrade known as “The Merge” is fully implemented, it has the potential to advance even further. The change will move Ethereum to a proof-of-stake-based consensus, which will decrease the number of coins and make mining useless. The update is planned for the 3rd or 4th quarter of 2022.

Tether (USDT):

One of the first and most well-known stablecoins, Tether (USDT), is a cryptocurrency that aims to connect its market value to a currency or other outside reference point in order to lessen volatility. The majority of digital currencies, including popular ones like Bitcoin, have frequently experienced times of extremely high volatility.

Tether and other stablecoins aim to reduce this volatility in order to draw in consumers who may otherwise be hesitant. The cost of Tether is directly correlated with the value of the US dollar. The mechanism allows users to transfer money more quickly and easily from other cryptocurrencies back to dollars rather than actually converting to fiat money.

Investors who are skeptical of the severe volatility of other coins choose Tether because its value is said to be more stable than that of other cryptocurrencies.

Binance Coin (BNB):

One of the biggest cryptocurrency exchanges in the world, Binance, offers its users the ability to trade and pay fees using the Binance Coin cryptocurrency.

Since its debut in 2017, Binance Coin has developed, and it now performs more functions than only allowing transactions on Binance’s exchange platform. Now, it can be utilized for trading, processing payments, or even making trip plans. Additionally, it can be traded or converted into other cryptocurrencies like Ethereum or Bitcoin.

Investors who engage in a lot of trading should be aware that recently, Binance temporarily suspended deposits and withdrawals for various networks, including Polygon and Solana, in order to execute updates. Airdrops—rewards based on a percentage of consumers’ deposits—were unaffected by a more recent one, which occurred on April 8.

Initially, Binance Coin was an Ethereum blockchain-based ERC-20 coin. It eventually had a mainnet launch of its own. A PoS consensus model is employed by the network.

Polkadot (DOT):

A special blockchain compatibility protocol called Polkadot (DOT), which was established in 2016, is created to link several networks. It also makes it possible for parachains, or parallel blockchains, to perform transactions and exchange data in a secure manner. The Polkadot security allows developers to create their own blockchains.

Polkadot was created by Gavin Wood, who also worked as Ethereum’s chief architect. The exciting thing about DOT is that the total supply is not strictly capped. Instead, a new token is consistently given forth.

The Substrate blockchain building framework is used to create the relay chain for Polkadot. Known as libp2p, Polkadot incorporates adaptable cross-platform network frameworks for peer-to-peer applications.

Another well-known feature of Polkadot is its ability to let users stake DOT tokens, which rewards them for their contributions.

Each time a user bets DOT tokens, they are utilized to validate and mine the blockchain, aiding in the security and upkeep of the network while also earning rewards for their efforts. The DOT token’s value rises as a result of each of these use cases.

Conclusion:

Because of the volatility of the cryptocurrency market, those who speculate on these digital assets should not risk more money than they can afford to lose. Cryptocurrency assets have experienced severe volatility in 2022. Since the market’s record-breaking highs in November 2021, it has been falling. Additionally, it might be risky for beginners to trade because they may be up against highly experienced competitors.

Here are some other considerations to bear in mind when you choose whether cryptocurrency is the best investment for you:

How quickly transactions are completed

The costs of doing a transaction

The possibility to use your cryptocurrency for standard transactions and bank transfers

Remember that cryptocurrencies aren’t a get-rich-quick scheme if you’re only trying to invest and not performing any network transactions. You should view it as a long-term investment instead.

Lastly, if you like what we do here at Cryptoknowlogy, do give us a shoutout in your own community of wonderful human beings who are interested in cryptocurrency.

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Why Cryptocurrency is So Volatile?

Everybody knows that the crypto market is notorious for its volatility. Crypto natives and investors are not any strangers to the rollercoaster ride that is the crypto market.

Popular cryptocurrencies can fluctuate 10, 20 even 30 percent within a daily trading day. But what makes crypto prices so volatile? Fundamentally, any market is driven by supply and demand. In crypto markets, the consequences are more exaggerated as there is less liquidity. Liquidity refers to the convenience with which an asset can be bought, sold, or converted without affecting its market value. In this article, I will highlight the reasons for such extreme market volatility.

