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Cryptocurrency Beginners Guide

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Cryptocurrencies

The boom in cryptocurrencies has taken the world with storm. Each day news regarding Bitcoin and other currencies spreads over the world. Large financial institutions, governments and media are keen to get involved such as the news of Facebook getting involved with their coin in 2021.

What is a cryptocurrency?

In short cryptocurrencies are electronic currencies. To better understand what a cryptocurrency is let’s take a look what its not: Government controlled or Centralbank controlled so it is in other words a complete separate system.

Now that we know what it is not let’s take a look on what it acutely is. Digital currency or Medium of exchange peer-to-peer network. So basically a decentralized, peer-to-peer network that is used as a medium of exchange (money). Learn the most frequently used words, terms and concepts related to cryptocurrency to make it easier for you to understand with our cryptocurrency glossary,  Here!

How does a cryptocurrency work?

First and foremost there are many different cryptocurrencies so when asking if one can trust a crypto currency one need to look at each type separately.

Looking at Bitcoin we can imagine as an onion with several layers. The first layer is the Blockchain. The blockchain is the system that Bitcoin is based upon. In short the blockchain is a protocol (system) that is based on math and is practically impossible to change.

This makes bitcoin and bitcoin transactions immune of manipulation thanks to cryptography. When we peal off the second layer we see that Bitcoin is both a payment system and a currency.

Bitcoin

With a capital B is the system or protocol, bitcoin with a lower case b is the currency. The third layer is that the system has no central governing body but is instead spread around the network. In other words it is nowhere and everywhere.

When we reach the forth layer we can see that the code is transparent so anyone can check its legitimacy. Looking at the fifth layer we see that there is a limited amount of bitcoins available. This means that there is no possibility to create bitcoins in infinity unlike fiat currencies.

The sixth and final layer we see that anyone that have bitcoin can send it to another user using different wallets. These transactions are confirmed by other users and sent almost instantly. Wow sounds great, but how do we know all this?

Well the system is completely open-source which means that it is transparent. So anyone can see how the system works which in turn makes it possible to determinate that it works!

Can I trust cryptocurrencies and what gives it legitimacy?

Since Bitcoin as a system and most other cryptocurrencies are open source anyone can verify its legitimacy. Besides the fact that you can do that it is also completely decentralized and practically impossible to manipulate.

So in other words Yes, you can trust it. But where you buy is important! If you like you can check out our list of recommended crypto exchanges.

Crypto Exchanges

A crypto exchange is the place where you can buy your first bitcoins. There are a lot of different exchanges such as Binance or Coin Mama so the options where to buy bitcoins are pretty wide. A exchange works just like any other types of currency or equity exchange.

You have buyers and sellers and the price is determinate by supply and demand.

Crypto Wallet

You need somewhere to store your cryptocurrencies . With your wallet you will get a crypto wallet address which allows you to send and receive money.

This address is not to be confused with the private key which is a key that grants you access to your wallet. The address you can share online and with others but not the key. Think of it like this in simple terms a Crypto wallet address is like a Bank account number and a Crypto wallet key is like Your Password.

How do I buy cryptocurrencies?

The process is actually very easy. You will need to create a wallet. Here you have two options:

1. Go to the top exchanges and use their wallet.
2. Create a separate wallet on another service.

Depending if you prefer convenience (use the same one as the exchange) or security (open a separate one). Now you just register on the exchange and buy bitcoins. You can use bank transfers, credit cards, PayPal and other e-wallets.

Some offer payment methods only available in certain countries. When you have chosen the amount of crypto you wish to buy enter your wallet address and buy them. The transactions will be confirmed in the blockchain within minutes and you are now the proud owner of bitcoins, Ethereum, Litecoin or any other currency you bought!

Check our walkthrough guides on how to buy and trade on some of the most popular exchanges, here! Also see our list of the most popular exchanges in the world, here!

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