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What Is Cryptocurrency? The Ultimate Crypto Learning Resource

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what is cryptocurrency

My first encounter with cryptocurrency was back in 2011 when there was little to no utility. However, fast forward to today, and you can use various cryptocurrencies as a form of payment in many countries around the world for various goods and services.

They have risen to popularity because they use advanced cryptography, along with an online distributed ledger, to secure transactions of any kind. If you’re wondering what these mean, don’t worry – we cover it later on.

You’ve probably heard of Bitcoin, right? Well, that’s the cryptocurrency that kicked this all off with the pseudo-anonymous Satoshi Nakamoto, creating the infamous Bitcoin. Back in 2009, you could quite literally buy one bitcoin for $5 and, in 2021, it reached the highs of $64,854!

You’re looking to gain a deeper understanding of cryptocurrency that may potentially lead you to the next Bitcoin. Well, let me help you understand cryptocurrency in an easy-to-digest way:

What Is Cryptocurrency?

Cryptocurrencies use a technology called ‘blockchain’, which is a technology that manages and records any type of transaction. 

A Simple Take On ‘What Does Blockchain Mean?’ 

It may seem complicated at first but what blockchains do isn’t. By now, you know that a blockchain can facilitate the recording of transactions across their network. 

They do this by storing the data in ‘blocks’ and creating a chain as more and more blocks are made. There are three key components that you need to wrap your head around when understanding blockchains:

1. Smart Contracts 

Smart Contracts are instructions written on the blockchain to facilitate a speedier transaction executed according to the smart contract. The smart contract can be coded to include most functions, including legal terms, payments, financial services like lending and borrowing and much more.

2. Immutable Records

Due to the way blockchains are created, there is no way to alter a transaction after it’s already been recorded. 

That means that if there’s been any human error, then a new transaction needs to be created to reverse the mistake. Both transactions would be available to see on any blockchain explorer. 

3. Distributed Ledger Technology

Any users of the blockchain will have access to the smart contract and the distributed ledger. Remember that the records are immutable so that no one can change them. 

It’s clear that one of the primary uses of cryptocurrency is to replace the central fiat system with a transparent, immutable blockchain system that can pay for goods and services.

Many cryptocurrency companies have created their own ‘crypto’ token that you can use to pay for their goods or services – much like arcade ‘tokens’. Another way cryptocurrencies are used is to help ‘govern’ the protocol in terms of upgrades and developments. 

As blockchain and cryptocurrencies can be decentralised, the companies that set them up to pass over the voting rights to their token holders or validators (more on that later!). And as blockchain is an open, distributed ledger that can record every single transaction in something called a ‘block’, nothing can be abused without it being recognised. 

If you want to learn more about blockchains and what they do, check out our What is Blockchain Guide?

There was a previous thought that digital currencies can be double-spent. However, this point has been nullified due to the verification procedures, immutable records, and cryptographic security.  

What does double-spend mean? Double-spending was seen as a potential flaw in a digital cash world in which the same token can be spent more than once. The thinking was that the token could be duplicated or falsified. 

This means that you cannot create a fake ‘bitcoin’ or any other crypto and hope to sell it for the same price as a real bitcoin/crypto – as it’s all traceable on various block explorers. 

We’ll be talking about the use-cases and various utilities later on in this guide once we’ve covered some basics – stick around.

What Are The Different Types Of Cryptocurrencies?

There are loads of different cryptocurrencies, but it all started with what people refer to as the ‘king’ cryptocurrency – Bitcoin. Launched in 2009 after the global financial crisis, only 18.8 million bitcoins are in circulation with a hard cap of 21 million bitcoins. 

That means that there will never be more than 21 million bitcoins – which you can hardly say the same about the US dollar, where over 30% of the supply was printed in 2020-2021. 

And it’s true – Bitcoin is still the king cryptocurrency with a market cap far more significant than any of its closest rivals, namely Ethereum. Fun fact, did you know the total market cap of cryptocurrency peaked at $2.6 trillion. Yes, trillion!

What about the others, though? Well, anything that is not Bitcoin is commonly referred to as an “AltCoin”, and they are led by the aforementioned, Ethereum. Read more about the best altcoins in 2021.

There are thousands of altcoins with different tokenomics, technologies, blockchains and utilities. Let’s distinguish the two main mechanisms as that’s probably the most significant factor along with the code-base they’re built on. 

Bitcoin’s popularity has meant that its technology has been copied or ‘forked’ many times and that’s why cryptocurrencies like Litecoin, Bitcoin Cash and more exist. All of these cryptocurrencies work on a proof-of-work basis. 

