What is Crypto? Explanation of Cryptocurrency for Beginners

1. What is Crypto?

 

Crypto (short for cryptocurrency) is a type of digital currency issued by projects built on blockchain technology. It uses cryptography to secure and verify transactions. Crypto serves various functions, including value storage, payments, trading, mining rewards, and participation in project activities.

 

2. Types of Crypto in the Market

 

Cryptocurrencies are classified into various categories, such as altcoins, meme coins, large-cap coins, mid-cap coins, low-cap coins, stablecoins, and even shitcoins. However, this article focuses on two main types:

• Coin: A cryptocurrency that is launched and operates on its own independent blockchain.
• Token: A digital asset issued on an existing blockchain, without having its own chain.
  
  

 

Each asset is created with a specific purpose. Therefore, users need to understand their differences to make smart investment decisions.

 

Is Crypto Safe?

 

The crypto market is largely unregulated and decentralized, making it susceptible to malicious actors. However, it is also a breeding ground for innovation, capital inflow, and unique opportunities.

 

User Risks

 

Unlike traditional finance, crypto transactions are irreversible. Losing your passphrase or private key—or sending funds to the wrong address—can result in permanent asset loss.

 

Regulatory Risks

 

Laws regarding cryptocurrencies are still evolving. Some governments classify them as securities, others as currencies—or both. Sudden regulatory changes can restrict trading or impact market value.

 

Management Risks

 

The lack of clear regulations also creates an environment where scams or unethical behavior may go unchecked. Many investors have suffered losses from project teams failing to deliver on promises.

 

Third-Party Risks

 

Investors often store assets on exchanges or custodial platforms. If these are hacked or collapse, users may lose their entire holdings.

 

Programming Risks

 

Many platforms use smart contracts to manage fund transfers. Bugs or security loopholes in these systems can result in asset loss.

 

Market Manipulation Risks

 

Market manipulation remains a major concern in crypto, as individuals, institutions, and even exchanges can influence prices unfairly.

 

Despite these risks, the crypto industry has experienced explosive growth, with its total market cap exceeding $1 trillion.

 

Pros and Cons of Crypto

 

Advantages

• Fast and Borderless Transactions: Users can send funds globally without intermediaries.

• Security and Anonymity: Built on blockchain, crypto ensures high data security and privacy through cryptography

• Decentralized and Transparent: Operates openly, with data shared across the entire network.

 

Disadvantages

• Mass Adoption: Crypto still faces barriers like high fees and latency before it can achieve mainstream use.

• High Risk: Participants must be aware of the many risks involved.

• Intrinsic Value: Only a few cryptocurrencies retain real value—many disappear during bear markets.

 

 

 

Buying and Storing Crypto

 

How to Buy Crypto

 

Users can buy/sell cryptocurrencies through exchanges:

• Centralized Exchanges (CEX): Binance, Huobi, Coinbase, OKX, Bybit... These platforms are company-operated. Users must use P2P trading or transfer assets onto the exchange to trade.

• Decentralized Exchanges (DEX): Uniswap, PancakeSwap, dYdX, Curve... These require non-custodial wallets, and they do not hold users' funds.

 

How to Store Crypto

 

To store crypto assets securely, users need crypto wallets that encrypt data and maintain owner anonymity.

 

Types of crypto wallets:

• Centralized Wallet: Managed by a third party.

• Decentralized Wallet: Managed by the user, including:

• Hot Wallets

• Cold Wallets

 

Key Things to Know When Entering Crypto

 

Information Channels

 

Users should follow reputable platforms for up-to-date news and research:

• Fast news: Twitter, Telegram

• Market updates: CoinDesk, CoinGecko, CoinMarketCap

• Deep research: Binance Research, Messari

• DeFi data: DeFiLlama, DeFi Pulse, Dune Analytics

 

Investment Portfolio Management

 

Crypto investment can start with as little as $50 or grow to millions. Each capital level requires different investment strategies and portfolio allocations. Users should understand common mistakes and learn to manage their portfolios for optimal results.

 

Asset Security

 

Popular scams in crypto include:

• Offering free tokens/coins and then requesting users to sign wallets

• DNS hacks redirecting users to phishing websites

• Email phishing attacks

• Impersonating project teams in community groups
  
  

 

Making money in crypto is difficult—but keeping it is even harder. Users must be extremely vigilant about protecting their assets.

 

Ways to Make Money in Crypto

 

There are several ways to earn in the crypto space:

• Buying, selling, and holding

• Airdrops and retroactive rewards

• Mining

• Participating in DeFi (staking, farming, lending, borrowing...)
  
  

 

The crypto industry also offers jobs in design, blockchain engineering, market research, and more.