Cryptocurrency

What is cryptocurrency?

Cryptocurrency is a type of  currency (digital currency) or medium of exchange which uses digital files as money. The files share same methodology/technology with cryptography (the science of hiding information). Cryptocurrencies use "decentralized control",  they aren't controlled by one person or government.

 

What is cryptography?

Cryptography is the study of protected communications techniques that limits to only the sender and intended recipient of the information to view its contents. The word is derived from the Greek word "kryptos", which means hidden. An example of cryptography is an encrypted message in which letters are replaced with other characters. To decode the encrypted contents, we would need a grid or table that explains how the letters have been substituted.

 

What is a blockchain?

A blockchain software will allow a network of computers to bridge directly to each other without middlemen . It forms a decentralized network of computers through which values can be immediately sent , exchanged , or stored with a very high level of security at a lower cost.

 

What is a wallet?

A crypto wallet is a place where you can safely secure your cryptocurrency purchases. There are many different types of wallets.

Most people favor  “Hosted Wallets”, ”Non Custodial Wallets” or “Hardware Wallets”. The right one for you depends on what type of security you are looking for and what you want to do with your crypto purchases. 

 

HOSTED WALLET 

A third party keeps your crypto, just like a bank holds your savings account. The main benefit is that if you forget your password, you will not lose your investment. It’s drawback is your inability to access all the benefits cryptocurrencies offer. Changes may be implemented to support more features.

How to set up a hosted wallet:

After searching, decide which wallet you like. The  main considerations should be based on  type of security, ease of use, and compliance with government and financial regulations.

Create your account. Enter required information, choose a secure password. It is highly  recommended you use 2-step verification (also called 2FA) for an extra layer of security. 

 

NON CUSTODIAL WALLET

A non-custodial wallet, gives you a complete control of your cryptocurrency. Non-custodial wallets don’t rely on a third party to keep your investment safe. While they provide the software necessary to store your cryptocurrency, the responsibility of remembering and safeguarding your password is all on you. If you lose or forget your password — referred to as a “private key” or “seed phrase” — you will not be able to access your secured cryptocurrency. If someone else discovers your password, they will have full access to your assets. 

Why a non-custodial wallet? In addition to being in full control of the security of your investment, you can also access more advanced crypto activities like yield farming, staking, lending, borrowing, and more. If you only want  to buy, sell, send, and receive crypto, a hosted wallet may be the easiest solution.

How to set up a non-custodial wallet:

Download a wallet app of your choice.

Create your account. You don’t need to share any personal info( unlike a hosted wallet) to create a non-custodial wallet. Not even an email address.

Be sure to write down your password and have a few back ups. It is a random 12-word phrase. Keep it in a secure location. If you lose or forget this 12-word phrase you won’t be able to access your assets.

Transfer cryptocurrencies to your wallet. It’s not always possible to purchase cryptocurrencies with traditional currencies (like US dollars or Euros) with a non-custodial wallet,  you’ll have  to transfer cryptocurrencies into your non-custodial wallet .

  

HARDWARE WALLETS 

A hardware wallet is a physical device,  the size of a thumb drive, that stores the private keys to your crypto offline. It is not  a popular way for storage, because of their increased complexity and cost, but they offer some benefits — for example, they can keep your crypto secure even if your computer is hacked. The advanced level of security makes them difficult to use compared to a software wallet, they can cost upwards of $100 to buy. 

How to set up a hardware wallet:

Buy the hardware. Two trusted brands are Ledger and Trezor. 

Install the software in your wallet. Download the software from the selected brand's" company website" and follow the directions to create your wallet.

Transfer crypto to your wallet. A hardware wallet typically will not allow you to buy crypto using traditional currencies (ie; US dollars or Euros), and because of this  you’ll need to transfer crypto to your wallet.

 

What is Bitcoin?

Bitcoin is a digital currency.  It was invented and implemented by the presumed pseudonymous Satoshi Nakamoto who integrated many existing ideas from the cypherpunk community and pioneered the rise of the digital currencies. Bitcoin has lower transaction fees compared to  traditional online payment systems and, unlike government-issued currencies, it is operated by a decentralized authority.

 Physical bitcoins do not exist. There are only balances that are kept on a public ledger and Bitcoin owners  have transparent access to. Very large amounts of computing power is needed to regularly verify the transactions. Bitcoins are not distributed or endorsed by any banks or governments. They are not  valuable as a commodity and  are not to be considered legal tender.  Bitcoin uses a decentralized ledger system to spawn, distribute, trade and store the assets.  

 

What is an Altcoin?

Altcoin is an alternative digital currency to Bitcoin. The word Altcoin is a combination of "alternative" and "coin", to form "altcoin". It  refers to a group of cryptocurrencies other than  Bitcoin.

A large number of the altcoins are developed upon the basic framework provided by Bitcoin. As a consequence most altcoins are peer-to-peer. They aim to offer efficient and inexpensive ways to process  transactions on the Internet. They share many overlapping features but altcoins vary widely from each other.  Mining-based cryptocurrencies, stablecoins, security tokens, and utility tokens are all considered Altcoins.

 

What is the difference between Cryptocurrency and traditional "Money"?

