Cryptocurrency Investing - Risks and Basics You Should Know

Before starting today's content, let me send you a poem:

The evolution history of the stock market chicken

In the beginning, I only traded in stocks. I only lost money when they fell. Later, I learned to short stocks and lose money when they went up. Later, I learned to sell stocks and they lost money. Later, I changed to call stocks. I will lose money. I have recently started to speculate on coins. I even lose money on holidays.

If making money is so easy, why are there so many office workers rushing to work every morning? Why don't they just stay home and count the money.

Risks, ideas and insights

You may have heard that it is possible to make huge profits in the cryptocurrency market, but the money in the market is smart and will always drill where there are opportunities. If you hear that there is a super profitable place and no one goes there, not everyone You are the smartest, but because its risk and entry threshold must be relatively high, so few people care about it, or it may even be a scam. This is why high profits are always accompanied by high risks, and you feel the most stable and safe. Bank deposits tend to have the lowest profit opportunities.

The first cryptocurrency ancestor, Bitcoin (BTC), was mined on January 3, 2009. We call it the genesis block of Bitcoin. It has only been more than ten years since the genesis block of Bitcoin. , Compared with traditional finance, which is a super new market, emerging markets will naturally have some problems such as insufficient liquidity or violent price fluctuations, so you will immediately find that things with large fluctuations are easy to make money in it, but high Profits are accompanied by high risks, and the probability of losing money is naturally high, so if you are really interested in investing in cryptocurrencies, you must first understand that it has high risks. Do not know at all.

Here is a picture that was very exciting when the market fell sharply before. When the market is killing, many garbage coins just drop into shit or even return to zero for you to see. I often hear new project parties appearing on the Internet, constantly boasting. How good is your currency, and what kind of benefits can early investors have? Of course, you can't say that 100% must be a scam. After all, you can see that all mainstream coins have had such a day now~ But if you are not very deep If you don’t understand it, just jump in and play, and even press your family’s property to go in and play with coins of unknown origin. Returning to the Zero Sleeping Park may be your end tomorrow.

Although I'm a loyal listener of the Cancer Podcast, I don't agree with his often saying "don't touch what you don't understand". I think he said this because he hopes everyone can do their homework beforehand. Enter, but you must have heard the saying "one day in the currency circle, ten years in the world", there are countless new information bombarding this place every day, whether it is news, celebrity tweets, application of new technologies, new economic models, new If you really wait until you understand things such as project releases, etc., when will you wait until you can enter the market? It’s a relatively good practice to walk and see, and my suggestion for newbies is “you can try things that you don’t understand but are interested in first, and learn by doing.” I think as long as you start investing, even if it’s only a few hundred dollars Taiwan dollars will naturally make you develop the mentality of thinking about serious research, because you are on board.

How small is the small amount? It is the amount you can afford. Don’t look at Bitcoin and Ethereum, which seem to be too expensive to buy. In fact, you don’t need to buy one at a time. Since the advent of Bitcoin, everyone has a consensus that the smallest unit of currency is 10e-8 (0.00000001 ), we call this unit a satoshi, which means that our minimum transaction amount is 0.00000001 bitcoins. Assuming that the price of one bitcoin is 50,000 US dollars and the exchange rate between US dollars and Taiwan dollars is 28 yuan, then 0.00000001 bitcoins Converted into Taiwan dollars, it is 0.014 yuan. If a bitcoin asks for one million US dollars one day, the minimum unit of bitcoin is only 0.28 Taiwan dollars. However, many centralized exchanges will set the minimum amount of a single transaction, which is about 10 US dollars. , so if you just want to experience it for the first time, I would suggest that you may put three or five hundred Taiwan dollars to try and see how these things are used, and these money will be lost even if you lose everything and return to zero. will affect your life.

Why cryptocurrency?

It is not that you have to invest in cryptocurrencies. Other assets such as real estate, Taiwan stocks, U.S. stocks, bonds, etc. should be considered in many ways. Compared with all in specific assets, decentralized investment will be a relatively good strategy, and if you want to say The advantages of investing in cryptocurrencies, as we said above, you can buy a super small amount instead of buying a complete coin at a time, and the exchange fees are almost higher than those of Taiwanese securities brokers or real estate brokers. It is lower, and sometimes there are activities that can reduce the handling fee to zero. For novice investors or those with a small capital, it will be a relatively fun place to play. In addition, if you have seen dozens of single-day transactions in the currency circle % ups and downs, maybe it is more difficult to go back to stocks because of the short-term fluctuations in the market, resulting in inaccurate investment judgments.