News and Tweets from Crypto Influencers:

There’s the ever-accelerating news cycles and tweets from crypto influencers that are  the main reasons for abrupt price changes. An honest example is Elon Musk’s tweet from early May of 2021, saying “Tesla would no longer accept bitcoin due to energy concerns.” and after this tweet, Bitcoin tumbled nearly 15 percent. Depending on the nature of the news, fear or greed might be incited among traders — the two most important elements of any stock market. In turn, traders panic sell, or greed-buy their cryptocurrencies, causing large price swings. As these price swings become larger and bigger, other traders will react accordingly causing even more volatility.

Increasing Participation of Institutional Investors:

Next factor is the increasing participation of institutional investors often known as whales. At times, these whales execute billion-dollar transactions that are enough to shake a market. The whales create volatility which will incentivize speculators — usually small-time traders to move in and out of positions, causing a consequence.

Time-Span of Crypto Market:

The crypto market remains relatively young and small compared to traditional markets. The primary 50 Bitcoins for instance were mined in 2009, hence lacking the trade history of traditional assets like land or precious metals. Because the crypto market is so young, it’s still within the price discovery phase. This is often the most volatile cycle of any asset’s life, especially when it involves unprecedented technology. As the crypto space is gaining more legitimacy, institutional investors will start taking positions with more conviction. This might make crypto markets less volatile within the long run. And as the crypto ecosystem matures, it would start resembling the healthy volatility patterns of traditional markets.

Lack of Intrinsic Value:

Stock market for instance is backed by companies that sell tangible goods, earn revenue, pay taxes, and give employment for people. Cryptocurrencies, unlike stocks are hard to value since most of them lack fundamentals to base their market price on and many projects when they even list on the exchange do not have fully developed products.

In some ways, the crypto market is more like a venture market in terms of risks and the stage of product development. But unlike the venture market, these projects have their listing on crypto exchange so you get higher risk projects listed on crypto exchange. They are more prone to volatility than stock market with more mature projects in trading. It would be foolish to say that every crypto coin or token out there has no fundamentals and solid base since there are enough projects that can and should be seen as a serious play for investors like Ripple, Ethereum. However, let’s not forget that there are over 12000 coins listed on Coin Market Cap already and unfortunately most of them don’t have anything behind them, maybe except the passionate community or paid celebrities to market them which is not much for sustainable growth and stability.

Decentralization:

Cryptocurrencies have caused a revolution within the financial sector and their true potential is yet to be discovered within the future. it’ll take some time before traditional financial markets and fiat currency will have to compete with a contender in the face of cryptocurrencies and there are reasons for that. Don’t get this wrong, decentralization is one among the reasons why crypto became so popular and managed to draw so much attention as well as investors in their funds however, there’s a downside to this. Since cryptocurrencies are decentralized they do not have governments or any other powerful entities behind them to support their stable value. There are not any mechanisms or tools to stabilize the price of a cryptocurrency besides the markets ones. Thus, if traders lose faith within the cryptocurrency and stop buying it, it’ll lose its value drastically.

Lack of Regulation:

Just like with decentralization, lack of regulation features a much broader meaning in case of crypto being both a good side and a bad side of the crypto world. Lack of authorities like banks or governments directly affects the volatility of the crypto assets. Cryptocurrencies in their terms are freewheeling assets, that can’t be governed or regulated to stay within certain borders and that is a straightforward way towards uncontrolled price volatility.

Lack of massive Money:

Yes we are already aware that numerous hedge funds and venture capital companies have opened their hearts minds and wallets towards crypto currencies and blockchain technology. However, most institutional investors and major trading firms are very sceptical about investing in cryptocurrencies. Certainly today’s cryptocurrency markets are far more mature and interesting for institutions than they were saying five years ago, still the shortage of regulations heavily reduces the willingness of big money to invest in digital assets. Thus because institutional investors stand back from the cryptocurrency markets they lack the solid base to be stable.

