This Beginners Guide to Cryptocurrencies will cover the fundamentals of cryptocurrencies, how to get started and how to obtain your initial coins & tokens. While we recommend everyone seriously interested in investing and trading take a comprehensive crypto trading course, this guide will help beginners get off to a great start. And set them up for more advanced training as they enter the exciting world of cryptocurrencies.
Before anyone can start investing, trading or shopping with cryptocurrencies, they must own some. This guide’s primary focus: Getting You Started in the World of Cryptocurrencies!
Whether it’s buying, trading or mining, we’ll guide you to getting your first coins here!
Let’s start with Money
To better understand what cryptocurrencies are, let’s get on the same page about what money really is.
Money is an agreed-upon measure of value. It’s not necessarily valuable in-and-of-itself but it has value by collectively agreeing it does. The money you received in exchange for your product or service represents the measure of value that you and the buyer have agreed the product/service possesses. It works because we all agree that if someone offers you some money for a product or service, you’ll be able to exchange that money for products or services with someone else later.
Over the course of history, there have been many agreed-upon forms of money, from earth deposits like gold or spices to, most recently, modern paper notes like the dollar or euro. Once gold-backed, these banknotes are now backed by nothing more than a decree. This is Fiat Money. The governments have decreed them to hold a given measure of value. At the same time, money, like gold or salt, has an intrinsic value. We all agree on its value because it is itself valuable. Fiat does not. Its value is that a central authority, the government, has legally determined it does.
Fiat money comes with some disadvantages. However, it requires that we trust in someone (the central authority) rather than something (an item that is universally agreed to possess its value). This makes fiat money ‘Centralized’. That is, there is central control of the money and its measure of value. Another problem is that it’s not a limited resource. The central controlling authority can produce more as they see fit. The exchange (for product/services) value decreases as they print more. This means it requires more money to buy the same products and services over time.
This brings us to cryptocurrencies. While they do not possess intrinsic value like salt, they are not centrally controlled and have an unregulated limited supply.
This brings us to Bitcoin. So what is Bitcoin? Bitcoin (BTC), is a cryptocurrency used for online peer-to-peer transactions. It is open-source software that operates on blockchain technology.
Bitcoin has some mystery surrounding its origin. It was created in 2009 by an unknown individual with the alias Satoshi Nakamoto. He created Bitcoin so people can conduct online transactions without needing to deal with the bureaucracies, regulations and absurdly high processing fees.
Unlike fiat currency, Bitcoin is a digital currency. It can never be printed, and it is decentralized. That is, there is no institution regulating it or decreeing its value and making it accessible to everyone.
The software, Bitcoin, exists and operates on blockchain technology. This is an incorruptible ledger or record of transactions. This data can be distributed without any possibility of copying that data.
Only you can access your Bitcoin. No government or bank can freeze or take that money. This also means you can participate in peer-2-peer transactions, sending and receiving money without going through a bank.
Ethereum is another open-source software based on blockchain technology. Developers use the platform to build and distribute decentralized applications. Ethereum cryptocurrency operates on smart contracts. These are a type of code enabling the automatic exchange of money or digital property under specific conditions. Ethereum is not limited to processing codes. The Ethereum blockchain allows developers to run unlimited applications. Ethereum-based currencies have become most popular due to how ‘Ether’ tokens are constructed on the ”ERC-20” standard.
After Bitcoin’s meteoric rise, numerous other coins started to appear in this new crypto financial market space. These new coins are collectively referred to as Altcoins or alternative coins (bitcoin alternatives). Many of these coins arose in response to one Bitcoin issue or another.
There have been well over one thousand Altcoins created. 2018 was a particularly active time in the altcoin world. Many of these coins have come and gone and many more will be gone soon. But not all. Some have real promises and possibly a very bright future.
Initial Coin Offerings or ICO, are often used to stimulate enthusiasm and confidence for an emerging cryptocurrency. They help raise funds for the development of a new idea or currency. Investors are offered fixed units of the emerging currency in exchange for already established coins like Ethereum or Bitcoin.
Beginners Guide to Cryptocurrencies: Buying
While Bitcoin is the best-known cryptocurrency and possibly the only one you’ve heard of, it is not the only option. There are hundreds of crypto coins and tokens available for purchase. Many are built on the same or similar tech.
You may also want to consider buying coins like Ethereum, Litecoin, Ripple, or any of the other desirable options.
Cryptocurrencies can be bought on exchanges and through brokers. We will get into this more below. For now, consider that there are more digital currencies than just bitcoin. Many of them show great promise.
