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Jumping on the Crypto Train

adityavinodh profile image Aditya Originally published at yo.adityaone.com ・4 min read

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What is a cryptocurrency?

Cryptocurrencies are a form of a completely digital currency. You might think it is similar to online banking, or credit or debit cards, but all of these methods still involve a middle man - your bank or card providers. Cryptocurrencies use a technology called the blockchain to completely get rid of any third person. You can directly make transactions with whoever you want, in a secure manner, without involving any other person. There are a few popular examples of these digital currencies, like Bitcoin, Ethereum, and the recently trending Dogecoin. Bitcoin was the first major, successful attempt at a cryptocurrency, and the following currencies that were created using similar technology (but with minor differences), are called altcoins.

What is the blockchain?

It's not too important to know the specifics, but most cryptocurrencies rely on this technology to function. In simple terms, the blockchain is a chronological ledger or chain of data that is updated and synchronised across multiple computers across the internet. Every transaction is public, including the unique identification for both parties involved in the transaction, and the amount transfered. There is a complex cryptographic task that the computers must solve and agree on. This is why every transaction takes around a few minutes or sometimes hours to get approved and verified. Due to this design, the data or transactions can never be "hacked" or changed. It is nearly impossible.

Blockchain Diagram

How to use it?

It is meant to be a replacement for traditional currencies, but it is far from becoming widely adopted. To actually use these cryptocurrencies, you first need a wallet. This can be a physical hardware wallet that you can buy, or a digital wallet that you can download, like a mobile app. Using an app as a wallet is the easiest, and is what I recomment. You can use an app like Coinbase Wallet or Metamask. You need to buy and trade cryptocurrencies from an exchange. Make sure to do your research and use a reliable one. You can use your bank account or credit/debit card to purchase the cryptocurrency of your choice. For beginners, I recommend something like Uphold or Coinbase (Different from Coinbase Wallet). Once you are done with the purchase, these exchanges usually provide a hosted wallet which is where your crypto will be stored. It is okay to leave it there, but it is usually recommended to transfer it to a separate wallet for security reasons. So, from the hosted wallet on one of these exchanges, you can transfer the cryptocurrency to your own wallet (something like Metamask), or even withdraw it to your bank account.

Fees and costs

The exact fees and cost of the transactions will vary depending on which exchange you use, but most exchanges, especially new ones, have a 0% commission and fees policy for transfering from one crypto to another, and sometimes for also buying. But you often have to pay a network fee when withdrawing to a bank account or transfering to your or someone else's wallet. This fees depends on the network, and is often called network fees.

Things to consider

Purpose of the cryptocurrency

Every currency is created with a specific purpose in mind. Consider this while making a decision to purchase or invest in cryptocurrency. Bitcoin and Ethereum for example, are very popular currencies, but are also quite slow compared to other altcoins. It takes longer for transactions to complete, and have high network fees. It is okay if you are planning to make a long term investment, but it is usually not recommended for small, frequent transactions. Bitcoin Cash (BCH) (Not Bitcoin (BTC)) is an example of an altcoin which is a fork from Bitcoin. It was made in order to be fast and scalable, and has a much lower network fee than other alternatives.

Cryptocurrency networks

Multiple cryptocurrencies or tokens can use the same network to operate and function. Bitcoin uses the bitcoin network, ehtereum uses the ethereum network, Basic Attention Token (BAT - Used by the Brave browser) also uses the ethereum network, and Bitcoin Cash uses its own Bitcoin Cash network. The network used by the currency or token is important to consider, because it determines if you can convert it to another token, and how much network fees you will need to pay. Certain wallets like the Coinbase Wallet, only allow you to convert tokens to others if they use the Ethereum Network, other tokens can be stored and used, but not be converted to other forms.

Should you use it?

Cryptocurrencies are extremely volatile, and therefore have a high risk. The value of your tokens can drastically change everyday, and thus pose a problem to be used as a daily currency. But, if you want to explore and try it out, its definitely something to dig deeper into. I would recommend to start with $10 - $15 as it is mostly the minimum amount required for the purchase.

Bonus

Get started for free

Brave Rewards

If you use the Brave browser, which I highly recommend, you get paid for watching optional advertisements that are completely privacy focused. You get paid in BAT (Basic Attention Token) which is based on the Ethereum Network. You can link it with an Uphold account. Once you reach a sufficient balance, you can transfer it to your own wallet. No credit/debit cards are required.

NFTs

NFTs stands for Non Fungible Tokens. These are getting a lot of hype recently, and are in simple terms, a digital collectible. Its like collecting stamps or coins, but a digital version of that. They are also based on the blockchain, and help people purchase unique, non-replacable digital items, like a Tweet, an image, etc.

Check out this link to learn more: Forbes Advisor article

Other resources

https://cryptocurrency.org/beginners-guide

Discussion (1)

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jamesw profile image
Dima Santarskyi

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