If you’re new to the world of cryptocurrencies, you may be wondering where to start. This guide will introduce some of the essential concepts in cryptocurrency. You’ll learn about blockchain technology, mining, different types of cryptos, crypto security, etc. By the end of this guide, you’ll be ready to join the cryptocurrency revolution! Let’s get started with the basics of cryptocurrency.
The Basics Of Cryptocurrency – What is Cryptocurrency?
Cryptocurrency is a digital or virtual currency that makes use of cryptography to secure transactions. Cryptography is the practice of secure communication in the presence of third parties. It has been used for centuries to protect information from unauthorized access and is now an essential part of online security.
Cryptography uses mathematical algorithms to encrypt and decrypt data. These algorithms are designed to be challenging to break, even by powerful computers. As a result, cryptography provides a high level of security for online communications.
However, it is essential to remember that cryptography is only as secure as the keys used to encrypt and decrypt data. If these keys are compromised, then the data is no longer safe. For this reason, it is crucial to keep cryptographic keys secret and use strong passwords to protect them.
Bitcoin, the first and most well-known cryptocurrency, was created in 2009. Since then, over 10000 different cryptocurrencies have been designed for various purposes. However, not all cryptos are good, and many of them can also be a scam and are the worst cryptocurrencies to invest in.
How do Cryptocurrencies Work?
Cryptocurrencies are decentralized systems that work on blockchain technology—a secure, tamper-proof decentralized ledger of all transactions. Cryptocurrency verifies transactions by a network of nodes (computers) through cryptography and is recorded in a blockchain. Bitcoin, the first and most well-known cryptocurrency, was created in 2009 by an anonymous individual or group using the pseudonym Satoshi Nakamoto.
Why are Cryptocurrencies so Popular?
Cryptocurrencies are popular because they offer several advantages over traditional currency. These advantages include:
- Cryptocurrencies are digital and global, meaning one can use them anywhere.
- Cryptocurrencies are decentralized, not subject to government or financial institution control.
- Cryptocurrencies are secure and difficult to counterfeit. Cryptocurrencies are private, meaning transactions are anonymous.
Is Cryptocurrency Safe to Use?
There is no one-size-fits-all answer to this question. Cryptocurrency safety depends on various factors, including the type of cryptocurrency, the method of storage, and the user’s level of security awareness. However, cryptocurrencies are generally considered safe to use, provided the appropriate security measures are in place.
If you want to learn more about crypto security and how to stay safe, read our cryptocurrency security guide.
Is Cryptocurrency a Good Investment?
The answer to this question is subjective, as cryptocurrency investment has pros and cons. Some believe cryptocurrencies are a good investment because they offer several advantages over traditional currency, including security, privacy, and global accessibility. Others believe cryptocurrency is a poor investment because its value is unstable and any government or financial institution does not back it. Before making any investment, it is essential to research and speak with a financial advisor to make sure that the investment is suitable for you.
Why Should you think of Investing in Cryptocurrency?
Cryptocurrencies are becoming increasingly popular, and there are many reasons why you should consider investing in them. Here are some of the main benefits of investing in cryptocurrency:
- Cryptocurrencies are a global digital asset, meaning one can use them anywhere.
- Decentralization; means they are not subject to government or financial institution control.
- Cryptocurrencies are secure and difficult to counterfeit.
- Cryptocurrencies are private, meaning transactions are anonymous.
- Cryptocurrencies offer many advantages over traditional currency, including security, privacy, and global accessibility.
What Was the First Cryptocurrency Ever Created?
Bitcoin was the first cryptocurrency ever created. It was created in 2009 by an anonymous individual or group using the pseudonym Satoshi. Bitcoin is the most well-known and popular cryptocurrency, and it is used to verify transactions on the blockchain network.
Difference Between Cryptocurrency and Digital Currencies
Cryptocurrency and digital currencies are two different things.
Cryptocurrency is decentralized digital money that uses blockchain technology to secure and verify transactions. Digital currency is a type of currency that is only available in digital form. It is not physical like fiat currency. Money stored in PayPal, for example, is a type of digital currency.
