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Beginner's Guide to Cryptocurrency
Understand Cryptocurrency, its underlying technology, and how to manage and buy cryptos.
Introduction
Cryptocurrency is a type of money that exists on the internet. It relies on blockchain technology and cryptography.
Before I go further, we need to know how it works.
Blockchain
The blockchain is like a big business book where people can keep track of their transactions. It is secure and stores these transactions on many computers. This forms a computer network known as a "node."
Every transaction has an ID. One person can't change the business book since it's saved on many computers. All transactions are publicly available.
Cryptography
This enables the secure transfer of cryptocurrencies through the blockchain.
It is a peer-to-peer type of transfer. The sender and receiver don't have to know each other.
It generates a public key that is available for public view. But the private key is only known to you. People can view the transaction with the ID or public key on the blockchain. But only you can access the coin in your wallet through the private key.
Cryptocurrency
Cryptocurrency is digital money. Examples are Bitcoin, Tether, and Ethereum. You can also call them "coins," "cryptos," or "tokens." Henceforth, I'll use them interchangeably in this article.
It uses cryptography and blockchain to execute transactions. Like fiat currencies, you can buy, sell, and transfer cryptos. To store them, you'll need a wallet.
Cryptocurrency Wallet
This is an app or electronic device. It allows you to store, transfer, and track your cryptocurrency transactions.
Types of crypto wallets
Custodial wallet
They store your private key.
They handle the security of your coins.
Non-custodial wallet
You have access to your private key.
You can interact with the blockchain.
You can trade cryptos on decentralized exchanges (DEXs).
- Examples are Trust Wallet, Math Wallet, Metamask, etc.
Hardware wallet
These physical devices (such as USB drives) store your cryptocurrencies. Examples include Ledger, Trezor, etc.
Software Wallet
They're browser extensions and mobile and web apps that store cryptos. Examples are non-custodial wallets.
Hot wallets
Examples are software wallets, where your assets are stored online.
Cold wallet
Your wallet is offline. Examples include the hardware wallet.
Crypto exchanges
Crypto exchanges are platforms where you can buy and sell coins.
Types of Crypto Exchange
Centralized Exchange
They operate like a traditional bank.
They offer a marketplace to transfer and trade cryptos.
They usually have customer support.
You must verify your identity to use their platform.
Examples are Binance, Kraken, Coinbase, etc.
Decentralized Exchange
No identity verification.
No customer support.
Crypto transactions are automated via smart contracts.
To buy and sell, you will need to log in using your non-custodial wallets.
Examples are PanckeSwap, Uniswap, Balancer, etc.
Conclusion
You can make money by buying and selling cryptos. Blockchain developers can get a job thanks to cryptocurrency.
I’ll learn to discover more. When I do, I’ll write you again.