Inexperienced Investors:

Crypto is essentially accepted and embraced by Gen Z and millennials those who trust tech companies and corporations more than they trust the government. Crypto, unlike traditional markets like stocks or land does not have high barriers to entry. If you’ve got access to the internet and a $100 starting capital you can start investing and trading in the crypto market.

There is no need for accountants, trading licenses, or large starting capital. Low barriers and the absence of requirements have led to a sudden influx of inexperienced traders and investors into crypto markets who do not have much expertise in long-term investing.  All that means that when the market goes down, all these green investors tend to panic and dump their bags thus creating chaos in the market.

Conclusion:

We have seen a lot of things and factors that make the crypto market volatile. Anyone can decide the risk and advantages involved in the rise and fall of market prices.

In simple words, it is said that most cryptocurrencies can either make a person rich or pull down a person to the trash in seconds still, people should maintain a clear mindset while trading in bitcoins and other cryptocurrencies, as the mindset will decide the win-lose scenario of that particular trade. 

Lastly, if you like what we do here at Cryptoknowlogy, do give us a shoutout in your own community of wonderful human beings who are interested in cryptocurrency.

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How to Protect Your Cryptocurrency from Hackers

Hackers love stealing crypto because it is decentralized, private, and censorship-resistant and no banks or insurance companies going to bail out if we got hacked.

It is very easy for hackers to take our precious coins and vanish. If you think it won’t happen to you but when it does, you have instant regret.

Ledger hack leaked almost $300K crypto customer’s information like your address, name, email, phone number, and more.

There are also more and more phishing attacks in both volume and complexity.

You can’t rely on corporations anymore to protect your info and keep your data safe. 

In this article, I will cover all the methods by which you can protect your cryptocurrency from hackers.

Passwords:

You have no idea how sophisticated hacking tools are these days. Hackers have access to tools that are able to very easily crack passwords with brute force attacks.

Often they use a list of commonly used passwords that can be easily bought on the dark web usually password lists that come from well-known data breaches.

There is a strong chance that your password could be among the millions that they can fire in the hope of landing a lucky shot.

If you want to be extra secure with your passwords then you’re going to want to use extra strong and unique passwords for all your different accounts.

Network Safety:

Use VPNs in public places so they can’t have a compromised router stealing your data.

Check your own home router, reset settings, set a very secure password, and don’t forward random ports. Also check to see if there are any strange connections of devices you don’t recognize in the past few days, weeks, or months.

You can also use network scanners. A lot of antivirus software also includes this and they tell you all the vulnerabilities that your network may have. 

2FA Security:

I will also suggest that you use a phone-based 2FA and not an email one in case your email is compromised. You can use an authenticator app like Microsoft Authenticator, Google Authenticator, or Authy.

The one phone-based two-factor authentication method that you should however avoid is an SMS-based one. This is because of a pretty common attack vector called a Sim Swap. 

Basically, this is when a hacker is able to gain access to your phone number through your phone or network provider, they trick them into moving the number over to a phone that they control and they can then use this in order to change all your passwords gain access to your emails and eventually your crypto.

This has happened too many times to count and some have been able to steal upwards of a hundred million dollars.

So just don’t use SMS-based authentication it’s not worth the risk, get an authenticator app instead.

Web Browser Safety:

Don’t save passwords in your browser like Chrome, because if hackers hack your account, they can easily get access to your browser. 

Malicious browser extensions– Be very careful about which browser extensions you save and utilize.

Bookmark important sites, especially Crypto sites, so you don’t get tricked by fake websites that look very similar to real ones.

Multiple Exchange Accounts:

This is the other method to protect your cryptocurrency from hackers.

If you have your hot coins split across a number of different exchange accounts then there is yet again one less point of failure. These points of failure are not only related to the risk of potential hacks on exchanges but also in those periods when the exchanges go down as they often do.

I am sure that you’ve experienced times when you can’t log into your account just when the markets are going up. Those of course are exactly the times that you might want to buy the dip or take some profit. It’s incredibly frustrating if you can’t log into your only exchange account to do that.

It’s not only about having more than one exchange account, though it’s also about making sure that the exchanges that you are using are safe and reputable.

To read more, visit Cryptoknowlogy.