However, while talking about cryptocurrency markets, there is one significant difference:
Decentralization is a crucial feature of cryptocurrency that distinguishes it from traditional currency as the government or a financial institution does not control it. That makes it more secure and harder to counterfeit and keeps your transactions private and anonymous.
There are three types of decentralization in crypto and blockchain, they are:
- Business. – Removing mediators allows all businesses to interact with each other through smart contracts directly.
- Location. – Blockchain servers are located across the globe, and often, people have to “record” and validate transactions.
- Transactional. – All transactions on the blockchain are typical for the buyer and seller or the sender and receiver. There is no need to create multiple contracts or transactions for different organizations (such as a central bank) as one business will request and sign a transaction, and another will receive and sign the same. After that, the transaction is immutable and unchangeable forever.
Some other points to note on the cryptographic techniques of decentralization are:
- Encryption: This technique protects data so only authorized individuals can view it.
- Transparency: This feature of the blockchain allows all transactions to be visible to everyone on the network.
- Immutability: This means that once a transaction is recorded on the blockchain, it cannot be changed or deleted.
- Stability: The decentralized nature of cryptocurrency helps to protect it from instability caused by political or economic factors.
- Legality: The legal status of cryptocurrency varies from country to country. In some countries, it is legal to use and trade cryptocurrencies, while in others, it is not. However, no government can stop using crypto even if they ban it.
There are more than 100 cryptocurrency terminologies that we will talk about in another article but right now, let’s talk about the most important ones:
- Address: A cryptocurrency address is like a bank account number. It is used to receive and send payments.
- Altcoins: Altcoins are alternative cryptocurrencies to Bitcoin. Some popular altcoins include Ethereum, XRP, and BNB.
- Blockchain: It is a digital ledger that records all cryptocurrency transactions.
- Decentralized apps (dApps): dApps are applications that run on a blockchain network.
- Decentralized finance (Defi): Defi is a financial system that runs on a blockchain network.
- Distributed Ledger Technology (DLT): DLT is a digital ledger that simultaneously records all cryptocurrency transactions in many places.
- Fiat: Fiat is a term used in crypto to describe government-issued currency, such as the US dollar.
- Gas: Gas is a unit of measurement used to calculate the amount of processing needed to complete a transaction on the Ethereum blockchain.
- Initial Coin Offering (ICO): An ICO is a fundraising event where a new cryptocurrency project sells tokens to investors in exchange for funding.
- Know Your Customer (KYC): KYC is a set of guidelines that require businesses to verify the identity of their customers. For example, before participating in any projects launched on the Bhero launchpad, you should first complete KYC.
- Mining: Mining is verifying and adding transaction records to a blockchain. Miners are rewarded with specific cryptocurrency for their work.
- Non-fungible tokens (NFTs): NFTs are digital assets that are not interchangeable with each other. They can represent artwork, collectibles, gaming items, etc.
- Private key: A private key is a secret code that allows you to access your cryptocurrency. You should never share your private key with anyone.
- Public key: A public key is mainly used for two functions, one is to receive cryptocurrency, and the other is to verify digital signatures.
- Satoshi Nakamoto: It is a pseudonym used by the creator of Bitcoin. No one knows if it is one person or a group of people.
- Smart Contracts: Smart contracts are computer programs that automatically execute transactions when certain conditions are met. They can’t be altered or deleted.
- Wallet: A cryptocurrency wallet is where you store your cryptocurrency. It can be a desktop application, mobile app, or even a physical device.
- Whale: A whale is a large holder of cryptocurrency. For example, suppose you buy many “X” tokens. In that case, you are considered a whale with the power to influence the “X” token market.
Coin vs. Token in Cryptocurrency?
Many beginners in crypto often confuse the terms “coin” and “token.” They are two different terms, and it’s good to know the difference.
What is a Coin?
A coin is a cryptocurrency that has its own blockchain. For example, Bitcoin, Ethereum, and Egld are both coins. They each have their independent blockchain.
What is a Token?