Without going into too many explanations below are the main differences:

 

TRADITIONALS

CRYPTOCURRENCIES

Exchange of money to acquire something of value

Value is exchanged in the form of cryptocurrencies

They are physical

They are virtual

Its core is located in a specific country or group of countries

They are global

Central Banks and financial reserves control them

They are controlled by all users and blockchain technology

Become part of the economic system through bonds

Become part of the market directly

Great inflation and interest rate influence

Supply/Demand is the only influence

Issued by governments

Decentralized mining offers

Value transfers are very slow and bureaucratized

Peer-to-peer payments are made instantaneously without intermediaries

Commission costs

Costs come from software maintenance

Not every person in the world has the power to have a bank account

They can be used by the whole society, including those parts of the population without access to financial resources

 

 

What are the differences in cryptocurrencies?

The main differences are based  on how the  coins are produced and spent. Some coins, for example, Bitcoin, Dash or Monero, are created in a process called “mining” where powerful computers are involved to solve  cryptographic puzzles. Upon solving the puzzle miner is rewarded by the system with coins (bitcoins, dash coins, etc.). The miner is then able to trade with those coins on the market. On the other hand, coins like NEM (XEM) possess other types of algorithms where there is no need for powerful hardware. And then there are currencies such as ripple and IOTA that can’t be mined but they’re produced by an organization that stands behind the currency.

 

What is the difference between a digital currency, virtual currency, and cryptocurrency?

Digital currency is a blanket term used to refer to money that exists solely in the digital space. Virtual currencies and cryptocurrencies are digital currencies because they exist online. Virtual currencies are a form of digital currency available in the virtual world (think of exclusive online communities created by developers).Cryptocurrencies are digital currencies because they exist online, but they are also virtual currencies created with cryptographic algorithms. So, while we may often see the terms digital, virtual, and cryptocurrency cobbled together, it’s important to understand the nuances between the three.

 

What is mining?

Cryptocurrency mining, or cryptomining, is a process in which transactions for various forms of cryptocurrency are verified and added to the blockchain’s  digital ledger. Also known as cryptocoin mining, altcoin mining, or Bitcoin mining.

Each time a cryptocurrency transaction is made, a cryptocurrency miner is responsible for ensuring the authenticity of information and updating the blockchain with the transaction. The mining process itself involves competing with other cryptominers to solve complicated mathematical problems with cryptographic hash functions that are associated with a block containing the transaction data. The process of mining is also responsible for introducing new coins into the existing circulating supply and is one of the key elements that allow cryptocurrencies to work as a P2P decentralized network without the need for a third party central authority.

 

Are crypto's a scam?

No they are not, but this doesn’t mean people can not be scammed. They are legit. Cryptocurrency and the blockchain technology it is built on will disrupt the way money and information are exchanged. Cryptocurrencies can be a very legitimate investment with returns that outperform stocks. However they can be very volatile and are not suitable for conservative investors.

 

What is DeFi?

DeFi means “decentralized finance,” a blanket term used for an assortment  of financial applications in cryptocurrency or blockchain modeled toward unsettling financial intermediaries. DeFi is distinct because it broadens blockchain use from simple value transfer to more complex financial use situations. Today centralized organizations manage the majority of the cryptocurrencies. DeFi brings in decentralized exchanges to eliminate centralized point-of-collapse within the ecosystem.

 

What is protocol?

Protocols are sets of rules that allow data to be shared between computers. They establish the structure of the blockchain — the distributed database that allows digital money to be securely exchanged on the internet. A Blockchain protocol operates on top of the Internet, on a P2P network of computers that all run the protocol and hold an identical copy of the ledger of transactions, enabling P2P value transactions without a middleman though machine consensus.

 

How to purchase cryptocurrency? 

The easiest way to buy Cryptocurrencies is by using centralized exchanges. They can also be purchased from ATM( Bitcoin), via voucher cards( Bitcoin) or from  people who are willing to sell..

But before you decide on a purchase there are a few things to consider.

Location

To find out how and where you can buy cryptocurrency, it is important for you to check your country's regulations.

Payment Method

The most common and accepted payment methods to purchase cryptocurrency include: credit card, bank transfer, or even cash. Different websites accept different payment methods, so you'll need to choose a website that accepts the payment method you want to use.

Type of Cryptocurrency

Not all cryptocurrencies are available for purchase on every website. You will have to find a website that sells the cryptocurrency that you want to buy.

Cost of Fees

Each website has different fees. Some are cheap, some are not so cheap. Make sure you know how much the fees cost before setting up an account on any website. You don't want to waste your time verifying yourself and then find out the fees are too high!

 

How to send & receive cryptocurrency?

he process of sending and receiving cryptocurrencies (like Bitcoin, Litecoin, Ether, etc.) can have small differences between wallets (as each coin has its own set of wallet options in which that cryptocurrency can be stored), but in general:

  1. Log into a wallet you have funds in.
  2. Go to the send/receive screen (by clicking the tab or button that says this or shows the proper icon).
  3. Choose whether you want to send or receive cryptocurrency. TIP: In general you must only send and receive like-coins. Meaning, you can only send/receive Bitcoin-to-Bitcoin, Litecoin-to-Litecoin, etc. (you can’t, for example, send Bitcoin to an Ethereum wallet or even Bitcoin to a Bitcoin Cash wallet).
  4. For sending: Enter the public wallet address of the recipient and choose the amount to send (make sure to add for transaction fees; you’ll need enough coins in your wallet  to avoid   mistakes then hit “send transaction” (or the equivalent) and verify the transaction one more time (confirming your public address and their public address is correct). TIP: you can write a note with your transaction to let the recipient know what transaction is for. TIP: Using a QR code to copy an address helps avoid potential mistakes.
  5. For receiving: You don’t have to do anything except share your public wallet address with the sender. If you are in person, you can do this by letting them scan a QR code (if your wallet offers that).

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