If you don’t know what is blockchain and don’t have crypto-actives in your investment portfolio yet, you are missing a great opportunity. The kind that doesn’t knock on your door twice. So, read this article to the end to understand how disruptive the technology behind this great innovation is.
What is Blockchain?
You may have already heard the term blockchain, but if you haven’t, you can be sure that in the next few years it will be present in our daily lives, especially in the area of technology.
Translated from English as “blockchain,” the concept of blockchain emerged in 2008 in the paper known as the bitcoin white paperwhich explains in detail the proposal for an electronic currency that is built on a reliable, decentralized network that does not allow duplication of spending and can be made peer-to-peer at any time and to any place in the world, requiring only internet access. Bitcoin is the pioneer and the best known, but there are several assets with similar characteristics. These digital assets are called cryptocurrencies.
The big revolution behind the whole bitcoin system is actually the blockchain, because it is this technology that makes the network reliable. But don’t worry! In this article you will understand how it works, and also the possibilities of using this technology that goes far beyond cryptocurrencies.
Think of a public ledger, where all transaction history is recorded and everyone can access it whenever they want. A big database. In this book, information such as the amount of coins transacted, who sent, who received, when this transaction was made, and where in the book it is located, are registered through cryptography, that is, anonymously.
These transactions are stored within a block, and each new block that is generated carries all the information from the previous block plus its own information, thus forming a chain of blocks.
As you can see in the image, each block generates a so-called “hash”. The hash is basically a code of letters and numbers that represents the information imputed in the block. As if it were a “fingerprint”, unique. Understanding that each hash contains all previous hashes, any changed information generates a new hash, and if it does not agree with the entire network, it is invalidated.
This is exactly how Kanna’s ballast works. Each token carries the date, time stamp, and coordinates of the impacted space. This process involves 4 actors: the buying stakeholder, the selling stakeholder, the miner/validator, and the local community that is responsible for verifying and guaranteeing the real impact of the land.
That is why this system provides transparency and immutability, after all, to make any change it is necessary that more than 50% of the network (of thousands of people spread around the world) validate the veracity of the information. This is called blockchain network consensus and is done by the computers belonging to this network.
The blockchain explanation above brought up aspects of currencies as an integral part of the information that will be generated in a block. But this system allows other types of information, not necessarily just financial transactions. In addition to cryptocurrencies, blockchain technology can also be used for document validation, intellectual property, public transparency, medical records, diplomas, real estate records, and so on. We can already see that the possibilities for using technology are promising, can’t we?
The Smart Contract Revolution
And from this universe of technology and blockchain, the so-called smart contracts have emerged. They are contracts capable of being executed by themselves, formalizing negotiations between two or more parties without depending on the intermediation of a third party. Then rules, conditions and consequences can be established and blockchain helps this kind of software to verify and record this information providing reliability for all involved.
In addition to transparency, another benefit provided by smart contracts is cost and time savings related to business transactions and process efficiency. Another factor that does not enter into the account would be possible human error.
Technology is a tool that has definitely been improving our lives. But, as with any other aspect, you have to be careful. Studying and understanding how it works is essential to have security and success in this type of transaction. For example, the code that makes up the contract must be perfect, without any openings or bugs. Otherwise, you will become vulnerable.
So always research the projects, companies and people involved. There are many people – like us – who value transparency and information, but unfortunately we can’t say that they are all.
How to invest in cryptocurrencies
Now that you have understood how all the revolutionary technology behind bitcoin, Kanna coin and other cryptocurrencies works, you must be wondering what the first steps would be to start investing.
The golden tip is: study before anything else. There are more than 11,000 assets in the crypto market, and obviously there are good and bad projects. There is no point in choosing where to invest your money because of a name, a promise, or a pretty website. It is necessary to understand the fundamentals of that project, and then make a speculation.
