Crypto has become the buzzword for investment. Some say it has the potential to transform everything from personal finance to banking to even our identities. But the talk around it is often laden with complex jargons.
We spoke to Nischal Shetty of WazirX, a Bitcoin and cryptocurrency exchange company, who simplifies it all.
Decentralisation: As opposed to a traditional banking system where all approvals are taken from a central authority, the crypto world uses blockchains that require approval from the majority of users to operate and make changes.
What are blockchains? “These are record keepers. Information once fed into a blackchain cannot be altered. It is duplicated and distributed across the network of computers on the blockchain with each block containing a log of transactions— those done by buying and selling coins,” says Shetty.
Hash: A mathematical function that converts transitions into a set of unique numbers and letters. It is an important feature because it transforms a string of characters into shorter values so it can be remembered easily. Bitcoin node: A network of computers or servers that run the software. The main function of a node is to establish a connection with other nodes as this is used to transfer information of transactions and data. Mining: This is creating a new Bitcoin by solving computational equations.
It ensures that the ledger of transactions is maintained. Fear, Uncertainty, and Doubt (FUD): Spreading fear and misinformation to gain an advantage.
“Defamation of character is a strategy used to discredit a company, product, or project by spreading false information about it. With this, the goal is to instil fear and gain an advantage,” says Shetty.
HODL: The term first appeared in a 2013 blog post. In the title, the term was misspelt: ‘I am hodling.’ Investments are held on to despite price declines, which is known as ‘hodling’. Hodlers refer to investors who aren’t good at short-term trading but want to get exposure to cryptocurrency’s value. An investor may also benefit from it if they feel strongly about one coin and plan to hold onto their investment for a long time.
Hodling strategy is similar to the ‘buy and hold’ strategy that is used in the traditional markets,” shares Shetty. BUIDL: Participants in the crypto industry who continue to build regardless of price fluctuations are typically described as a ‘builder’.
“Crypto enthusiasts should continue to build the ecosystem despite a brutal bear market. These people care deeply about what blockchain and cryptocurrency can do for humanity, which is why they are working so hard to achieve it,” explains Shetty.
Coin Burn: This is a deflationary mechanism built inside the cryptocurrency. The reason why cryptos are so valuable is that there is a limited supply. “Let’s say for Bitcoin, it is the halving process that happens once every four years. But for altcoins that don’t use the Proof of Work consensus mechanism, coin burn is one of the mechanisms that ensure the supply is reduced as the demand goes up,” says Shetty.