Compare that to Ethereum, and many of the ‘newer’ cryptocurrencies run on the proof-of-stake system. It’s far more carbon-friendly, but it’s not all advantages. 

If you’re looking to learn more about the benefits and shortcomings of proof-of-work and proof-of-stake, then head over to our Proof of Work vs Proof of Stake guide. 

Why Have Cryptocurrencies Risen To Popularity?

Cryptocurrencies leverage the same opportunities for millennials that previous generations had with globalisation and the invention of the internet. 

This has been particularly true when you measure the growth of cryptocurrencies, with a combined market cap of $2.6 trillion at its peak and a rate of explosive growth not experienced in traditional markets for a few decades. 

If you’ve read the previous sections, you’re probably a bit more “in-the-know” regarding cryptocurrencies. I’m going to dive deeper into the advantages cryptocurrencies bring but also the disadvantages they bring, too.  

What Are The Advantages Of Cryptocurrencies? 

Traditional Finance, that’s the regular bank that your mum and dad use, has traditionally been very difficult and expensive to make transactions, small or large. The world has become more and more open with the invention of cheap air travel, and trillions of dollars are transferred across the globe – incurring huge fees. 

Cryptocurrencies Allow For Cheaper Financial Transactions

Cryptocurrencies made it possible for ‘everyone’ to bank; it opened up the possibility for anyone to transfer funds between two cryptocurrency wallets without the need to consult a bank or credit card. 

This leads me to my first benefit: how cryptocurrencies make it cheaper and quicker to transfer financial assets around the world. It’s also pretty safe as they are secured through cryptographic systems on the blockchain. 

Countries such as El Salvador have recently adopted Bitcoin as part of their legal tender. Why? Around 6bn, or 20% of El Salvador’s GDP, comes from the remittances sent home from their families living and working abroad. 

Historically, they were charged hefty fees to make these transfers, but they can make the transfers for under $0.10c in fees and quicker with the Bitcoin Lightning Network! 

Cryptocurrencies Are At The Forefront Of Technological Innovation

Cryptocurrency is quite literally at the forefront of the new wave of technological innovation. The teams and venture capital firms behind some of the largest cryptocurrencies involve some of the brightest minds in the world. 

From NFT’s to AI on the blockchain to cheaper financial services, the array of products and services is pretty astounding considering the industry’s relative youth. I can’t wait to dive into these later for you. 

What Are The Disadvantages Of Cryptocurrencies? 

Of course, one of the first reasons cryptocurrency was shown negatively is its synonymous nature with money laundering and tax evasion. When bitcoin first started, there was no real way to track the identity of the payments and, once it became possible, new, more anonymous cryptocurrencies, like Monero and ZCash, popped up. 

This leads me to issue number 1 when it comes to cryptocurrency: 

Cryptocurrencies Can And Are Used In Illegal Activities  

I think it’s important to remember that the monetary value of cryptocurrency crime is far outweighed by those that take place with fiat currency. 

However, cryptocurrencies have been used in high-value extortion cases such as the Colonial Pipeline hack in the US where hackers ransomed the company for over $5m in Bitcoin, although US government agencies quickly recovered that. 

More pertinently, cryptocurrencies are the go-to method for buying illegal products and services online on the deep web. 

Cryptocurrency Is Rife With Hacks and Scams

As cryptocurrency is pretty much unregulated, and the money lives in the ‘code’ and ‘code is law’, this triplet of factors have made cryptocurrency a hanging ground for scammers and hackers. 
Most recently, a white-hat hacker stole over $620 million from Poly Network before returning the funds slowly over the week after the hack.

However, there have been many reports of cryptocurrency scams where unlawful creators have been known to “rug pull”. That means they take all the money invested in their tokens, so the price goes to zero! 

I must say that as long as you do your own research and are diligent about where you place your money and what coins you purchase, you’ll most likely avoid these mishaps.

How to Buy Cryptocurrency? 

There are 1000’s of cryptocurrencies that you can purchase. However, you’ll mainly want to stick to tokens that are on major exchanges. 

But before you get there, you’re going to want to consider how you’re going to store your crypto. Ensuring you have a safe and secure place to store your crypto will add an extra layer of protection for your investments. 

How To Store Your Cryptocurrency

You may have heard of the term ‘crypto wallet’ when people talk about cryptocurrency. There are two ‘different’ categories of cryptocurrency wallets: 

  1. Hot Wallet. A hot wallet is an online-based wallet, whether that be mobile or desktop. Cryptocurrency exchange wallets are also ‘hot’ wallets. 
  2. Cold Wallet. A cold wallet is a hardware device such as a Ledger or Trezor. These wallets can receive transfers online or offline; however, an ‘offline’ feature makes them more secure. 