If you are already investing in other assets and you are just starting to pay attention to cryptocurrencies, then you may have to understand what investments we are really investing in. When investing in different cryptocurrencies, what can be said behind the investment? Cryptocurrency is still in the early stage of growth, so many things are actually still in the stage of selling dreams. After slowly understanding, I will grasp a "benefit ratio" in my heart, and then it is not too late to decide how much % of my total assets to invest.

blockchain

Blockchain is a very big topic. There is not only one blockchain in the world, and the applications of each chain are different. Asking what a blockchain is is like asking what artificial intelligence and deep learning are. It is impossible to finish the story in one moment, so we can talk about the most primitive and pure blockchain first. From here, we may feel a little bit about the blockchain.

At the beginning, let’s clarify one thing. Bitcoin is not equal to blockchain. The world of blockchain can be divided into “application of currency” and “application of chain”. There may be some economic models in the application of currency. Just like when we introduced the NFT article before, if you want to buy and sell NFTs in OpenSea , you usually need ether for the transaction, then buying NFT with ether is itself a currency application; and the application of the chain It is related to the comparison of technology. In fact, it is only necessary to build several network nodes in the same computer, so that they can maintain a common goal together, and a chain can be formed without even issuing coins. For example, the Hsinchu government once launched The blockchain combined with the production and sales history of agricultural products is an application case of using technology to check food safety.

The operation of the blockchain can be understood as the data and assets are stored in one block after another, a block is the smallest unit of time in this decentralized world, and the blocks are connected by cryptography. The relationship between them, so you often hear that the miner is responsible for calculating the password between blocks. The first person who calculates the password of the new block can connect the two new and old blocks together. This Actions are regarded as maintaining the operation of the blockchain, so block rewards are obtained, and the rewards are usually the coins of that chain (the bitcoin blockchain will issue bitcoins).

Bitcoin blockchain

The world's first blockchain is the Bitcoin blockchain. When it was first created, its purpose was very simple. It was just an accounting system. It would record how much money everyone has and who gave it to whom in which block. How much. There will be two roles, one is the user, who pays some transfer fees in this accounting system and enjoys using this system, and the other is the miner, who is responsible for maintaining the operation of the blockchain and receiving rewards.

Since it is a ledger, of course we don’t want the ledger to be damaged or altered secretly by the bad guys, so it can be said that the main feature of the Bitcoin blockchain is the distributed ledger and the immutable features. One of the core features of most emerging blockchains!

Is it possible to hack the Bitcoin blockchain?

In theory it is possible, but in practice it makes no sense to do so. If you have done a little homework before, you may have heard of 51% attack (double-spend attack). You can write what you want to write, and no one else can tamper with it after it is written. We can calculate how much the cost of doing this may be, so that you can feel more why it is meaningless.

At the moment of writing the article, the computing power of the entire Bitcoin network is about 150EH/s, which means that 15 times 10 to the 19th power (150,000,000,000,000,000,000) hash functions can be calculated per second. If you want to generate new computing power out of thin air, there are already existing For the ant mining machine S19j-Pro, it is about 105 TH per second, which means that 12 times 105 times 10 can be calculated per second. The power (105,000,000,000,000) hash function, so about 1.46 million units are needed. The price of the mining machine fluctuates with the price of the currency. The price of one is almost 300,000 or more, but we assume one here. Mining machines cost 300,000 Taiwan dollars. On the premise that so many mining machines can be bought with 300,000 yuan, the cost of mining machines alone will cost about 400 billion Taiwan dollars. The power supply problem of mining and the cost of heat dissipation have not been taken into account. If there is such a large amount of money, there is no need to spend so much cost in order to attack the blockchain, because there must be more risks in the market. More profitable investments are worth his while.

However, you only know how the blockchain works and you don't know how to hold it, usually we have a cryptocurrency wallet to store these cryptocurrencies.

cryptocurrency wallet

The coins and bills in our hands need a wallet for us to carry, or an account like our bank where we can put money in, or the coffee you just bought needs a cup, like all the If you want to get it, you need to find a container to put it in. The cryptocurrency wallet is a container used to store encrypted assets. The wallet is divided into cold wallet and hot wallet, but if it is just a small amount of money, we only need It is good to understand hot wallets. Although cold wallets are more secure, they are also more expensive, and hot wallets can be generated for free!