The mechanical process of buying cryptocurrencies is not very involved (most of the time). However, picking the right exchange to buy through can be a little more tricky. There are different exchanges with different specialties, unique features, and varying fees and rates. This section will explore exchanges focusing on finding a beginner-friendly option. We also have a more in-depth Exchange Guide for those interested in getting in deeper.
In this beginner’s guide to cryptocurrencies, we will compare the main types of exchanges by how you plan to use your cryptocurrencies.
First, a quick word on Mining Cryptocurrencies. This is another way of acquiring coins.
Buying cryptocurrencies is an obvious way of obtaining coins and tokens. However, it’s not the only way! Cryptocurrency mining can be very appealing to some.
Mining occurs when complex blockchain tasks are executed. Like mining gold back in the day, mining cryptocurrency can be difficult and expensive, but it can also be very profitable. Just how profitable depends mainly on the method used, how much capital is required for operations and the value of the cryptocurrency.
There is some complexity to mining, what to mine and how to mine it. For this reason, and because it’s not the best place to begin a crypto journey, we’ve decided to create a dedicated mining guide… coming soon!
Investing or Trading
Are you primarily interested in a longterm cryptocurrency investment? Or are you looking at getting into frequent trading?
If your only interest is in buying some Bitcoin (or another coin/token) for long-term holding, you might want to consider a brokerage exchange service. These usually have a little higher price per coin but they are, almost always, a much faster and safer way to buy. Many brokers only sell coins and do so directly. The process can be very fast and easy.
Trading platforms are the better choice for those interested in trading. Whereas brokerage services usually offer little (if anything) in the way of selling or trading, Trading platforms offer a great deal.
Trading platforms almost always have lower costs and fees. They often have excellent trading and analysis tools and resources. However, they are also usually very challenging for beginners. If you are just getting started in crypto trading, you must immerse yourself in a high-quality trade & analysis course and/or community.
Is your main interest in cryptocurrency for making purchases with Bitcoin (or another crypto)? If so, you’ll probably prefer the speed, ease, and simplicity of buying from a broker. You’ll pay a bit of a premium for the convenience but you could save yourself a lot of risks, hassle, and time.
There are some great Brokerage Exchange Services. Not all operate the same. Some require a great deal of verification and some even keep an eye on your spending. So, choose carefully if you’re looking for privacy or anonymity. For most people, this will not make a difference. You may not care much. The verification process is all a part of improving the security of the service so it may even be preferable.
However, you may prefer a decentralized exchange if you don’t want your details and activity revealed. There are several options and a few are well-regarded in the crypto community.
To sum up:
Brokerage services are better for beginners, shoppers and casual investors to quickly, easily and reliably buy Bitcoin and other currencies.
Coinmama is one of the most popular, safest, easy to use and fastest ways to buy Bitcoin & other cryptocurrencies. Search our Directory for all exchange listings or explore our Exchange Reviews for our take on some of the most popular ones.
Trading Platforms are best for experienced individuals looking to trade cryptocurrencies.
Changelly is one of the most popular exchanges today. It offers a wide range of tools and resources for trading, a good rate, and solid security. Search our Directory for all exchange listings or explore our Exchange Reviews for our take on some of the most popular ones.
Beginners Guide to Cryptocurrencies: Wallets
A cryptocurrency wallet is one of the most crucial aspects of buying, selling or trading cryptocurrencies. Wallets effectively (not literally) store our cryptocurrency. It is important to have a wallet offering great security by a company with a great reputation and for a reasonable price.
There are several types of wallets. Each had its unique advantages and disadvantages. These include hardware wallets, mobile wallets, and desktop wallets. We get into wallets more deeply in our Wallets Guide.
For now, it’s important to understand that a wallet is what ‘stores’ and protects your digital money. Using a trustworthy wallet service can keep your money safe and offer peace of mind!
While we recommend using hardware wallets to store the bulk of your funds, software, web, mobile, etc., wallets can be a great place to start, especially if you’re starting with a smaller investment. Most exchanges and brokers offer wallets and several free wallet services.
To sum up: There are a lot of great wallets out there. And there are many reasons why you might choose one over another. Because of this, we have written a Wallet Guide for a deeper look. Here are a couple of great options if you’re looking for something to get going.
If you are looking for a free, easy-to-use, reliable wallet… this is a great option!
There are several quality Hot or Web wallets out there. Jaxx is one of the best. It is easy to use and secure wallet that can be used on various devices. Search our Directory for all wallet listings or explore our Wallet Reviews for our take on some of the most popular ones.
This is for those who want the best security and peace of mind with a hacker-free device!
The Ledger Nano S is one of the market’s most popular and secure wallets. It comes with many great security features, is easy to use, and is as hacker-proof as it gets. Search our Directory for all wallet listings or explore our Wallet Reviews for our take on some of the most popular ones.