The easiest way to think of a wallet is to compare them to your bank account. You wouldn’t want your money, or in this case crypto tokens, to be in someone else’s possession; in this case, you would want to purchase a cold wallet. 

What Are The Different Types of Cryptocurrency Wallets? 

We’ve covered the two different categories of cryptocurrency wallets, but it’s also essential to distinguish between the different types of cryptocurrency wallets. 

There are five main types of crypto wallets, and you can use the table below to help you navigate each wallet type. 

Wallet TypeLevel of SecurityRead More
Online3/5Coming Soon
Mobile3/5Coming Soon
Hardware5/5Coming Soon
Desktop4/5Coming Soon
Paper3/5Coming Soon

What Are The Best Cryptocurrency Wallets? 

There are hundreds of crypto wallets out there, but I’ve tested quite a few and researched the security of each wallet, so you don’t have to. 

Below you will find a table of my top 6 crypto wallets and why they’ve been chosen: 

Wallet Name TypeFeaturesPrice
Ledger Nano XHardware– Best-in-class security standards to protect your crypto assets
– Bluetooth connection to trade your crypto assets on-the-go
– ‘Ledger Live’ mobile application lets you trade 20+ assets
$119……….
Trezor Model THardware-Touch screen display with total security for your crypto
– Includes everything so you can get started immediately
 – Cutting edge crypto wallet design
$190
MetamaskWeb / Mobile– Easy-to-set up and is free to use
 – Covers most major networks so there’s no need for multiple wallets 
– Built by a hardcore development team – ConsenSys Software
FREE
Trust WalletWeb / Mobile– Buy cryptocurrencies within the app safely and securely
 – Free-to-use and better than holding in a centralised exchange
– Shows you all tokens in your wallet automatically without manually adding
FREE
Ledger Nano SHardware– Large storage system to install up to 100 apps
 – Use their mobile phone app to manage major cryptocurrencies
 – Less risk of hacks and loss of funds due to higher security
$99
ExodusWeb– Stake 7 major cryptocurrencies within their web app to earn passive income.
 – One of the easiest-to-use web wallets
 – Has back-up features built in
FREE

If you’re looking to learn more you can view our best cryptocurrency wallets guide that dives deep into the security and pros and cons of each wallet. Okay, so now you know how to store your cryptocurrency, the next big question and solution I will provide you with is…

Where To Buy Cryptocurrency

There are loads of high profile cryptocurrency exchanges, and I’ll cover a few of them today for you.  

Cryptocurrency exchanges, especially the popular ones, have advanced security features such as 2FA, anti-money laundering measures and often require you to KYC. All of these features enable you to trust these exchanges more. 

However, this does not make them immune to attacks and hacks. There are loads of high profile exchanges that have been hacked, including MTGox, which drove Bitcoin’s price down by 23% to $418 and caused the loss of 100,000’s of Bitcoin’s.  Most recently, the largest Japanese cryptocurrency exchange – Liquid, was hacked for over $70m. 

I use a few different cryptocurrency exchanges. The simple reason is that some offer a more comprehensive or diverse range of cryptocurrency tokens and additional features and advanced security features. 

Here is a list of cryptocurrency exchanges and whether they are available in the US. 

Exchange NameAvailable in the USRead More
BinanceYesComing Soon
FTXYesComing Soon
KrakenYesComing Soon
BitmartYesComing Soon
KucoinNoComing Soon

How To Set Up Your Cryptocurrency Exchange 

Most well-known cryptocurrency exchanges will require you to KYC. KYC or Know Your Client is an anti-money laundering measure. It’s pretty much harmless to you and I but requires you to have the following pieces of collateral ready: 

  • Government identification 
  • Pen and paper 
  • Working webcam or mobile camera 

Most cryptocurrency exchanges have the ‘option’ to KYC; however, please remember that you’ll only be able to withdraw a limited amount of money per day if you don’t. 
Note: As recently as 20th August 2021, Binance has made it mandatory for any account to KYC. This was a measure put in place to appease regulators.

Once you’ve chosen your crypto exchange, whether that be Binance, Coinbase, Kraken or any of the rest, then head over to their website. Within the profile section of your account, you’ll see an option to pass different verifications. 

In my experience, the KYC procedure usually takes less than 24 hours, and my Kucoin KYC took 25 minutes. 

Note: Make sure you have a piece of paper and black pen with you as you’ll be asked to write the date and an unknown variable on a piece of paper and take a selfie! 