A token is a cryptocurrency that does not have its blockchain. A token is usually built on top of an existing blockchain such as Ethereum, Elrond, Binance chain, etc. For example, BHAT is a token built on the Elrond network.
Different Types Of Cryptocurrency And Tokens
There are thousands of tokens that have their purpose. All of them mainly come under specific categories. Let’s talk about four different types of tokens.
- Utility token: A utility token is a token that gives you access to a product or service. For example, suppose you want to use the Bhero platform to participate in many unique projects. In that case, you must buy and stake Bhat tokens.
- Security token: A security token is a token that represents an investment in a company or project. For example, suppose you want to invest in a new real estate project. In that case, you can buy security tokens representing a project share.
- Payment token: A payment token is a token that can be used to make payments. For example, suppose you want to buy a coffee with cryptocurrency. In that case, you can use a payment token such as Bitcoin or Ethereum.
- Stablecoins token: A stable coin is a token pegged to another asset such as the US dollar. The primary purpose of a stablecoin is to minimize price volatility. For example, USDT is a stable coin pegged to the US dollar.
How to Buy Cryptos in a Cryptocurrency Exchange?
If you want to buy cryptocurrency, you must follow these three steps, and you are good to go.
- Choose a platform. – There are many cryptocurrency exchanges that allow you to buy, sell, or trade cryptocurrency. Some famous cryptocurrency exchanges are Binance, Coinbase, Kraken, Kucoin, etc.
- Create an account. – After choosing a platform, you will need to create an account. That is pretty simple. Just fill out your basic information, and you are good to go.
- Deposit funds. – The next step is to deposit some funds into your account. You can do this with a credit/debit card, bank transfer, or crypto. Once the funds are in your account, you can start buying cryptocurrency.
- Placing an order. – The final step is to place an order. You can either buy or sell cryptocurrency on these platforms. If you want to buy, you must choose the amount you wish to purchase and click on the “buy” button. If you sell, select the amount you want to sell and click on the “sell” button.
How to Store Cryptocurrency?
Knowing how to store your cryptocurrency is essential, or you might lose what you bought. There are two main ways to store cryptocurrency.
Hot Wallet Storage
The first way is to store it on the cryptocurrency exchange where you bought it. That is called “hot wallet storage.” The main advantage of this is that it is very convenient because you can buy, sell, or trade cryptocurrency anytime you want. However, the main disadvantage is that it is not very secure because the crypto exchanges can be hacked, and they can freeze your account without your permission. In the crypto world, there is a saying: “not your keys, not your coins.” Therefore it is good to only store a limited amount of cryptos on such wallets.
There are three types of hot wallets, and they are:
- Desktop wallets: These are wallets that you can download and install on your computer. The advantage of these wallets is that they are very secure if you have good anti-virus software. The disadvantage of these wallets is that your computer can be hacked if you don’t have good anti-virus software.
- Web wallets: These are wallets you can access through a web browser without installing any apps. The advantage of these wallets is that they are very convenient because you can access them anywhere in the world. The disadvantage of these wallets is that they are not very secure compared to other wallets.
- Mobile wallets: These are wallets that you can download and install on your mobile phone. The advantage of these wallets is that they are very convenient because you can always have them with you and are more secure than a web wallet. The downside is that if your phone is lost or stolen, you risk losing your cryptos.
Cold Wallet Storage
The second way is to store it in a “cold wallet.” Cold wallets are offline storage devices that are not connected to the internet. The main advantage of this is that it is very secure because hackers can’t hack into an offline device. The main disadvantage is that it is not very convenient because you will need to connect your cold wallet to the internet to buy, sell, or trade cryptocurrency.
There are two different types of cold wallets, and they are:
- Paper wallets: Paper wallets are pieces of paper with your public and private keys printed. The advantage of paper wallets is that they are very cheap and easy to make. The disadvantage is that they are not very convenient because you will need to use a different wallet to spend your cryptocurrency. Also, it’s easy to lose a piece of paper compared to, for example, hardware wallets.
- Hardware wallets: Hardware wallets are physical devices that look like USB sticks. The advantage of hardware wallets is that they are very secure and convenient because you can use them anywhere. The disadvantage of hardware wallets is that they are a bit more expensive than paper wallets. However, they are worth having if you are serious about crypto investments.