Look for ideas that you identify with, projects that you believe in the solution that the proposal brings. Don’t forget: well-founded projects have a lot of added value, and regardless of the price at the moment, their value tends to grow in the long term. Don’t leave fundamental analysis aside.
There are a few ways to get exposure to the cryptocurrency market. You can trade them on an exchange, accept them as a form of payment, or do a P2P deal, i.e. directly with another person who wants to sell. The latter can also be done via a DEX (decentralized exchange).
In 2018 the CVM (Comissão de Valores Imobiliários) allowed Brazilian funds to make indirect investments in cryptocurrencies abroad by buying derivatives or shares of other funds. In 2021 the first fund was launched on the Brazilian stock exchange, allowing investors who are “not qualified” by the CVM – read lower purchasing power – to also have this opportunity. So it is possible to get exposure to these kinds of assets in a more traditional way as well.
Speaking of “traditional investments”…
It is already known that the banking system is responsible for most of the payments made in the global economy. This system is also responsible for issuing new currencies, technically, through the control exercised by its state economic organs.
The result of a lack of control and planning results in sky-high inflation and a gradual loss of purchasing power over the years. To give you an idea, the 2021 minimum wage has the lowest purchasing power since 2005. A survey done by mathematician José Dutra Vieira Sobrinho for Invest News points out that the real has lost 84% of its purchasing power in the last 26 years, since the beginning of the real plan.
It turns out that the effects of inflation are not the same for the entire population, and food expenses end up weighing much more heavily on the lower income classes, who need to use most – or all – of their earnings on food. And the effect that this causes everyone already knows: the top goes up and the bottom goes down.
According to an article published by El País, studies and specialists say that segregation increases in correlation to the growing inequalities caused by the current economic model.
And knowing that ̶e̶s̶t̶á̶ ̶t̶u̶d̶o̶ ̶e̶r̶r̶a̶d̶o̶ the current economic model is not efficient, much less the financial education of the population, the proposal of cryptocurrencies is precisely to subvert the currency issuer, without being controlled by an inefficient regulatory body. Thus creating a valuable monetary system, giving the power of value decision to people in the famous and simple supply and demand model.
Exchange is not a wallet
The motto of the crypto community is: if you don’t have custody of your assets, they are not yours. But how so? The most important thing to understand about this digital currency universe is that the idea around this whole financial system started by bitcoin, is primarily, the protection of your capital and it is only properly protected when it is in your custody. Technically we should not trust the big companies and brokerage houses as they are susceptible to problems, regulations, and a host of attacks. This is why enthusiasts of this market, for the most part, will not recommend the aforementioned traditional investment model in the form of funds and derivatives.
The recommendation would not be to leave it on an exchange either. Think about it: if there is a problem with your clients’ money, banks and funds can – or at least should – reimburse them for their monthly fees and charges. That’s the idea. The exchanges, on the other hand, do not charge any custody fees and their revenue comes exclusively from their trading fees. In other words, there is no guarantee or protection regardless of the size and reliability of the company. Exchange is not a wallet!
What to do then? Basically what the community advocates is that you can quietly use exchanges to trade your cryptocurrencies, but if your goal is to hold (term for holding an asset for the long term) the best thing to do is to have a cryptocurrency wallet.
Have custody of your assets
Known as wallets and of various types, digital wallets are responsible for storing security keys. There are two types of keys: the public ones, which are like a kind of address to send and receive, and the private ones, which resemble the password to a safe and should not be shown to anyone – even because the market is very digital, it is recommended that this password not be accessible online.
When you make transfers through the wallet, the transaction is registered in the blockchain and it is precisely through the blockchain that you can allow access, consult, and control your assets.
Now that you understand how the cryptocurrency universe and even the much talked about blockchain work, I bet you are surprised by the growth potential of this market because of its revolution and technology.
Exploring this potential, our project was born. Check out Kanna’s White Paper to understand how we will make a difference by generating social impact. If you have any questions, please contact us and we will explain. And the next step is to invest! 🙂