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Will Cryptocurrencies replace fiat money in future

Many cryptocurrencies have different features and objectives. A subset of cryptocurrencies aims to solve some of the perceived challenges of fiat currency and aspire to become a form of money to make payments or store value.

For many years people used precious metals as the standard medium of exchange.

However, governments have adopted a form of money called fiat which is a currency that is not backed by a physical good but by the confidence of the government issuing the currency.

IMF recently released a paper that explores the decline of the US dollar and the different currencies that could rise to replace it.

In this article, I will explain you how Bitcoin could become a world reserve currency.

Bitcoin As Reserve Currency:

Central banks are ditching dollars for non-traditional currencies. I reckon it’s reasonable to assume that they’re doing this because the biggest fiat currencies are on their way out including the US dollar. The threat of sanctions certainly isn’t helping either.

In addition to being a non-traditional currency by definition bitcoin’s market cap isn’t far off from many of the non-traditional currencies being held by central banks.

Moreover, many of the monetary technologies that are making it possible to effectively swap between non-traditional currencies are being improved if not outright created by the crypto industry.

While BTC probably doesn’t fit too well within the existing foreign exchange framework this could also be the case in a few years time especially as assets increasingly become tokenized including fiat currencies.

Bitcoin is neutral money meaning central banks won’t ever have to worry about their BTC holdings being frozen or their BTC transactions being blocked by foreign countries.

Never mind the fact that there are many countries considering making Bitcoin legal tender and some are even considering accepting BTC as payment for international trade which is another reason why central banks hold dollars on their balance sheets.

As such I predict that BTC will eventually find its way into the non-traditional currency category assuming the IMF counts it as a currency of course.

Once that happens, it’s quite possible that BTC’s share of this non-traditional currency pool will increase in a similarly exponential manner as non-traditional currency holdings on central bank balance sheets.

This means a 20x increase over a 20-year period and that would likely translate to a Bitcoin market cap in the tens of trillions of dollars which is roughly the M1 money supply for the US dollar.

The pandemic money printing has probably accelerated the transition to non-traditional currencies and the next financial crisis will certainly add fuel to the fire.

Now I know this may sound crazy but assuming all of my assumptions are correct, this means BTC could become a serious contender for world reserve currency status sometime between 2040 and 2050. 

And this coincidentally lines up with the projected end of the US dollar’s status as the world’s reserve currency.

I personally believe that this is possible but I know there’s a long way between point A and point B and we are almost certainly going to see a lot of volatility in the meantime.

Cryptocurrency vs Fiat Currency Comparision:

Cryptocurrencies are digital medium exchanges. So basically instead of having a US dollar to give to someone or any other type of currency that’s fiat we actually use a digital currency which could technically be used anywhere in the world if they all accepted it. So we don’t ever have to go to another country and change our fiat currency to be able to use ours in their country.

Some cryptocurrencies have a limited supply which makes them scarce. The limited supply will make it more and more valuable.

On the other hand, Fiat currency is a method of payment that has acquired the status of legal tender by the government. The core value of fiat money lies in the fact that it is approved by the government and is, in fact, a trustworthy currency.

However, fiat currency may not have much value on the face of it. For instance, paper money is essentially a piece of paper that the government backs. A piece of paper has no intrinsic value but only becomes worthwhile after the public instills their trust in the government’s ability to back such currency.

How are cryptocurrencies valuable?

Many similarities exist between cryptocurrency and fiat currency, despite both being the opposite ends of a spectrum.

Cryptocurrencies represent a shift in power from government-regulated systems toward a self-regulating digital ledger with no place for authoritative oversight.

Crypto enthusiasts have time and again pointed out that fiat money differs from cryptocurrencies only in terms of tangibility.

It can be seamlessly applied to daily life as a form of payment, as seen in El Salvador where Bitcoin has become a legal tender and is now a Fiat currency.

Meanwhile, crypto supporters consider the existing volatility in the crypto space as a source of apprehension about money. However, one should not forget that even the US dollar is not free of instability.

Despite existing volatility, cryptocurrencies have a few essential factors providing them with some value.

Firstly, the underlying blockchain technology is a marvel for modern-day businesses as it provides a secure financial system to help them keep track of transactions, with zero possibility of an error.

