Crypto Clarity: Understanding Cryptocurrency Basics

Updated: September 5, 2022
by Cristian Morales

Crypto Basics: How to Get Your Head Around Cryptocurrencies

Crypto came up seemingly overnight. One day, we were all convinced that crypto would be a fad that wouldn't last more than a few months, and the next, it seemed that every second person was mining bitcoin! To most people, cryptocurrency is something that's not entirely real because they don't really understand the details of the currencies and systems. People who understand these systems and make use of them as often as they can, believe that the future is crypto. If this is the case, it’s probably a good idea for the rest of us to learn a little bit about the basics of these unregulated currencies and how to deal with them! Let’s unpack some of the basics of cryptocurrency and leave you with a better understanding of this foreign subject.

Crypto Clarity Understanding Cryptocurrency Basics

What Is Cryptocurrency?

Any and all types of decentralized digital currency fall under the umbrella of crypto, a form of currency based on the science of cryptography. Decentralized means that the currency in question isn't issued by any official bank or government like the dollar or Euro.

Crypto is made and traded or exchanged from peer to peer. You can’t hold crypto in your hand. Being a digital currency means that the value of most kinds of crypto isn't pegged to the value of any other type of currency and that you’ll never see it in a physical form. The “crypto” part of cryptocurrency refers to the technique used to completely secure each and every unit so that no one can copy one piece of currency.

Most cryptocurrencies use a Blockchain platform; this is essentially a digital accounting book or ledger that records transactions. Blockchain has been fundamental to crypto since its inception in 2009.

How Does It Work?

How Does Cryptocurrency Work

You might have heard the expression “,” which may conjure up images of dwarves with spades and pickaxes digging their way towards some sort of treasure. It’s not quite the same as traditional mining, but similar in a way. To mine crypto, you must make use of complicated cryptographical equations to confirm each transaction on your chain. The mining software completes billions of complicated calculations to verify transactions as they go along: these processes are either called Proof of Work or Proof of Stake. Since anyone with access to the right programs can mine, the competition is fierce. You and your software must be the first to verify all transactions in the block to (perhaps) be rewarded with a new coin.

While crypto may have started out small, there are currently thousands of different variations, but most have a somewhat similar format. The peer-to-peer network is what makes crypto so unique and appealing to a lot of people: there's no middleman there to take a chunk of whatever the value of your crypto is, and you can access it without assistance 24/7.

The system of verification or crypto is referred to as “trustless” since there's no person in the middle saying yes or no to the transactions: it’s all automated and self-governing. The most significant Bitcoins are currently Ethereum, Bitcoin, Tether, Solana, and Binance Coin. You can store your crypto in an online wallet which you can access from your phone or your computer. These blockchain wallets allow you to trade directly from them.

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What Is Blockchain?

Money has to be secured, no matter what kind of money it is. If you left your bank notes lying unsupervised on a public table, there’s no doubt that someone would come along and steal them, right? It's the same with crypto: it needs to be kept safe. Blockchain technology is the way that crypto is kept secure. This digital ledger can track and record many different types of assets, not just crypto. Blockchain is “transparent,” which means that if you’re using a public one, anyone else using it can see what you’re doing. Though they can see, the record of them seeing is permanent, as well as the record of any action taken on the chain; no one can wipe it out, so no one can hide. Small nodes of data are collected together in chains in chronological order.

How Do You Mine Crypto?

How Do You Mine Crypto

You might have heard the expression “mining crypto,” which may conjure up images of dwarves with spades and pickaxes digging their way towards some sort of treasure. It’s not quite the same as traditional mining, but similar in a way. To mine crypto, you must make use of complicated cryptographical equations to confirm each transaction on your chain. The mining software completes billions of complicated calculations to verify transactions as they go along: these processes are either called Proof of Work or Proof of Stake. Since anyone with access to the right programs can mine, the competition is fierce. You and your software must be the first to verify all transactions in the block to (perhaps) be rewarded with a new coin.

Why Does Everyone Love Crypto?

