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Cryptocurrency for Beginners

What are Cryptocurrencies? Explained For Dummies

4 min read
We can agree that there a lot of government and banking restrictions on where you can send to, who you can send money to and what time you can send money.

What are Cryptocurrencies? Explained For Dummies

Cryptocurrencies are a type of currency which are not owned by any government or country. Cryptocurrencies are digital and their transactions powered by a new technology called blockchain.

People around the world use different currencies for everyday situations.

For example official country currencies like the Euro and dollar are Cryptocurrencies.

Some Video games and board games like monopoly have their own in game currencies.

Most cryptocurrencies were designed as decentralized ecash system of the internet

 

What are Cyptocurrencies?

We can agree that there a lot of government and banking restrictions on where you can send to, who you can send money to and what time you can send money.

Not to mention the exorbitant fees banks will charge you for international transfers.

You will also need to wait 3-5 business days for the money to reach the destination account.

Sometimes, it’s faster and cheaper just to pay that plane ticket and just drop they money there yourself.

Most cryptocurrencies were designed as decentralized ecash system of the internet

 

The “Crypto in Cryptocurrency

Ahhh crypto, let’s begin her

Such a cryptic word…

The term crypto is short for cryptography.

This is in fact, IS what makes cryptocurrency safer than “regular” bank-based currency.

And that’s always a good thing

 

Cryptography is the encryption software used to protect to blockchain.

 

[/vc_row][vc_row][vc_column][dt_sc_blockquote type=”type2″]Why are they even called  ‘Crypto’ if they’re even legit? That’s kinda of woo woo name to call something

[/dt_sc_blockquote][/vc_column][/vc_row]

My little brother in 2018 (•_•)

 

The ”CURRENCY” in cryptocurrency

Now, let’s talk about currency.

We use currencies everyday except we call it money What are Cryptocurrencies? Explained For Dummies

Bitcoin is the first cryptocurrency created.

It was created in 2008, so it has been around for over a decade.

So, just like the Dollar, Euro, Pound or your local currency, Bitcoin as well as other cryptocurrencies work the same way.

The only difference, and what makes it better, is that you can send any amount to any one instantaneously around the world from your wallet.

And what makes it even more awesome, is that this makes international transfer fees cheaper than using traditional bank or money transfers.

This is also why banking institutions don’t like.

 

Decentralized banks

Another feature of cryptocurrencies is that you are your own bank.

Each cryptocurrency is its own bank.

 

In many countries around the world there is a limit to how much cash you can legally carry or you can get fined.

The reason is for governments to track spending to avoid illegal activities like drug trafficking and money laundering.

But this comes at a cost, which means to access YOUR MONEY when you want, sending it to whoever you want to and whenever it’s convenient for you.

Cryptocurrencies have given you back the freedom of control of your money.

You cryptocurrency is 100% under your control.

 

How cryptocurrencies work

Cryptocurrencies work a lot like borderless bank transfers.

Let’s say you want to rent a property to someone in Timbuktu , all they would need is a your wallet address and they transfer could take place within seconds.

 

Where do you store your cryptocurrency?

Cryptocurrency is stored in a cryptocurrency wallet.

Because of it’s unique technology, which is blockchain technology, it can not be stored in the same online wallet as your bank accounts.

Each cryptocurrency runs on different algorithms.So therefore, just like a regular bank, were they give you a separate account for USD or Euros, the same rule applies to cryptocurrency.

Except, that you do not want to see yourself with 10 different wallets for each cryptocurrency.This is why, I recommend using a multi-crypto currency wallet such as Exodus.

To see how it works, go to Exodus.io and download a free cryptocurrency.

I recommend Exodus for beginners simply because it is extremely user-friendly and intuitive.However, you will want to invest in a hardware wallet as you become more confident.

How do you receive cryptocurrency?

It works a like a regular bank transfer except the crypto goes directly to the other person’s wallet.

If you look in the Exodus wallet, you will see receive cryptocurrency and public key which is a long strong of alpha-numericals. However, Exodus gives you the QR version which makes life so much easier.

Your public key works like your bank number.

NEVER give out your private key!

So to receive cryptocurrency, just give your public key

 

How do you send crypto to another person

You simply ask the person for their public key which works like a bank account number.

Then enter the amount of cryptocurrency you want to send and click send.

 

Private key vs Public Key

The private key and public key are both long strings of alpha-numericals.

However, the public key is the account number you give out to receive cryptocurrency.

The private, works like your username and login, integrated into one, which is why you should never give it out.

 

How are the price decided?

The prices of cryptocurrencies are decided by demand and supply of the buyers and sellers on the market.

This is why so people love them; they are completely decentralized on top of the cheap transaction fees.

What is makes cryptocurrencies such as bitcoin interesting, is that unlike fiat currencies (currencies whose prices are determined by a government),they gain value rather than lose value because of their limited supply.

For regular government issued currencies , the government prints money and controls the prices.