The exceptionally powerful blockchain software relies on the Proof of Work or Proof of Stake mechanism to mint new coins, offering a restricted supply.

Moreover, cryptocurrencies are believed to have the edge over fiat currencies in terms of their universal trading feature.

Cryptos can be traded from anywhere by anyone at any time without any need for users to convert their value across nations.

Conclusion:

We can say that cryptos getting acknowledged as legal tenders will be a progressive path breaker for the world, but before it happens there is a way to go and it will be in near future but not soon.

It is assessed that by 2023, the worldwide blockchain market will go up to 23.3 billion. These figures are jawbreaking and recommend that crypto is digging in for the long haul and may wilfully replace fiat later on in the future.

But one Word of Caution:

As with any investment, make sure you consider your investment goals and financial situation before investing in any cryptocurrency. Cryptocurrencies can be extremely volatile and it’s still a very speculative investment. You should invest carefully and with caution.

Lastly, if you like what we do here at Cryptoknowlogy, do give us a shoutout in your own community of wonderful human beings who are interested in cryptocurrency.

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Different Types of Cryptocurrency

There are over 12000 cryptocurrencies and each of them has its own purpose or use case that's meant to give it value.

Knowing which category a crypto falls into is crucial if you're investing in the crypto market.

This is because each crypto category has its own pros and cons. They also tend to pump and dump at different points during a bull market.

So in this article, I will tell you about these crypto categories and how you can use this knowledge to maximize your gains and minimize your losses.

Most cryptocurrencies fall into categories such as stores of value, smart contracts, oracles payments, privacy, 

exchange tokens and of course meme coins.

Store Of Value Cryptocurrencies

Store of value cryptocurrencies are designed to hold or even increase their purchasing power over time.

Every year regular currencies lose between two to three percent of their purchasing power. This is because governments around the world are constantly printing money to stimulate economic growth. 

The more money the government prints, the more it loses its purchasing power and this is a big part of why cryptocurrencies were invented in the first place.

Bitcoinwas created in 2009 as a response to the 2008 financial crisis. Bitcoin is the only cryptocurrency that falls into the store of value category.

Bitcoin is technically the most secure payment network on the planet.

Smart Contract Cryptocurrencies

Smart contract cryptos are designed to be programmable with less emphasis on storing value.

Smart contracts are basically programs that do something automatically when a certain set of conditions is met.

The coolest part about smart contracts is that they can be used to create different types of cryptocurrency tokens that are fungible like a regular currency or non-fungible like a rare baseball card.

The difference between smart contracts and regular programs is that smart contracts are immutable 

 and decentralized.

In other words, you cannot modify the smart contract once it's been created and it's impossible to shut it down because it exists on a massive network of computers spread around the world.

When you combine multiple smart contracts together you get a decentralized application or dap.

There are daps for everything including payments, trading, lending, and borrowing. 

The best part about dapps is that no middleman is taking a cut or stealing your data.

In contrast to the store of value cryptocurrencies, smart contract cryptos get their value from their utility as payment for smart contract and dap transactions.

For Ethereum, these fees are paid in ETH and for the Binance Smart Chain, these fees are paid in BNB, and so on.

Smart contract cryptocurrencies offer a radical alternative to the digital and financial infrastructure we use today.

This alternative is referred to as web 3, an evolution of the current web 2 internet.

Oracle Cryptocurrencies 

Oracle cryptos make it possible to bring real-world data to smart contract cryptocurrency blockchains.

Smart contract cryptocurrency blockchains need real-world data for their dapps to have real-world use cases. This data comes from oracle cryptocurrencies.

The difference between data feeds like Api’s and oracle cryptocurrencies is the data feed that oracle cryptos provide are decentralized.

Now the way this normally works is that dozens of individuals or institutions will tell an oracle crypto what the

price of something is and the oracle will use the average of their answers.

Like smart contract cryptocurrency coins, oracle crypto tokens are required to pay for the fees associated with fetching this data.

Chain Link is currently the largest and most adopted oracle crypto on the market.

