Crypto Basics for Beginners | Learn Crypto Basics

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With the amount of attention it’s received in media and pop culture over the last few years, you've probably heard of crypto. However, it can be challenging to wrap your head around what this term means and represents. 

16% of Americans are using crypto today, and plenty more are trading coins throughout the world. Whatever interests you about the crypto space, learning crypto basics is key. 

This article will explain the crypto basics for beginners to start you on the right path.  

What Is Cryptocurrency?

A cryptocurrency is a type of peer-to-peer digital asset that can be used as a form of digital money. In other words, they can be used to store and exchange value. 

Cryptocurrencies are built on blockchains or distribute ledger technology. A blockchain or distributed ledger is a record of all of the transactions that happen within a network. These transactions are publicly verifiable, and the ledger is maintained by decentralized networks of computers. These networks create an open, auditable account of the state of the cryptocurrency network. This allows blockchains to work without any centralized intermediary or bank. 

Started in 2009, Bitcoin was the first cryptocurrency and the innovator that created blockchain technology.

How Do Blockchains Work? 

The first step in understanding crypto basics is learning about blockchain technology. A blockchain is a public, distributed ledger that records all crypto transactions within a particular network. This ledger constantly grows as cryptocurrencies are transferred, whether through buying or selling. Actors within a blockchain network such as nodes or validators ensure that all transactions being added to the chain are legitimate. This distributed network replaces centralized authorities for key functions like ensuring transactions are valid and preventing users from using crypto they don’t have. 

How Do Transactions Work?

In traditional financial networks, banks or other financial institutions ensure that transactions are valid. Cryptocurrencies on the other hand rely on ‘consensus mechanisms’ to verify transactions, add them to the blockchain and create new tokens. The two most common consensus mechanisms are proof of work and proof of stake. 

In proof of work, what are known as “miners” race to solve complex math problems for the right to update the blockchain, which comes with it a predetermined amount of tokens as a reward. It’s an energy intensive process, but one that comes with a proven track record and significant security and decentralization. 

In proof of stake, the computing power of the miners is substituted for the financial commitment of stakers, who stake (in other words lock up) their tokens in order to get a chance to validate new transactions, update the chain and get rewards. 

How Many Cryptocurrencies Are There? 

Currently, there are more than 18,000 different cryptocurrencies. Some of the most prominent include Bitcoin, Ethereum, Solana, and even memecoins like Dogecoin. . 

On the one hand, there are a lot of cryptocurrencies because they are open source and can be spun up easily. On the other, the past decade has shown that cryptocurrencies only grow and thrive if they can attract a network of enthusiastic developers and holders.

How Secure Is Crypto?

Most large cryptocurrencies are extremely secure due to the scale of the resources put into securing them through mining or staking. This means that the ability of a malicious actor to force fraudulent transactions through major cryptos is very low. 

At the same time, cryptocurrencies are self-sovereign digital assets, which means that user error can lead to hacking and theft. In recent years, several high-profile hacks have resulted in the loss of millions of dollars’ worth of cryptocurrency. 

To protect your coins, the highest security comes from storage in a cold wallet that isn’t connected to the internet. If you’re regularly interacting with your crypto, you should work carefully to ensure the exchange or wallet you’re holding your tokens with has a sterling reputation for security (and even then, there is risk). 

Is Crypto Regulated?

One of the biggest misperceptions around crypto is that it operates in some lawless Wild West. That couldn’t be further from the truth. There are a huge number of regulatory regimes around the world that cryptocurrencies need to abide by. Within specific jurisdictions, there are often different regulators for different aspects of the crypto industry. Crypto has become a significant priority for governments around the world, a development that has been welcomed by the industry. 

Learn Crypto Basics and Join the Revolution

It can be intimidating trying to learn about crypto for the first time. If you're still trying to learn crypto basics, take solace in the fact that the crypto industry is still a young one that is constantly evolving. At FTX, we’re thrilled to be a part of your learning journey.  

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