Things to Know Before Investing in any Digital Asset
We all know that crypto comes with benefits and risks, but we often forget the basic rules of cryptos when investing. We tend to make decisions based on emotions rather than intellect. Doing so can cost us a lot of money and time. Therefore, you need to know certain things before investing in cryptocurrency.
Learn a Method of Buying, Selling, Exchanging, and Storing Cryptos Before Investing
The first thing you need to do is to learn how to buy, sell, exchange, and store cryptocurrency. You can check “How to buy cryptocurrency?” and “How to store cryptocurrency?” which I have explained above.
Create a Diversified Portfolio for Long-Term Success
The second thing you need to know is that you should not put all your eggs in one basket. That means that you should not invest all your money in one cryptocurrency. You should create a diversified portfolio consisting of different types of cryptos. This way, you will mitigate the risks and have a better chance of making a profit in the long run.
DYOR First: Read the Whitepaper and Other Sources
The third thing you need to do is DYOR which stands for Do Your Research. That means you should not invest in a cryptocurrency just because someone else is telling you to. Before investing, you should research by reading the whitepaper, lite paper, economic models, and other things.
Understanding the Project and Team Behind it Before Investing
The fourth thing you need to understand is the project and the team behind it before investing. You should ensure that the team is composed of experienced and reputable people. Also, you should ensure that the project has a good roadmap and is being developed according to the roadmap.
The Basics Of Cryptocurrency – Do Not Invest in FOMO
You should never invest in FOMO, which stands for Fear Of Missing Out. That is when you invest in a cryptocurrency just because everyone else is investing in it, and you do not want to miss out on the profits. As the famous quote goes, ” Money is not made when everyone is greedy, but when there is blood in street.”
Invest What you are Comfortable to Lose
One of the most important things is that you should only invest what you are comfortable losing. That is because crypto is a risky investment, and there is always a chance that you could lose all your money. For example, a recent luna crash made people lose every penny they invested, reaching almost 0 from more than $100 in a few minutes.
Always Think About the Long Term
Cryptocurrency is a long-term investment, and you should always think about the long term. It is always good to hold for at least a few years for good returns. Many people make the mistake of selling either for just a few dollars of profit. Or trade in loss due to the fear of crypto going down. In the long run, the holders tend to profit the most.
Three Major Cryptocurrencies
There are three major cryptocurrencies: Bitcoin, Ethereum, and Tether.
- Bitcoin: It is the first and most well-known cryptocurrency, with a market cap of more than $300 billion. It was created in 2009 by an anonymous person or group named Satoshi Nakamoto.
- Ethereum: Ethereum is the second most popular cryptocurrency, with a market capitalization of more than $100 billion. It was created in 2015 by Vitalik Buterin.
- Tether (USDT): Tether is a stablecoin pegged to the US dollar. It has a market cap of more than $50 billion. It was created in 2014 by Brock Pierce.
Best Crypto Resources on the Internet for Beginners
If you are new to the crypto world, here are some of the best resources on the internet:
- Coinbase Learn. – Coinbase learn has an excellent and comprehensive guide for beginners that covers everything from crypto basics, practical courses, beginner guides, and market updates on significant cryptos.
- Binance Academy. – Binance Academy is another excellent website that offers comprehensive guides on cryptocurrency-related. Do you want to learn about blockchain technology, trading strategy, security tech, or crypto-related? Binance Academy is the best place to find all of it.
- Coindesk. – Coindesk is a website that offers the latest news, prices, and analysis on Bitcoin, Ethereum, and other major cryptocurrencies. It is an excellent resource for keeping yourself up-to-date with the latest happenings in the crypto space.
- Cointelegraph. – Cointelegraph explains in detail everything a beginner needs to know about cryptocurrency: mining, wallets, blockchain, ICOs, etc., in the most straightforward way.