The primary advantage of oracle cryptos is that the demand for their tokens is likely to grow in tandem with the amount of smart contract cryptocurrency dapps and users

The primary disadvantage of oracle cryptocurrencies is that they have allocated enormous amounts of their pre-mined token supplies to their teams and private investors.

Payment Cryptocurrencies

Payment cryptos aim to replace the current payment systems we use today and sometimes use smart contract technology to do this.

If you've ever sent money overseas you know how expensive and slow it can be. If you run a business then you know how much money payment processors like Visa, Mastercard, and Paypal take from each transaction. If it involves moving money there is a middleman somewhere taking a cut slowing things down and adding complication to processes that would otherwise be simple.

Instead of using an outdated payment network that takes days to settle payment cryptocurrencies make it possible to finalize transactions within seconds at a fraction of the cost.

As with other cryptocurrencies, any payment focus coins or tokens can be kept on your own personal wallet. You don't have to rely on a bank to store your funds.

Popular payment cryptocurrencies include Bitcoin Cash, Dash, Terror, and Telcoin.

Privacy Cryptocurrencies

Privacy cryptos are designed to preserve your privacy when making transactions or using dapps.

Privacy cryptos like Secret Network make it possible to create privacy-preserving dapps.

Others like tornado cash make it possible to privatize your public transactions on Ethereum by mixing up your funds and sending them to a new wallet address with no transaction history.

Popular privacy cryptocurrencies like Monero focus on private payments and use privacy technology.

The primary advantage of privacy cryptocurrencies is that most of them are extremely well designed and built to last.

The primary disadvantage of privacy cryptos is that they're frequently targeted by regulators because of their use in illicit activities. This often results in privacy coins being delisted from cryptocurrency exchanges.

Stablecoins

Stablecoins are digital representations of fiat currencies.

They fall into one of these three groups: - 

Fiat-collateralized: This cryptocurrency is backed by fiat currency. Examples are Tether (USDT) and the Gemini Dollar (GUSD).

Crypto-collateralized: This cryptocurrency is backed by another cryptocurrency, an example is DAI.

Non-collateralized: Non-collateralized stablecoins rely on a smart contract to buy/sell the stablecoins in order to keep the price constant.

Exchange Tokens  

Exchange tokens are owned and operated by the cryptocurrency exchanges they belong to.

Exchange tokens are the combination of a membership subscription and company stock.

Exchange tokens are like a membership subscription because they can give you a whole bunch of perks such as trading fee discounts and VIP access to early coin and token sales.

Exchange tokens are like company stock because the performance of an exchange token depends on the popularity of the exchange in question.

Example is Binance Coin.

Meme Coins

Meme coins have no specific use case and exist for no other reason besides hype and a false promise of profit.

Most meme coins exist for one purpose and that is to enrich their creators.

Dogecoin is different as far as meme coins go. Dogecoin was created as a joke and one of the only reasons it survived the last bear market is because it can be merged and mined with Litecoin at no additional cost.

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What Is a Blockchain and How does it Work?

What is a Blockchain?

Blockchain is a revolutionary technology that has changed how transactions work. It intends to provide a safe and secure mode of transactions by using digital cryptocurrencies that cannot be manipulated by anyone.

Blockchain is a decentralized, distributed, public ledger system.

Blockchain is a set of blocks that record information of transactions like who made the transactions to whom.

The amount of trade in the form of a digital ledger that is distributed across the entire network making it more

secure and impossible to change, hack, or cheat the system.

Then it is verified and validated by every node in the blockchain network to proceed with the process of making the transactions.

Blockchain technology is a solution to the problem of centralization, a decentralized way of maintaining a ledger that is practically impossible to falsify.

Cryptocurrencies like Bitcoin, Ethereum, and many more that make use of this blockchain network for transactions, help you keep track of them as the market capitalization of the cryptocurrency.

Almost every day new cryptocurrencies are coming in front and more and more people are willing to participate in this revolution of the economy.

Blockchain is believed to revolutionize the economy and technology of the world in the coming future.

How Does a Blockchain Work?

A blockchain is a distributed property that anybody can access. Once data is recorded on a blockchain, it cannot be modified. Hence, data is only recorded when the maximum number of participants agrees. 