How To Buy Cryptocurrency

Let’s get down to business and cover the two main methods to acquiring some cryptocurrency and transferring the tokens to your very own wallet. 

You’ll notice I mentioned that there are two main methods, and that’s because some cryptocurrencies do not have an option to purchase the token with fiat currency. That means you’ll have to add in a few additional steps, but it’ll only add on a couple of minutes. 

How to Buy Cryptocurrency With Your Credit / Debit Card

Hopefully, you’ve set up your crypto exchange account and passed all of the identity verification procedures; if you have, then proceed to the step-by-step instructions below. If you haven’t, then just scroll back up to read about the verification procedure and how to complete it. 

Woo – the time to buy cryptocurrency is now! If you’re buying a major crypto currency, such as Bitcoin or Ethereum, and you’re signed up to a major exchange like Binance, then the instructions below are for you. 

Step By Step Instructions To Buying Cryptocurrency With A Credit/Debit Card

I’ll be covering Binance today as it’s the most popular, but it pretty much plays out the same for all of the exchanges. 

  1. Head over to the cryptocurrency exchange you signed up for, in this case, Binance. 
  2. In the menu, you will see a tab called ‘Buy Crypto’. Click here. 
  3. A drop-down menu will appear; click ‘Buy Crypto’ with Credit/Debit Card 
  4. Once redirected to the new page, use the dropdown and choose the cryptocurrency you wish to purchase 
  5. Choose the amount and click continue 
  6. Next, you’ll be required to fill in your card details to make the purchase. This is just like filling in your card details anywhere else online! 
  7. Ta-da! You’ve finished, and if you navigate to the header again and hover over ‘Wallet’ and click ‘Fiat & Spot’, you’ll see your chosen tokens there.

Step By Step Instructions To Buy Cryptocurrency With Other Cryptocurrency 

One of the significant barriers to entry at the moment is that not every cryptocurrency is available to purchase with a credit/debit card. 

Okay, so what does that mean for the instructions above? Well, it’s quite simple, but you’ll want to make sure that the crypto you buy with your card is Bitcoin or Ethereum. Why? They have the most flexibility when trading this for another coin. 

  1. If you’re on your ‘Wallet’ page, then scroll to Bitcoin or Ethereum, whichever you’ve purchased, and click on ‘Trade’.
  2. You’ll be redirected to quite a daunting trading terminal but don’t worry, you can ignore the majority of what you see. 
  3. Find the pair you wish to purchase by clicking on the BTC/USDT* or ETH/USDT box on the left above the chart.
  4. In the right-hand sidebar, you will see several boxes and a big Buy and Sell button. Click on Buy (it’s default set to buy, but it’s always good to double-check!) 
  5. Choose the amount you wish the buy 
  6. Click Buy ‘COIN NAME’ 
  7. Go back to your wallet to check out your new tokens

*USDT is the largest stablecoin in the crypto ecosystem. It’s a 1:1 pegged version of USD, this means that to get one USDT you have to provide one USD. If you’re looking to learn more about stablecoins check out our best stablecoins guide. 

What Are The Top Cryptocurrency Utility and Use Cases? 

Cryptocurrency has evolved at breakneck speeds, and the rate of innovation and use-cases continues to increase rapidly. 

Here are some of my favourite use-cases within the crypto ecosystem: 

Non-Fungible Tokens (NFT’s)

An NFT is a digital asset representing real-world objects like art, music, in-game items and videos. They are bought and sold online, frequently with cryptocurrency, and they are generally encoded with the same underlying software as many cryptos.

NFT’s work by storing the meta-information of the product on the blockchain. As you may remember, blockchains create immutable records that can’t be changed, and smart contracts make automatic transactions. 

Okay, but let’s break down what this actually means? If you take traditional art, the original artist receives no royalty from any secondary sales once the art has been sold. With the invention of NFT’s, it means that digital art can have one single unique owner. If it’s sold on the secondary market, then the digital artist can receive an automatic royalty. 

The art powerhouse, Christie’s, has even taken to auctioning NFT’s with the infamous digital artist Beeple’s NFT selling for $69,000,000. 

Artificial Intelligence on the Blockchain 

AI is expected to bolster the global economy by $15.7 trillion by 2030, according to PWC. Cryptocurrency is a $2 trillion ecosystem that is rapidly growing year on year. 

What’s crazy is that both industries are in their infancy but at the forefront of technological innovation. I’ll try to explain the concepts behind how both are being used in conjunction with one another to create a more robust technological stack. 