Think of a cryptocurrency wallet as a safe, then when you have this new safe, you will have a set of passwords that can be used to unlock it. This password is the "private key". This private key is very, very important. In the world of blockchain, if we want to transfer any assets in the wallet, we must use the private key. In other words, once the private key of our wallet is obtained by someone who is interested, he has the right to transfer all the assets in the wallet to himself. If we lose the private key of the wallet, it means that the safe is locked. Basically, all our assets in this wallet cannot be retrieved. It is very dangerous, so we must keep it safe.

When creating a new wallet, the wallet application will directly paste your private key to you. The private key may usually appear in two forms, one is a general private key, which may look like this "4233afe490cfcac009caabcce3b13730826460f57..." A string of things that look like garbled characters is actually a hash code with a total of 64 digits in hexadecimal; the other is the Backup Phrase, which is another representation of the private key , its purpose is to help users memorize or record complex private keys and reduce errors in private key transcription. The mnemonic is generally composed of 12, 15, 18, and 21 words, which may look like In this way, "alpha beta gamma delta epsilon zeta eta theta iota kappa lambda mu", but these words are all from a fixed vocabulary, and the order of generation is also obtained according to a certain algorithm, so don't worry about entering 12 words at random and one will be generated address.

Information security issues

Be careful not to take screenshots or photos of mnemonics or private keys and store them in the cloud! ! ! The information security issue here is no longer traditional information security, but also asset security! In the past, hackers attacked us to lose at most personal information or our own privacy, but in the decentralized world, the direct loss also includes money and digital assets (such as NFT).

We must download many apps on our mobile phones. As long as the apps that can help you take photos, upload photos, or analyze photos, they all have permission to read the album. Since they have permission, they can secretly read them at any time. It is not difficult to take all your photos and find a screenshot of the private key; if it is stored in the cloud, in fact, the commonly used Google Drive or Dropbox will not encrypt the files we upload normally; send Email to yourself It may be because we intentionally or unintentionally opened the e-mail permission to an App, exposing the private key to danger. Once someone finds your wallet private key, they can steal all the assets in your wallet anytime, anywhere.

A better storage method may be to write it on paper and something that you can think of that can be kept away from the Internet, or if you really want to put it on the Internet, then split the private key and mnemonic into pieces. They are placed in different network resources, which can greatly reduce the chance of private key exposure.

Finally, I would like to recommend a few hot wallets for everyone to try, Metamask , Trust Wallet , Coinbase Wallet , blocto , and maybe I will write more articles in the future to go into cold wallets, hot wallets and their respective advantages and disadvantages.

However, if you plan to buy and sell cryptocurrencies on a centralized exchange in the future, you don’t need to encounter a cryptocurrency wallet at all, because the centralized exchange will automatically keep the private key of the wallet for you. When you need to transfer assets , the exchange will automatically use your private key to do this. When you see this, you will remember that the ownership of the private key represents the ownership of the wallet, so many people feel that it is very dangerous to hand over the money to the exchange for safekeeping. The thing is, indeed, if the exchange runs away, just like the loss of the wallet private key, our assets will not be able to get back, so we must choose a large exchange, which is relatively safe, but never guarantees safety, I In future articles, we will also recommend several well-known exchanges for your reference.

So how do you start investing?

In fact, the threshold for purchasing cryptocurrencies with Taiwan dollars is not as difficult as before. In Taiwan, many pioneers have already invested in this market to help everyone create a relatively easy-to-enter environment. This is probably the feeling that the predecessors planted the trees and the latter enjoyed the shade. Bar! If you want to start learning to invest in cryptocurrencies, I recommend starting with a local exchange in Taiwan. The advantage is that you can directly use Taiwan dollars to buy the currency you want to buy, or even go to the convenience store next door to get bitcoin. ! Moreover, the process of depositing and trading in Taiwan dollars is like buying stocks, without encountering any concept of cryptocurrency wallets, reducing the risk of asset loss due to on-chain transfer mistakes or loss of private keys, and it will be safer for beginners. investment method.

Next time I will introduce some of the most well-known cryptocurrency exchanges in Taiwan. They have been working hard to catch up with government regulations and become exchanges that are compliant, legal and regulated by the government. All users need to do real-name authentication (in order to prevent Money laundering), and they have physical bases in Taiwan, and the part of the cash flow also has the bank trust to protect our assets, and it is easy to deal with problems when they really encounter problems.

It doesn’t matter to those who are still watching, maybe the time has not come for you, after all, opportunities are everywhere, choose to join when you are sure, only play the ball you are sure of, watch and listen more before you start. choose!

Finally, thank you for taking the time to read my articles. If you still like these content, I hope to get your follow-up and support.

See you next time o((>ω< ))o~

Original link ITechNote technology essay