The functioning of the blockchain is dependent on three components: 

Data, Hash, and Previous Block Hash.

Step 1:Data

The type of data stored in a block differs based on the blockchain. If the data is about Bitcoin, the blockchain maintains information about a transaction such as the sender, receiver, and transaction amount.

Step 2: Hash

A hash, similar to a fingerprint, is also included in the block. When a block is created, its hash is computed. If something changes within the block, the hash will change as well. That is why hashing aids in detecting changes in a blockchain. If a block's fingerprint changes, it is no longer the same block.

Step 3: Previous data hash

A hash of a previous block is the final piece in a blockchain. The hash of the preceding block aids in the creation of a chain, and as a result of these aspects, the blockchain is extremely secure to trust and use. In a blockchain, each block is linked to the previous hash's data, but if any of the blocks' data is tampered with, the hash changes instantly, and the subsequent block recognizes it and makes the changes immediately. 

Computers nowadays are capable of storing hundreds of thousands of hashes each second. To make the blockchain valid again, the hash of tampered blocks is altered by default, as are the hashes of other blocks. This is accomplished with the assistance of proof of work that has been discussed above.

Blockchain Decentralization

Blockchain technology, at its core, is a decentralized version of the client-server model. Instead of having all of the data and information in one server that is accessed by the clients, rather place that information onto all of the clients. These client computers are then termed “nodes” and form part of the decentralized network.

When there is an update to the network, each node on the blockchain will update the distributed ledger and make sure that there is consensus among all the nodes as to the true form of the ledger. Consensus is formed when the majority of the nodes agree on the current form.

This is what makes blockchain technology so revolutionary, there is no need for a central authority of trust. Each of the network nodes can authenticate the entries and through defined mathematical and economic disciplines, each node is trusted by the others. If there is a redundancy in any one of the nodes then there should be no impact on the network or ledger.

The Four Elements of a Blockchain:

there are four elements a blockchain needs to actually have a life of its own. 

Peer-to-Peer Network:

A network of computers, also known as nodes, that are equally privileged. It’s open to anyone and everyone. This is basically what we already have today with the Internet. We need this network so that we will be able to communicate and share with each other remotely. 

Cryptography:

Cryptography is the art of secure communication in a hostile environment. It allows us to verify messages and prove the authenticity of our messages, even when malicious players are around. We need cryptography because of the first element. 

Consensus Algorithm:

You can switch the technical word “algorithm” with the word “rule”. This means we need to agree on rules on how we add a new page, also known as a block, to our records. 

There are many types of consensus rules, in Bitcoin’s case we use a consensus algorithm known as Proof of Work. 

This algorithm states that in order for someone to earn the right to add a new page to our ledger they need to find a solution to a math problem, which requires computational power to solve. 

Computers around the network run calculations to solve the math problem and in doing so, consume a lot of energy. In other words, they do a lot of work. That’s why when one of them finds the number that solves the problem and displays it to the network, they’re basically displaying a “proof of work”. 

Punishment and Reward:

This element is actually derived from game theory and it makes sure that it will be in people’s best interest to always follow the rules. 

So far, we’ve set up a network that has a way to communicate securely and follows a set of rules for reaching consensus. Now we’ll glue these elements together by giving a reward to people that help us maintain our records and add new pages. 

This reward is a token, or coin, that is awarded each time a consensus has been reached and a new block is added to our chain. 

The important thing to remember is that the punishment and reward system works on psychological behavior. It turns the rules of the system from something you need to follow into something you’ll want to follow since it will be in your best interest to do so. 

Public vs Private Blockchains:

A public blockchain is an open chain that does not require any kind of authorization to join. The general public is welcome to participate without authorization because it is of a decentralized nature and is not controlled by anyone. The public blockchain allows all branches of the chain to create and validate data. It doesn’t require any 3rd party. 

A private blockchain is a sort of blockchain in which only one organization has access to the entire network. A private blockchain refers to protocols, or rules, that screen and limit the players who can participate in their ledger. 

Private blockchain solutions include some level of security to control who has access to the data and who can be trusted with it. Employees of the enterprise are often the only ones who have access to this data. 

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