Crypto Guide for Newbies
This crypto guide for beginners is meant to serve as an easy-to-understand introduction to the world of cryptocurrencies. It will teach you the basic definitions of cryptocurrency. Like anything in life, you don’t just invest without knowing what it is you are investing in. Just keep that in mind!
A cryptocurrency wallet is a software program or physical medium, which enables users to receive or spend their crypto assets. It’s not a traditional wallet in sense of storing funds: user’s assets are stored not in the wallet itself, but in the decentralized blockchain register.
There are two types of cryptocurrency wallets: so-called hot and cold ones. Both of them have their own pros and cons.
Hot wallets are those that are connected to the Internet. You may choose between a high variety of them: online or mobile wallets, browser extensions, desktop versions. Such wallets are convenient and easy-to-make, but you can lose your money quite easily, for example if someone gains access to your computer or if you forget your password and recover phrase.
A cold wallet is one that doesn’t require access to the Internet. It can look like a USB drive, such as Trezor or Ledger wallets — securely programmed devices that store your private keys, — or like a piece of paper with a QR-code printed on it.
The advantage of hardware storage is that it cannot be hacked. They are often referred as more secure wallets since hardware is immune to computer viruses, it’s often secured by pin code like your credit card, and it requires confirmation of transactions on your device. The only fly in the ointment: it can be lost so easily (however, your funds may still be restored).
Some wallets work with only one cryptocurrency, others are multi-currency wallets. Hardware wallets usually hold several currencies, and cold wallets can be both types.
Wallet address is an identifier consists of a combination of random 26–36 symbols. It represents a destination of a crypto payment. You can get your wallet address generated by any suitable wallet — just choose one and click «New Address». To make the transactions untraceable, you can create several addresses.
Mining a process by which transactions of cryptocurrency are checked and new blocks are added to the blockchain register. Miners compete with each other in solving complicated mathematical problems with a cryptographic hash function. The first miner who discovers the solution and solves the code is rewarded by the right to authorize the transaction and earn a small number of cryptocoins.
In simple words, the mining process is a computer accounting called «verifying transactions». A computer selects pending transaction and check if the sender has sufficient funds to complete it. A miner provides the accounting service and receives coins as a reward.
Block Explorer is a website or mobile app that aims to find and provide information about blocks, transactions, smart-contracts and almost all the data of a certain blockchain. Having sent money to your friend and worrying if he received it? Just open a block explorer and discover where they are. No bank provides such data if the money is still processing.
What you can do with crypto
Using fiat money, you can pay for any goods and services — but only on the territory of the country that issued it. It’s different with cryptocoins: they are worldwide, and you can pay online all over the world.
However, cryptocurrency as a payment option is just getting started. Unlike such internet giants as Microsoft, Wikipedia or Expedia, that have already taken a step in the right direction, offline stores mostly implement Bitcoin payments to provoke hype by local and short-time campaigns. And there’s nothing wrong about it if you still can subscribe to Playboy of buy a bucket of chicken wings for your assets. It’s said that you even can purchase real estate with crypto — but often such claims happen to be a mere PR, meaning you have to convert your money on fiat anyways. So, can you pay with Bitcoin in a pub in 2020? Sure! But probably you have to travel to Sydney first.
Crypto trading is one of the major ways to earn on cryptocurrencies. It differs from traditional trading of precious metals, foreign exchange and stock insufficiently. Cryptocurrency trading is an act of speculating on cryptocurrency price movements by buying and selling the underlying coins via an exchange. The ultimate goal remains the same: buy low, sell high, make a profit. Higher volatility of crypto market makes the difference — that’s why this market doesn’t suit newbies well.
But what are the advantages of such kind of trading? Well, in 2017 Bitcoin already surpassed $20,000, and as we all know, its emission is limited — only 21 million of tokens may be produced. It implies that each newly acquired Bitcoin reduces the amount of the coins to mine. Traders hope that one day the prices will skyrocket exponentially. And due to the active investing to Bitcoin the whole altcoins market is flourishing.
If you find this a sufficient reason to try, you should use one of 150+ crypto exchanges. As a rule, the bigger daily trading volume, the more secure and reliable is the exchange and the more convenient its interface. The largest crypto exchanges are Binance, Upbit, Huobi, Bittrex and so on.
As in traditional investment «buy and hold» strategy means a situation when an investor buys some assets and holds them for a long time no matter what, holding in the crypto world also refers to such way to act when you just keep your funds and wait until the prices go green and reach all-time-high. At present this financial term is broadly known, thanks to the HODL meme. It originated in 2013 post on Bitcoin Forum with a dramatic sob story and a typo «I’M HODLING» in the subject.
Where to buy crypto
A fast way to exchange digital money on fiat and vice versa is peer-to-peer exchanges, such as LocalBitcoins. There you can find users’ advertisements for buying and selling cryptos. You can choose the variants depending on the exchange rate and make a trade with online banking or cash.
It’s preferable to use services with escrow accounts, which holds the funds until the transaction is conducted. Otherwise, there is a chance your transaction may be canceled by a bank so you lose your Bitcoins and altcoins.
To withdraw your money, you need to pass the verification, therefore don’t count on anonymity. The platforms typically require passport data and other private information.
The other way is centralized exchanges. It’s better to choose large and reliable platforms, such as Binance. KYC and AML procedures are also implemented there, but most of the time an exchange makes the swaps instantly if the platform doesn’t have problems with liquidity.
We would not recommend using such an exchange as a wallet to hold your assets. It’s better to withdraw your assets to other sites, perfectly to hardware wallets such as Ledger and Trezor. Apart from malware attacks, which threaten massive trading platforms, internal problems in companies may arise and lead to losing access to clients’ accounts.
Regular exchange services allow cryptocurrency holders to exchange their coins and tokens directly for any other coin. They are marketplace platforms, owned by third parties, so you deal only with the platform which executes transactions. The main downsides are also the fee and lack of anonymity. To help you to pick up the best rate without any market research, minimize the commissions paid to the intermediary, and conduct an anonymous transaction safe and secure, the exchange services aggregators were introduced. For example, on SwapSpace.co you can choose between more than 300 coins to exchange, selecting the exchange services by the rate you like and the conditions you prefer.
Besides, many crypto wallets also have an in-wallet crypto-to-crypto exchange option and allow you not only to store and transfer your assets but also to buy and withdraw funds. However, the fees for such kind of operations would be significant, so if you want nothing but to «hodl» Bitcoin for a while and then to sell it the same way your profit may be just eaten by the commissions.
Plenty of services offer to buy or to sell crypto right on mobile apps. Plenty of services allow buying digital currencies directly from the bank account and withdrawal them too. Each service has its own fee for operations, and you need to consider it while doing the exchanges. Usually, it’s better to choose reliable and time-tested variants and overpay a bit, than to try to save your money and lose everything.
So, we have reviewed the most important definitions of the crypto world. Ready to swap some currency? Choose SwapSpace and exchange your assets at the best rate!