A short guide to cryptocurrency – where should a newbie start?

Disclaimer: the article is not a professional guide for traders or investors. It’s designed for newcomers and shouldn’t be considered as a financial advice. Cryptocurrencies are volatile, so we can’t predict the future state of the market. It’s crucial to make your own research and explore various sources with different opinions.

The world of crypto is amazing. Most traders consider it as a way to make good profit but there’s something more. Cryptocurrencies can change the global economy and they are actually doing it right now. So, it’s obvious that more people are diving into the market, buying coins, registering accounts on the exchanges, and investing in fresh ICOs. But where should you start as a newbie?

Here we will cover the most basic questions: What is cryptocurrency? How to buy your first coins? What is the best investment strategy? Let’s start with general definitions and principles of the crypto world.

Cryptocurrency: Basics

Firstly, it’s important to distinguish main concepts and understand basic terminology . Here they are:

- Blockchain is a huge decentralized network which stores the encrypted data in chunks (or blocks). Each block of information is distributed among all the nodes in the network, so it can’t be faked or tampered with. Nodes act as guarantors of the network security and validate all the records within blockchain. Blockchain is suitable for managing various digital assets but for now, it is a unique technology that powers cryptocurrency.
- Cryptocurrency is a form of digital money that is based on cryptographic algorithms and protocols. Cryptography ensures that the financial transactions are secure, verified and authentic. Different cryptocurrencies serve different purposes. For instance, they can be used as a fiat system alternative with fast and anonymous transactions or as a fuel for software platforms.
- Bitcoin, or BTC, is the first ever cryptocurrency created back in 2009 by the anonymous programmer. Now, it is the most expensive and trusted cryptocurrency. Bitcoin is designed for cross-border peer-to-peer money transfers that involve no middlemen like banks. Bitcoin acts as a measure of value for other cryptocurrencies and can be traded against fiat money.

Basically, there are about 1400 cryptocurrencies in the market and all of them circulate within their own blockchain systems. Most coins can be bought or sold via exchanges or trading platforms that serve the purpose of online marketplaces for cryptocurrency.

How to get crypto in 3 steps?

Now that you understand the basics, it’s time to enter the crypto market. The task is simple but there are some pitfalls, so be sure to do everything correctly. Here are 3 essential steps that each newcomer should take regardless of the chosen strategy.

Create a wallet

Cryptocurrency wallets hold digital addresses that are necessary for making transactions. In layman’s terms, there is a public address which acts like a “login” and a private address which can be referred to as a “password” proving the ownership of coins. Always keep your private address secret to protect funds from hackers and scammers.
Wallets fall into three main categories:

1) Online or «hot». The best option for beginners. These wallets are always connected to the Internet, so they are fast but not as secure as hardware ones. Until you have at least 1 BTC - use online wallets; for more substantial sums - choose a safer option. Examples: Blockchain.info, GreenAddress.
2) Desktop/mobile. These wallets are available in both online and offline modes, so they are a bit more secure. However, they require some free space on your device. Mobile wallets are the best choice for making deals on the go.
Examples: Jaxx, Exodus, Mycelium.
3) Hardware or «cold». Long story short, these are devices like memory sticks which store your cryptocurrency offline. They are the most secure but may be too complex for newbies. Get a hardware wallet to store large amounts of crypto.
Examples: Ledger, Trezor.
The catch is that not all wallets support all cryptocurrencies. Usually, you will need a separate address for each new currency which isn’t really convenient. Also, cryptocurrency exchanges have their built-in wallets where traders can store their funds. The only problem is that such wallets are online and thus less secure.

Buy Bitcoin

Since Bitcoin is the most widespread cryptocurrency, we suggest that you start with it. Then you can trade it on exchanges against other alternative currencies or “altcoins”, hold it in the wallet or transfer to other users. The most popular ways to get BTC are:

- Buy from an exchange. Exchanges are websites where users can buy crypto, it’s obvious. Some of them allow for buying cryptocurrency with fiat, while others provide only crypto-to-crypto trading.
Examples
Crypto-to-crypto - Binance. One of the biggest altcoin exchanges that allows users to buy cryptocurrency with its native token - BNB, or the crypto alternative to USD - USDT.
Fiat-to-crypto - CEX.IO. We offer an overview of CEX.IO as one of the most user-friendly exchanges of this type. Here the users can buy cryptocurrency with USD, EUR, and GBP.

- Earn from a faucet. There are platforms which offer free crypto (usually Satoshi) for watching ads, completing quizzes, playing games, etc. Profit is low here, meaning you have to spend a lot of time to get some BTC. But faucets are a nice way for newbies to get their feet wet since they don’t require initial investments.

- Mine or cloud mine. Mining is a process of validating transactions within the blockchain, which is rewarded with cryptocurrency. However, mining requires specific hardware that is usually expensive and consumes much energy. Cloud mining involves renting remote equipment to do the same. Both types are unprofitable if we talk about Bitcoin, but they still worth trying when it comes to mining altcoins.

Diversify the portfolio

Finally, you would want to get some altcoins to hedge against risks. We recommend you to stick to the coins, which make the list of the largest cryptocurrencies by a total market cap. However, explore each coin’s background and get those that serve different purposes. Diversify and never invest more than you can afford to lose.