Dummies Guide To Cryptocurrency

Last Updated on April 7, 2023 by George

We’ll walk you through a detailed introduction to cryptocurrency investment for beginners in this article. Secondly, we must ensure that we have a solid grasp of the fundamental principles behind digital currencies.

The evolution of the Bitcoin industry and the value of digital assets will then be discussed. Now to round up our primer on cryptocurrency investment for beginners, let’s look at the digital market and the methods for accessing it.

Before we begin, we must have a basic understanding of some key terms. As we go forward, we’ll talk more about them. For a list to get you started, see below:

  • Blockchain: The unchangeable ledger permanently and accurately records all digital currency transactions.
  • Wallet: A location to keep your cryptocurrency digitally.
  • A cold wallet, known as cold storage, cannot be accessed online. Your wallet should be kept offline for the highest level of protection.
  • Keys: This serves as your wallet’s access code. These are very long; unless an exchange is holding your wallet, only you have them.
  • Proof of Work: Mining is the process of generating digital currency by resolving challenging algorithms, and this process is known as PoW.
  • Proof of Stake: This digital currency creation method also depends on a network of coin holders to mine and verify transactions.
  • A digital coin known as a stablecoin is linked to the price of another good or currency.
  • A fork occurs when the blockchain’s protocol diverges. A hard fork indicates a permanent change, such as creating a new coin or mining algorithm.
  • Burn: The removal of digital currency from circulation.

A cryptocurrency is a digital asset that is decentralized and operates independently. Each digital coin is untouchable and exchangeable for fiat money between its owners. The algorithm that creates the digital coin is recorded in a digital ledger utilizing blockchain technology.

The miner is rewarded for their work with another digital coin when digital coins are mined. The digital ledger contains a record of the new coin’s existence, and the ledger also includes any transactions.

For instance, a US resident with cryptocurrency in their wallet can transfer it to a recipient anywhere in the world. To receive the digital asset, the recipient needs to have a wallet. Also, nothing is under any centralized supervision.

The blockchain then records this transaction. Ledger theft or hacking is virtually impossible. Even though the ledger is open to the public, anonymity is assured because no names or addresses are displayed.

You can possess bitcoins fully anonymously, depending on where you live. Nonetheless, it is typically challenging to accomplish in most of the Western world. In any case, the value of this digital currency is solely based on the value that market players assign to them. Government or central bank can only devalue it by inflating the currency or creating more money.


As blockchain technology is practically impenetrable, we can be confident that the system cannot be gamed. Do not conflate wallet security with the fact that the blockchain cannot be compromised, and someone could break into a wallet if it is stored online.

A blockchain’s operation is demonstrated in the infographic above. The chain is expanded by adding a block for each transaction or newly generated coin. The transactions recorded in the chain’s order cannot be altered because it is irreversible.

The Dawn of Cryptocurrencies

A Bitcoin investment guide for beginners must know the history of all the current digital assets. 2008 saw the posting of a white paper on a cryptography email group by a person named Satoshi Nakamoto.

The white paper explained how a peer-to-peer network might create an electronic payment system that did not rely solely on trust. Satoshi Nakamoto mined the first Bitcoin with block number 0 on January 3, 2009.

In this manner, cryptocurrencies first appeared.

Cryptocurrency Fundamentals

Cryptocurrencies may appear to lack any basics to study, but the reality is precisely the reverse. It would help if you considered a few factors that might indicate how successful the virtual environment might be before investing in any digital asset. Let’s review the fundamentals to understand fundamental analysis in your cryptocurrency investing for dummies book.
This is the list of factors to look into before we go into further detail.

  • Background Analysis of the Crypto Whitepaper
  • Route Map for Products
  • Tokenomics
  • Bitcoin Whitepaper

Crypto Whitepaper

The whitepaper is the document that lists all of the project’s critical components in depth. You should, at the very least, include the following details:

  • solutions using blockchain technology
  • planned enhancements and features
  • Useful cases
  • The token economy
  • Information about sales Team profiles

Study the whitepaper carefully, and look for any crypto community reviews.

Background Study

The website for the project should have all the details regarding the new cryptocurrency and the team members. Verify that the team members have the skills to complete the project successfully and a solid track record. Moreover, find out who the potential early backers and advisors are.

Route Map for Products

Most cryptocurrency projects have a roadmap outlining the schedule for test nets, releases, and anticipated features. Verify milestone completion using the road plan, and assess whether the project has a clear path for future developments.


This is the demand and supply for cryptocurrency in terms of economics. Because they are used for more than just making payments, cryptocurrencies are often referred to as tokens. Also, consider the incentives that control network activity, such as node mining in a proof-of-work system protocol.

Most Popular Cryptocurrencies

Thousands of digital coins are currently available on the cryptocurrency market. Several of them are unknown to the general public and will probably only ever be used for cryptography exercises.

But, as we have seen above, many others have become more well-liked due to their basic principles.

When investing in cryptocurrencies, it is sense to diversify your portfolio by holding a range of coins.

