Explaining the basics of crypto to a COMPLETE novice.

80,000 Foot View


Cryptocurrencies are a community of digital currency that have no central issuing authority such as a government or bank. Instead, they use a decentralized system to record holdings and transactions. You can trade, invest or make secure digital payments. All of this takes place outside the control of conventional financial institutions.

In the world of cryptocurrencies, there are many more coins other than Bitcoin. In fact there are thousands. If this fact isn’t daunting enough, you may ask, “what is mining?” or “what is staking?” Don’t worry about those things. First of all, mining can be left to very technical people who want to get into the nuts and bolts. And staking? Well, that will be a good thing down the road a bit. But don’t worry about it just yet either. We’ll stick with the basics to gain a simple overview.

What is cryptocurrency?

Currencies such as Bitcoin, Etherium, or Solana are like regular currencies in many ways, but are entirely digital. A crypto coin like Bitcoin (which at time of writing has ranged in value from $62,000 to $72,000 per coin), can be divided into smaller pieces. So you can purchase a small fraction of the coin for, say, $20, $100, or $10,000 and receive the corresponding percentage of that coin. For example my first purchase was just 0.001 of the coin.

Where to purchase crypto

buying crypto

Two easy ways:

Two popular ATM networks are CoinFlip and Unbank.  For illustration, let’s go to a CoinFlip location and buy $100 worth of Bitcoin. First, you’ll need a crypto wallet. In this example, download Wasabi to your computer [download it here] [read my review here]. Next, go through the set up process, click on receive, and copy the QR code to your files. Email it to your smart phone.

Wasabi Wallet “Receive” QR code

Look up the nearest crypto ATM (easily findable on Google maps) or search the CoinFlip site for locations. With your smartphone and a $100 bill in hand, go to the ATM, let it scan your QR code, and feed the bill into the machine. It will confirm receipt of the cash and send Bitcoin to your Wasabi wallet. Are you nervous about feeding a bill to an ATM? I was. But I learned over time that they are trustworthy, regulated, and have a system in place for any snafu. It’s all good.

CoinFlip ATM website

In a few minutes, CoinFlip will have sent Bitcoin to your Wasabi Wallet and you will see the Bitcoin balance there. Voila, you own crypto!

Since Bitcoin is such a huge star in the crypto space, this is a good way to start. Moving forward, you might want to download a multi-currency wallet as well. You can download Coinomi, Atomic, or the Trust Wallet app to your phone, and use virtually the same technique to purchase and store other crypto coins.

Some popular exchanges are Kraken (with KYC) or MexC (largely without KYC). The latter is available only in certain countries. Use a VPN if you’re determined to work with them.

Taking care when investing in crypto

Investing in crypto is similar to investing in the stock market. Beware, both types of investing can be very volatile. Careful people say“only invest what you’re willing to lose.” Remember, this is NOT financial advice, this is for informational purposes only. I’m just telling you how I got started in crypto after many hours of research.


Filling in the gaps (more perspective)

So far we’ve managed to acquire a wallet, run to the ATM, and wind up with Bitcoin in our wallet in about 15 minutes. Let’s now back up a bit and learn more about the main components of this process. Buying, holding, and the names of a few other coins besides Bitcoin.

Available cryptocurrencies

The choices are far more than Bitcoin. There are thousands of coins and tokens. Be aware, not all are for transactions. There are other reasons for their existence, such as the improvements they may make for blockchain infrastructure, functionality, and of course the lovable NFTs. A big part of the crypto side of life is about the investment they represent, especially in the long term.

Two types of currency exist. Coins and tokens.

Coins belong to cryptocurrency networks that were built from scratch. They are “tier one.” With coins, lots of resources went into building a safe and reliable crypto network. There are only a few dozen crypto coins. The rest of the currencies are tokens. They are easy to make. Some are scams. Wise investors work with well known tokens only.

The following chart from CoinMarketCap shows the top coinsTokens are farther down. Those who are new to crypto are advised to stay within the top 100 in this list.

Top cryptocurrencies as shown at CoinMarketCap

Click on the image above to see the list. A second purchase might be from the top 10 or 20 coins. For example, Solana.

Advantages of Crypto

• A way to pay that is NOT with fiat currency like Dollars or Euros.
• A way to pay that is NOT with fiat currency like Dollars or Euros.
• You can invest in the coins and tokens, similar to stocks or bonds.
• Huge gains (or losses) can be had. Generally, the most popular coins have given excellent returns long term.
• A different form of wealth. It is not held by banks; you hold it. You have the control over it. Consider it in some ways like gold, but digital.