The problem with government currencies is that they lose value over time (inflation)

Aside from stablecoins (explained below), most cryptocurrencies are limited in supply

 

The most important cryptocurrencies

The biggest player in the cryptocurrency market is Bitcoin.

Bitcoin reached a trillion dollar market cap in 2021 (almost as big as apple)

The second biggest player is Ethereum.

 

What other cryptocurrencies are there?

Ethereum is the second cryptocurrency ever created, except it works on a completely algorithm compared to Bitcoin.

There is another form of cryptocurrency, which are modified, or as some prefer to call it; “Improved versions of Bitcoin”.

These cryptocurrencies are also called Altcoins which is short for alternative coins.

Altcoins are created through a process called forks.

A fork basically means using an algorithm and tweaking it to optimize it.

For example, Litecoin is a fork of bitcoin but processes transactions faster than bitcoin.

BitcoinCash is also a fork of Bitcoin.

There are hundreds of cryptocurrencies.

You can get the full list at Coinmarketcap.com.

 

Types of Cryptocurrencies

1. ALTCOINS

Altcoins are like tweaked copies of Bitcoin. Most altcoins are forks.

There are 100,000 altcoins and 99% of them are risky investments.

 

2. BLOCKCHAIN TOKENS

Blockchain tokens are a type a cryptocurrencies mostly used for crowdfunding by crypto start ups.

There are not mined like Bitcoin, so the founders issue them like shares and people around the world can participate in the crowdfunding.

The technical term for blockchain tokens are smart contract.

 

3. NFTs (Non-Fungible Tokens)

NFTs are a type of smart contract except images and media can be attached

 

4. USDT and stablecoins

One of the biggest problem with Bitcoin and Altcoins, is that the volatility which makes them unusable

USDT is cryptocurrency which was created as a solution to the volatility of cryptocurrencies.

USDT is backed by the USD. 

Usdt was created by Tron (founder Justin Sun) a private company and not by any central government

 

5. CBDC (Central Bank Digital Currencies)

Central Government Digital Currencies are a type of stablecoin.

When governments started to realize that blockchains and cryptocurrencies where like databases which allowed them to trace all the transactions, several started jumping on board.

While El Salvador adopted Bitcoin as their official currency,

China and Mauritius have launched their CBDC.

The EU on the other hand , at the time of writing, looked into privacy

 

6. PRIVACY COINS

The biggest problem with most cryptocurrencies and their Blockchains is they are like public spreadsheets that anyone can view at any time without permission.

This means that if you pay someone it bitcoin, they can view the contents of your bitcoin wallet and you can view theirs as well as all the wallets of the previous owners of that bitcoin.

 

How are cryptocurrencies created

Each time transaction get verified and validated on the blockchain, a reward is given as incentive.

This is called cryptocurrency mining.

 

Who verifies cryptocurrency transactions?

Transactions are bundled together as blocks.

Then, thousands of users around the world compete to solve a puzzle to verify and validate the transactions.

Once the transactions are verified, they get rebundled together into blocks.

Hence, the term blockchain.

 

How to  get cryptocurrency

You can buy cryptocurrency on cryptocurrency exchanges.

But if you are just starting out, I recommend Coinmama because it supports most countries and you can use a credit or debit card.

 

They also sell the post popular cryptocurrencies such as Ethereum, Bitcoin(BTC), Ripple(XRP), Litecoin (LTC).

 

But Bitcoin is expensive

Bitcoin’s price has increased quite a bit since 2008.

And it is true that not everyone can afford to buy Bitcoin at $10000.

However, the good news is that Bitcoin can be bits.

The Bitcoin decimals are called satoshis. So you can buy any amount of bitcoin based on your budget.

There are also other newer altcoins which are cheaper.

 

The hypocrisy of financial institutions

In 2017 JP Morgan CEO Jamie Dimon, called Bitcoin a fraud. However, in 2020, JP Morgan partnered with one of the biggest cryptocurrency exchanges.

You keep hearing that many banks are major multi-nationals are investing heavily in blockchain.

Yet, governments, banks and financial institutions like to demonize cryptocurrency

Blockchain is like a permanent ledger system, that when you enter a transaction is can not be removed.

It allows to record all transactions, which address they were sent from and to.

 

So what’s the problem?

Government love the idea of being able to monitor transaction but hate the lack of “regulation”.

But here’s the thing; the network that powers cryptocurrency is a blockchain.

Blockchain is both a payment network and a cryptocurrency.

Let that sink in…

 

Commonly asked questions

 

Where do you get cryptocurrencies?

Cryptocurrencies can be bought on cryptocurrency exchanges like Binance, Cex.io or Coinmama.

However, you would a cryptocurrency wallet for you to be able to send , receive and store your crypto.

 

Conclusion

Cryptocurrency has a shady reputation since Silk Road and most financial institutions have called it the currency of drug dealers. And yet they are embracing blockchain which is the name of this technology. So I created this Cryptocurrency-Explained-For-Dummies guide so that you will not only stop getting intimated by the word “crypto” but you will be able to use cryptocurrency like a pro at the end of this guide.

 

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