What to know about cryptocurrency

The world is revolving and the revolution keeps bringing new things to the surface. The best thing to do is to make sure you embrace the recent evolution. The era of technology and advanced technology has come to make life even easier for us all. Even though advancement continues.

Gone are the days when we had to reach the bank before we could have our money, the days of using tellers on counters before you could make withdrawal or transfer your money. Now the advanced way could allow you to do all these without taking a step out of your room. You can make transfers on your mobile and also use the atm for withdrawals. Life goes on and now you don't even have to use the banks for your money because the bank has full control over your money.

The era of cryptocurrency came and allowed everyone to have control over their money and made it easier to send a large amount of funds within a short period to anyone across the globe regardless of the country or native banking system.

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Embracing cryptocurrency could come in a hard way in the sense that you must learn the basics and know what it's all about before diving into it, if not there would be a time when you make grave mistakes and even come to regret embracing it. Just like every other thing requires experience, knowledge, and some level of expertise. You can't just jump into cryptocurrency without background knowledge. So I would be explaining some terminologies and techniques on how crypto works.

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DAO

It is an acronym for Decentralized Autonomous Organization. And they are a body or organization that deals with a structure in which token holders participate in the decision-making of an entity. There are different organizations created constituting different decisions makers, there is no central authority of a DAO and this is because the power is distributed among token holders

DeFi

DeFi means Decentralized Finance and it is a model for enabling cryptocurrency transactions, exchanges, and financial systems. Defi aims at making a different approach to the traditional system of finance using the Fiat currency and centralized system. It is a game changer in the financial world.

Centralized exchanges

Centralized exchanges is one of the most used medium of exchange in the crypto space. They are platforms that are used to exchange currencies online. They operate on changing fiat currencies to crypto assets and vice versa. They are the most common means of exchange and these are where huge investors have their transactions done.

One of the crucial elements of the centralized exchange is the use of third parties and they are called the “middleman”. The trader trusts the middleman to handle their assets. This is also a typical method used in the banking system where the customers have to entrust their funds to the banks.

The reason why people trust banks for their money is that there is some level of security and trust in them. They seem to hold them responsible for their assets. The same way happens on the centralized exchanges too. The centralized exchanges must have gained the trust of their traders helping them create a secure environment for their transactions.

Assets in the centralized exchanges are fully accessible by the middleman. So this gives the asset owner a chance of trading without the fear of losing their keys compared to the wallets whereby when their keys are lost the assets are gone alongside. Examples of centralized exchanges are Coinbase, Huobi, bitstamp, Kucoin, and many more.

Decentralized exchange

Decentralized exchanges are the opposite of centralized exchanges. This system cuts out the use of the middleman and makes room for secure and trustless environments. There is no use of an escrow in this system but every transaction is based on smart contracts and swaps.

The decentralized exchanges are less popular compared to the centralized exchanges. Examples of decentralized exchanges are Uniswap, DyDx, Pancakeswap, KyberSwap, Bakery Swap, Julswap, and many more.

Crypto Wallets

Crypto wallets are a medium programmed to store public and private keys for cryptocurrency transactions. It also has the functionality of encryption and signing which could be used for identification, smart contracts, and any other cryptocurrency transactions.

Wallets also contain the “seed phrase”. These are a unique set of 12- 24 dictionary words then they are encrypted to form private keys. The word forms are easier to memorize than the numerals. Examples of crypto wallets are Metamask, Trust Wallet, Coinbase Wallets, Safepal Wallet, Electrum Wallet, and many more.

We have two common types of crypto wallets.

• The hardware wallets
• The software wallets

The software wallets are digital accounts for your crypto assets. They are always in the form of applications, websites, and phones on online devices. They store your keys and also give access to your assets stored on the blockchain. There are a lot of software wallets and examples are the Metamask and Trust wallet.

The hardware wallet is a type of crypto wallet that stores assets in physical devices and grants access to your assets on the blockchain. The hard wallet device has the keys encrypted on a physical device which could be a USB or a Bluetooth connection. It is safer compared to software wallets because it stores its keys offline and is not easily hacked like the software wallet. Anyone who doesn’t have a wallet can never assess the assets in them.

Hacking and Security

There are a lot of scams and scammers out there today. They must be watchful and play false and fake games so that people would fall for their tricks then they can have full control over the assets and withdraw them all.

The scam could come in the form of hacking whereby codes and systematic upgrades are used to dig into exchanges and wallets then they withdraw all valuable assets from such accounts. So at times, they use phishing websites to mimic the original outlook of an exchange and once mistakenly logged into then you just grant them full access to your assets.

When trading or making crypto transactions, it's best to be watchful of the kind of exchange we transact on. And also be mindful of strange websites and unknown apps that request private keys.