More about wallets

A crypto currency’s wallet address is like a bank account number. Let’s say you have Bitcoin in your Wasabi wallet and Solana and other currencies in your phone based wallet. Each of these currencies will have an entry in your wallet and a corresponding “receive” and “send” number. That’s the coin’s address in your specific wallet. It’s just a number that corresponds to a specific currency in your crypto wallet.

Theoretically, your wallet and its contents should be completely anonymous.

This depends on the privacy policy of your specific wallet. Wasabi is very private in all regards by design [privacy documentation] [privacy policy].

WASABI PRIVACY STATEMENT (pertinent section): "Because we cannot link Your wallet and Your personal information (such as Your name and IP address) provided under the Service, Your personal information is safe and cannot be accessed by our staff or third parties."

Be advised, you will not find such robust privacy in a lot of the wallets on the market. Counter to the whole concept of wallets, they seem quite willing to hand over everything they have on you.

So privacy varies wallet to wallet. I’ll write more about wallet privacy in an upcoming post. But essentially, your holdings are held by you, not by a bank as with conventional money. One advantage that should already be apparent is that it’s not easy for any authority or individual to shut down your wallet or block your transactions, because you have control over that account. Just be sure to write down your recovery phrase when you set up the wallet and store it in a VERY safe place, otherwise you can lose your holdings.

How cryptocurrency holdings and transactions are handled

Cryptocurrency runs on a network called the blockchain that stores all the holdings and transactions around the world. The network of computers that keep track of cryptocurrencies are widely spread out. No one entity controls them all, so you’re never at risk of security breaches or other compromise. This is called decentralization. This is the complete opposite of how governments and banks control traditional currency. Theirs is a centralized system. Note, governments and banks are starting to get into digital currencies. These CBDCs are NOT cryptocurrencies. They’re just creating yet another system in which they have the custody and control. As freedom lovers have come to appreciate, this is NOT a good thing. Stick with the community of cryptocurrencies as listed at CoinGecko or CoinMarketCap.

Is crypto safe?

Not all coins or tokens subscribe to the same rigorous design commitments or best practices. So prudent research and wise choices must be made. It can also be said, most cryptos that have been around for years are battle tested over time and have a secure basis across the gamut of what can go wrong. And many traditional stock investors have a gradually growing trust in the value and sustainability of crypto. Conservative billionaire investors have recently conceded that they have increased their crypto percentage of overall holdings from 5% to 25% and more.

How does crypto have value?

Well, what gives the money in your pocket or bank any value? Major currencies used to be backed by gold. Not anymore. The only value is the trust in the government that issues their currency. Trust is eroding today, and now trust in any type of currency, fiat or crypto, becomes a free-for-all. But please keep in mind, governments are printing money without any backing. We’re now seeing record levels of inflation. These damaging government policies have become far worse in the past two years.

In contrast to dollars and other fiat money, cryptocurrencies are valuable because of what they do. It does depend on the coin, but many cryptos have important and powerful functionality. Bitcoin has tremendous value because there is a limited supply (there are a finite pieces of the “pie”), and only a small amount of it is created each day. And that amount is cut in half every four years. Demand for Bitcoin (BTC) has clearly increased over time. Prices rise due to demand. Bitcoin and other top cryptocurrencies have earned it. And!!! Top crypto coins are a great place to park your money. Although potentially volatile in the short term, their long term solidity earn them consideration as a good place to park at least some of your wealth.

Conclusion

Crypto is an interesting market/community/opportunity. It can be fun. And it is unique. Prices of crypto fluctuate so much because nobody knows what they are actually worth. This is still being settled or understood. In contrast, dollars and pounds have such a long history. 

In the long term, it’s easy to see that crypto is growing. The following growth chart tracks Bitcoin’s market capitalization over the years. Other currencies have tracked similarly to Bitcoin’s rise.

Chart: Bitcoin rise in value 2013 to present

Bitcoin: inception to March 2024 courtesy CoinMarket

Chart: Bitcoin market cap inception to present

Bitcoin market cap is $1.4 Trillion as at March 2024

To see this chart live, click on the previous chart image and go to the “market cap” tab.

Disclaimer: This content is NOT financial advice. This content is for entertainment purposes only. All readers are advised to do their own research and act upon their own personal and independent conclusions.