YourCryptoLibrary firmly believes it is of the utmost importance to learn about the basics of cryptocurrency before investing your hard earned money in. By providing informative content of the highest quality we will try to help you start with your cryptocurrency journey!
On this page newbies; who have absolutely no idea what cryptocurrency is or what it is used for, can learn a little more.
If you already have some basic knowledge about the space, feel free to check out our advanced section, where we explain topics -listed below, in more detail and with more nuance.
What are cryptocurrency?
One thing is clear, you decided to open this guide. This means you are interested in cryptocurrency. But, what exactly is ‘cryptocurrency’?
”A cryptocurrency is a digital currency/currency that uses digital encryption to produce new currency units and verify transactions, independent of a central bank.”
Cryptocurrencies emerged as a byproduct of one of the most important discoveries of the internet age, namely: Bitcoin.
Inventor of Bitcoin, Satoshi Nakamoto (a pseudonym) remains anonymous, intended to create a new electronic payment system that uses a peer-to-peer network to address the problem of “double spending” (being able to spend digital currency multiple times).
Try to imagine your bank account. Maybe its big, maybe it isn’t. But what exactly do you visualize? Right, nothing more than a number, a number in a database that only can be changed under certain circumstances, right?
Cryptocurrencies are exactly the same. Like any form of money, it must be verified in some kind of database, where you arrive at a certain balance and a number of transactions. With traditional money, this database resides with an authority such as the ING or Rabobank (in the Netherlands).
In the case of cryptocurrencies this database is shared and verified decentrally across the world in an encrypted way using the blockchain. What that is and what benefits it brings you can read here.
In summary, cryptocurrency is nothing more than a decentralized and encrypted version of traditional money; therefore, there is no central computer server or authority behind it. The best known examples of cryptocurrencies are Bitcoin and Ethereum. But, there are hundreds of other types of cryptocurrencies at the moment, each with their own use case.
What is Bitcoin?
Bitcoin is an invention of one or more anonymous individuals, who operated under the pseudonym Satoshi Nakamoto. The idea was to develop a medium of exchange that would allow transactions to be made over the Internet, without relying on central agencies such as banks. Bitcoin is characterized by direct, secure, verifiable and immutable transactions between two individuals.
Unlike traditional money such as the dollar or euro, the amount of bitcoins in the world is not determined by banks; everything is fixed in the way bitcoin is coded. Only a limited number of bitcoins are released each day, and they are distributed to anyone who uses computer power to contribute to the bitcoin network.
Should you want to learn more about the details, advantages and disadvantages?
What is Ethereum?
Ethereum was founded by a Russian named Vitalik Buterin. His fascination with blockchain led him to start developing his own project in 2014, what we know today as Ethereum.
Buterin developed a decentralized platform that, like Bitcoin, uses blockchain technology. Despite this, Ethereum is vastly different from Bitcoin. Indeed, Bitcoin’s functionality is focused on transferring value, while Ethereum can serve as the basis for decentralized applications and smart contracts.
For a long time Ethereum has been the second largest cryptocurrency in today’s crypto market after Bitcoin. The total value of Ethereum (ETH) represents about 10% of the total market. ETH, like BTC, is a digital currency that you can send to anyone in the world in no time.
Should you be interested in the details and how it works…
What is the difference between tokens and coins?
The crypto space has many new investors, enthusiasts, developers and with it many new terms. These terms can cause a lot of confusion on several levels.
Blockchains, (crypto)coins, tokens, equity tokens and utility tokens are some of these new terms. Although it all seems very confusing, the reality is a lot easier.
To begin with, a distinction must be made between shares, known from the stock exchanges, and digital money. Digital money, such as Bitcoin, is intended as a means of payment. In addition to Bitcoin, there are many other types of “cryptocurrency” that exist.
They measure their value by supply and demand, just like gold and silver.
There are also shares in the crypto space, so-called equity tokens. These act like shares, but recorded on the blockchain. Briefly, below are the definitions of a coin, token, equity, utility token and security token.
How to buy cryptocurrency?
There are currently over 400 different exchanges where you can buy cryptocurrency. Which one has the best prices, which one has the lowest fees, and which one is the best fit for you right now? That’s where we would like to help!
So many exchanges, so little time.
It can be difficult to know where to start… especially when you want to buy cryptocurrency for the first time.
Questions such as which exchanges are reliable, offer the lowest fees, have the largest selection or popular or lesser known, are important to ask!
Therefore we are happy to help by presenting our research.
What is DeFi?
Decentralized Finance, abbreviated DeFi, is a set of new financial instruments based on the decentralized blockchain features. The main goal of DeFi is to create a new financial system that is self-contained and independent of centralized institutions.
DeFi platforms enable savings, loans and insurance to be carried out anywhere, anytime. All that is required is an internet connection that provides access to the decentralized applications.
These decentralized applications make use of so-called smart contracts. Through these it is possible to take care of all the above mentioned without using an intermediary. DeFi gives people without a bank access to financial services through blockchain technology.
How do I keep my cryptocurrency safe?
Buying cryptocurrency is one thing, but storing it is another. It is extremely important to do this in the best and safest way.
Cryptocurrencies are stored in a wallet. This can be done in both a digital and a physical wallet (the currency itself is of course always digital), it is also possible to store these on an exchange.
However we advise against this, after all it’s safest to have the currency in your own possession at all times and not at a centralized party.
When you create a wallet, you receive a public address and a private address. The public address can be seen as your public bank account number, which you can send to other people so they can deposit currency into your account but also publicly view your balance on the blockchain.
The private address can be seen as your unique pin code, you should never share it with anyone and always keep it as safe as possible.
Disclaimer: Trading and investing in cryptocurrencies (also called digital or virtual currencies, altcoins) involves a substantial risk of loss and is not suitable for every investor. You are solely responsible for the risk and financial resources you use to trade crypto. The content on this website is primarily for informational purposes and does not constitute financial advice.