We’ll go through the top three cryptocurrencies in terms of market capitalization. To better comprehend their trade and objectives.

Bitcoin (BTC) (BTC)

As of this writing, a little under $400 billion is the market capitalization of Bitcoin, and that represents a significant drop from Bitcoin’s peak when its market cap exceeded $1 trillion. There are a few reasons why this coin is so popular.

Being the first digital coin to gain popularity in the at-the-time-obscure field of cryptography had a part in the first mover advantage. The maximum amount of coins that may be mined is 21 million, resulting in a limited supply.

As is common knowledge, an asset with a restricted supply is more valuable than an equivalent asset with a larger supply. Lastly, this cryptocurrency has gained widespread acceptability and is now used by institutional market participants as a standard asset.

This coin is one of the most widely exchanged due to the high level of interest in it. This digital asset has an average daily volume of about 2.5 million coins or $49 billion at the current exchange rate.

Ethereum (ETH) (ETH)

Ethereum is regarded as the silver of cryptocurrencies; you guessed it, Bitcoin is the gold of cryptocurrencies. Ether, the virtual money used by Ethereum, was introduced in 2015. It is an open-source blockchain that supports smart contracts, and the protocol also permits applications for decentralized finance.

These apps can offer various services, including the ability to borrow money against your Ethereum holdings or lend it out for interest. Or even develop NFTs, which are becoming increasingly well-liked as more brands enter the fray.

This cryptocurrency has an average daily volume of $23 billion, or 1.5 million coins, and this coin has an unlimited supply. Buterin, the creator of Ethereum, predicted that by 2021, there would be about 150 million Ethereum tokens in circulation in the whitepaper.

In 2022, we will have a little more than 122 million people. Therefore Buterin’s prediction needed to be revised. Although there is no maximum limit on the quantity of additional Ethereum coins that can be created, this functionality is not meant to cause inflation.

Because supply is intended to be cut back gradually over time, this is the case. A slower supply rate than demand rate should result from this feature. This guarantees that as time goes on, the value of Ethereum will not be stifled by supply.

Yet, the community is destroying Ethereum to maintain order. The digital money is burned by transferring them to a wallet with a receive-only function, and the Ethereum is regarded as burned after receiving it in the wallet and cannot be sent elsewhere.

Tether (USDT) (USDT)

Tether is a stablecoin backed by the US dollar, meaning that one Tether equals one US dollar. A Hong Kong-based exchange called Bitfinex developed this stablecoin in 2014. Since then, it has produced just over 69 billion coins overall.

The Tether team controls supply based on the demand they perceive. Tether may also be burned during redemptions, if necessary. This Tether is kept out of circulation and in the team’s treasury.

A 60 billion coin trading volume is typical every day, and the coin benefits from the price stability that larger peers like Bitcoin lack. Price volatility is particularly problematic when customers wish to purchase digital money.

This coin is a suitable substitute for fiat money due to its low transaction fees and quick processing times. The fact that US dollars back virtual money is also known to customers. But keep in mind that this coin’s price rarely falls below $0.99 or rises beyond $1.00 if you want to trade or invest in stablecoins.

Cryptocurrency Marketplace

You may buy and sell several cryptocurrencies on the cryptocurrency exchange. Most major exchanges do not list a wide selection of the more recent digital coins, and more exchanges welcome newcomers when trust and interest have been established over time.

According to CoinMarketCap, there are almost 20 000 different cryptocurrencies, yet the most significant exchange, Binance, only lists 387. Although cryptocurrency is all about decentralized finance, which it is, opening an account with an exchange in the US requires you to prove your identity.

You can begin trading and investing in cryptocurrencies once money is transferred to your exchange account. The range of exchange fees varies significantly from store to store, and depending on the exchange and volume traded, commissions for purchasing and selling range from 0.1% to 1.5%.

Moreover, several exchanges provide market maker discounts, and they are participants who place limited orders instead of just reacting to market prices. Although some exchanges still charge for one or both, most exchanges do not impose withdrawal or deposit fees.

Some exchanges allow you to trade on a margin, offering leverage based on the exchange and the sort of account you have. You can trade with more money on margin than is available in your account. You are then charged a fee in exchange for borrowing the additional funds.

Major exchanges list

  • Binance
  • Coinbase
  • FTX
  • Kraken
  • KuCoin
  • Bitfinex
  • Global Huobi
  • Gate
  • Bitstamp
  • Gemini

Final Thought- Dummies Guide To Cryptocurrency

Trading and investing can be risky when dealing with conventional assets. The significant volatility of the underlying assets makes Bitcoin investing increasingly riskier.
Companies offering their services might provide advice and assistance to sift out the top performers. Going it alone is never a wise move, particularly in a market with a wealth of information that is difficult to keep up with.
You can benefit from the specialized services of crypto IRAs in a tax-free setting if you plan to invest in cryptocurrency. Numerous businesses provide these services. Therefore we have produced a list of the top five; you can read our reviews here.

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