Both AI and blockchain-based products and services can work together to improve one another’s systems. The power of Machine Learning can improve blockchains, and the power of blockchains can boost an AI’s potential. 

Here is where it gets interesting though – AI’s are built to make decisions and learn by themselves, but due to a blockchains set up, each of these decisions is recorded on the distributed ledger. Being able to analyse these data points and decisions enables companies to make more informed and refined decisions. 

Here is a wonderful video of a current AI blockchain-based company explaining what they do and the power of AI on the blockchain: 

Decentralised Finance and Banking

You may have heard of the word DeFi being thrown around – well, that stands for Decentralised Finance. Okay, but what does that actually mean? 

We’ve touched on comparisons between Traditional Finance (TradFi) and Decentralised Finance (DeFi) a couple of times in this guide, but let’s dig deeper into it. 

Here’s a beautiful chart by CryptoRank displaying how much is locked up in DeFi (Aug 2021)

You can see that the growth is quite staggering, with an increase of over 160x in the last 12 months. 

DeFi aims to disrupt the current traditional finance industry by offering financial service products on the blockchain to everyone. Alongside this, transactions are cheaper and faster than traditional finance, where banks often elongate the process with intermediaries. 

One of the added advantages is that you can see exactly what a firm or entity is doing with the money you have deposited there due to the blockchain and immutable transaction feature. 

What Are The Top Cryptocurrencies To Buy? 

There are quite literally thousands of cryptocurrencies. However, take my word for it when I tell you that you have to really do your own research when it comes to investing in cryptocurrencies. 

That leads me to my first point.

Should You Invest In Cryptocurrencies? 

Friends and family close to you may already be investing in crypto assets. However, it’s important to realise that it can be extremely profitable but also quite risky. 

Cryptocurrency is still in its infancy as a financial market, and the prices can be highly volatile. If you have ‘diamond hands’, then volatile crypto can be extremely profitable from a long hold perspective. However, if you plan to ‘trade’ cryptocurrency, I would only advise this to professional and experienced traders. 

4 Cryptocurrencies To Research

Below you will find four exciting cryptocurrency choices. These four are chosen for good reason as they are all blockchains in their own right. 

Ethereum (ETH)

Ethereum (ETH) is often called the king of altcoins, and rightfully so. Ethereum is one of the most powerful and utilised blockchain technologies. 

You may have heard about Elon Musk and his negativity towards the crypto industry and how much energy it is currently using. Once Ethereum moves to its Proof of Stake system, it’ll become over 97% more energy efficient whilst becoming more powerful – this is planned for early 2022. 

On top of that, whilst the other selections run on their own blockchain, Ethereum hosts the highest number of high-value cryptocurrencies. If you remember the DeFi TVL image from earlier, you’ll also remember that Ethereum has over $100bn locked up in their blockchain.

Solana (SOL)

Solana is a relatively new blockchain, and SOL has really taken off in 2021. It’s different to Ethereum as it’s faster and incredibly cheap, with 1000’s of transactions costing under $1. 

SOL’s price has increased from $2 to over $75 in 2021 alone, a massive 3500% return. However, the market cap is still relatively small compared to Ethereum, and more and more coins are flocking to build their product on the Solana blockchain. 

Polkadot (DOT)

Polkadot is an exciting cryptocurrency blockchain that is due its time in the sun. While the token, DOT, has increased by over 1500% since its inception, it still hasn’t fully launched! 

DOT was created by one of the co-founders of Ethereum, Gavin Wood. Gavin left Ethereum to create Polkadot (DOT), and its sister coin Kusama (KSM) to help scale Ethereum by alleviating the majority of Ethereum’s issues. 

If you’re reading this before October 2021, then parachain auctions, a massive fundamental factor in DOT’s progress, is due to launch. 

Terra Luna (LUNA)

A new blockchain was launched at the end of 2018 by the talented Korean, Do Ho Kwon. Terra provides incredible financial services and its own stable coin – UST. 

The whole ecosystem of Terra Luna is growing at an exponential rate, and the same goes for its token, LUNA, which has increased from $0.3 to $33 in just one year. 

With more financial services due to launch on Terra Luna, it’s certainly one to keep an eye out on. 

If you want to learn more about the Terra Luna ecosystem then help yourself to our easy-to-digest What is Terra Luna guide. 

Other Top Cryptocurrencies To Watch Out For: 

Crypto NameCrypto TickerRead More
Binance CoinBNBHow To Buy BNB
MoneroXMRHow To Buy Monero
RippleXRPHow To Buy Ripple
VeChainVETHow To Buy VeChain

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