There's a straightforward answer to that question: growth. That and the revolution that crypto might bring to the financial industry. Bitcoin grew in worth at an incredible pace, and many other cryptos followed suit. Instead of being a disappearing fad, crypto has become a force to be reckoned with, and the industry is now worth trillions.

Best Way to Make Money on Cryptocurrency

You've heard the fomo-inducing stories: A lone programmer working out of his garage creates a new cryptocurrency that takes over the world and makes him rich beyond his wildest dreams! And then you hear about people who bought Bitcoin at $20,000 and are now selling it at $6,000. But what if - instead of trading cryptocurrencies - you could make money by actually using them? That's what many experts do and the information will surely help you: how to use your cryptocurrency skills to earn real cash.

Buy Low, Sell High

Buy low, sell high. The age-old adage has never been more applicable than to the cryptocurrency market. As with any asset class, there are ups and downs as different variables come into play. If you can identify these variables ahead of time and make strategic decisions based on them, you’re likely to have a profitable experience as a trader or investor in crypto markets.

Diversify Your Cryptocurrency Portfolio

Diversifying your cryptocurrency portfolio is a crucial step in maximizing your investment. You should have a mix of coins and tokens from different platforms, but you can also diversify by investing in multiple coins or tokens on each platform. The best way to do this is by using an exchange like Coinbase or Gemini that allows you to buy multiple cryptocurrencies with one account.

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Explore New Opportunities: ICOs and Cloud Mining

In the past few months, you may have heard about Initial Coin Offerings (ICOs) or Token Sales. These are new ways for companies to raise money for their projects by selling tokens or coins.

These ICOs are not regulated and can be risky, but it's possible to make money from them. You could invest in an ICO and make a profit if the value of that coin increases after its release. You could also join a cloud mining pool which allows members to mine cryptocurrencies at lower costs than buying expensive hardware required for solo mining operations.

Do Your Research

If you're going to invest in cryptocurrency, it's important to do your research. A great place to start is by learning about the best exchanges for buying and selling cryptocurrencies. Once you've done that, it's time to consider which wallet options are right for you - there are a lot of different kinds out there! You'll also want to make sure that you keep up with the latest news so that your investments can grow as much as possible over time. You should also join some online communities where people ask questions about cryptocurrencies and share information.

Make Cryptocurrency More Accessible to Everyone

The best way to make money on cryptocurrency is to do it in a way that makes it more accessible to everyone. This means making cryptocurrency easier to buy, easier to spend, easier to use and easier to store.

The first step towards this goal is creating an easy experience for new investors who are just getting started. You can do this by providing a clear and concise explanation of what cryptocurrency is—and why it's so important—on your website or social media platform. Then, walk them through how they can purchase their first coins with confidence using tools like Coinbase or CEX.

Next comes spending your crypto currency: if you can't easily spend what you've earned on things (food bill payment, rent payment etc.) then there aren't many options for earning more money in the near future either! So make sure there are plenty ways people can spend their coins online without needing too much technical knowledge; maybe even create some kind of marketplace where users can trade goods among themselves?

The last factor that will help bring widespread adoption of cryptocurrencies involves storage solutions such as cold storage devices (hardware wallets) which are secure against theft but also easy enough for non-techie folks.

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Making Money on Cryptocurrency Is Not a Myth

Cryptocurrency isn't a get rich quick scheme. It's not even a get rich scheme.

Cryptocurrency is a new asset class that has been experiencing rapid growth in the last decade, but its value is still volatile and unpredictable. This can make it difficult to determine what you should do with your cryptocurrency portfolio, but there are several ways to help protect your assets and earn money from them at the same time.

Wrap Up

It is important to remember that cryptocurrency is still in its infancy. There are many factors that will affect your ability to make money on cryptocurrency, but it’s an exciting time to be involved with this new technology. The potential for growth and profit is immense, so if you are interested in getting involved with this space now would be a great time to do so!

These crypto basics will help you to understand a little about this fascinating and fast-growing sector. Are you going to take the leap into crypto?

About the author 

Cristian Morales

Freelance writer and graphic designer with a can-do attitude. I became independent after spending 6 years in the hospitality industry and 5 years in banking & finance. I'm an all-rounder guy, open to working with like-minded people.

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