Best Crypto Resources on the Internet for Intermediate
If you are already familiar with cryptocurrency basics and want to learn more about trading, investing or other things related to crypto, here are some of the best resources on the internet for intermediate:
- Coinbase Earn. – Coinbase Earn is a website that offers free courses on major cryptocurrencies. These courses are designed to help you earn cryptocurrency by learning about it.
- Coinmarketcap Earn. – Coinmarketcap Earn is another website where you can take different lessons on crypto and earn cryptos while learning about it. You can learn and test your knowledge at the end through quizzes.
- Investopedia. – Investopedia is a website that offers in-depth guides on cryptocurrency investing and trading. It covers everything from the basics and intermediate investing to more advanced concepts such as technical analysis. Most of the articles, videos, and Investopedia are explained in more depth than on other websites.
- Coinidol. – Coinidol is a website that offers the latest news on bitcoin and many other cryptocurrencies. If you are interested in crypto, you must follow Coinidol to stay up-to-date with the latest happenings.
Best Crypto Resources on the Internet for Advanced
Here are three websites that offer the best resources for advanced cryptocurrency users:
- Coinbureau. – Coinbureau is a website that offers in-depth research and analysis on different cryptocurrencies. They offer well-researched reports on various cryptos to help you make informed decisions. Coinbureu is one of the most informational crypto websites to follow if you are serious about crypto.
- Defi Rate. – Defi Rate is a website that offers data and analysis on the decentralized finance space. If you are into Defi, this is the best website to follow. They offer a wide range of data and analyses on different Defi projects.
Pros and Cons of Cryptocurrency
Every coin has two sides so does the cryptocurrency. Let’s look at the pros and cons of cryptocurrency.
Pros of Cryptocurrency
Cryptocurrency offers a lot of advantages over fiat currency. Some of the main benefits are:
- Decentralized: Cryptocurrency is decentralized, which means it is not subject to the control of any central authority. That gives it a lot of advantages over fiat currency, which is subject to central banks’ power.
- Secure: Cryptocurrency is very secure and is impossible to counterfeit or double-spend coins.
- Anonymous: Cryptocurrency transactions are anonymous, meaning you can transact without revealing your identity.
- Fast and global: Cryptocurrency transactions are fast and global. They can be conducted 24/7 and are not subject to any geographical restrictions.
Cons of Cryptocurrency
Cryptocurrency also has some disadvantages. Some of the main disadvantages are:
- Volatile: Cryptocurrencies are highly volatile and also an extremely risky asset, so their prices can fluctuate significantly. That makes them risky investments.
- Scams: There have been many scams in the cryptocurrency space. Some coins have turned out to be complete frauds and have no value. So, you need to be careful when investing in cryptocurrencies.
- Limited acceptance: Cryptocurrencies are not yet widely accepted. They are mainly used for speculation and investment purposes. But, as more and more businesses start accepting them, their use will become more widespread.
- Regulatory risks: Cryptocurrencies are subject to regulatory risks. Governments are still trying to figure out how to regulate them. That could lead to some coins being banned in certain countries.
Which is the Best Cryptocurrency to Invest in?
It is a difficult question to answer as many different cryptocurrencies exist. It is hard to predict which one will succeed in the long run, but here are a few cryptos that will most likely do good in the long run. Bitcoin and Ethereum are quite well-known tokens and are always the safe and best cryptocurrencies to invest in. So let me talk about another valuable cryptocurrency like bitcoin.
- Elrond (Egld). – Elrond is a blockchain platform designed to be scalable, highly secure, and fast. It uses a novel consensus mechanism called “Adaptive State Sharding,” which allows it to process transactions quickly. It can handle 15000 transactions per second, one of the fastest in the crypto space. Also, the transaction fees are lower, which can be as low as $0.001. Quite impressive.
- BH Network (BHAT). – The BH Network is a project that aims to build the freelancer marketplace on top of the Elrond Network. They already have their own completely legal and licensed launchpad to bring unique projects and help companies migrate from Web 2 to Web3. BHAT Token is the utility token of the BH Network.
Before entering the crypto market and investing in digital currencies, one needs to know many things. These were some of the most important things to know. I hope this article helped you in some way. Thank you for reading!