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Before we get started, know this is not financial advice. The crypto world is volatile, and you should never risk money you aren’t comfortable losing. Now, let’s take a look at some of the most common lingo.
Every cryptocurrency transaction is processed, verified, and recorded on a virtual ledger known as a blockchain. When time someone buys or sells using cryptocurrency, another entry is made on this virtual ledger.
Think of the blockchain as a series of boxcars from a train. When a cryptocurrency transaction is made, another boxcar gets added to the train.
The blockchain is decentralized. This means it’s not stored on one machine or even across one network. Instead, the blockchain exists on computers all over the world that are accessible because of the internet.
People and companies help verify each transaction that gets added to the blockchain using their own computer’s processing power on a decentralized peer-to-peer network. Each transaction is timestamped, individually encrypted, and cannot be reversed or changed. Yes, you read that right — crypto transactions cannot be reversed.
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I know what you’re thinking: “I thought a Fiat was a car.” Not in crypto-land. Fiat money is government-issued currency. If you’re in the United States, that means the U.S. dollar.
Cryptocurrency, on the other hand, is virtual money.
Cryptocurrencies aren’t backed by governments or any other standard used with traditional currency. Each “token” represents the amount you own.
How much each token is worth varies based on the current market value. One day it’s up; the next day down. With cryptocurrency, the price fluctuations can happen much faster and are more extreme — both positive and negative. A good resource to check the current prices is CoinMarketCap.
Here’s an easy one to remember. An altcoin is any digital currency that’s not Bitcoin. There are thousands of cryptocurrencies, with new ones being added all the time.
At the time of this writing, these are the five currencies with the highest market caps. (That is the total market value of the circulating supply.) Since crypto moves so fast, this list may have already changed by the time you’re reading.
- Binance Coin
To buy cryptocurrency, you need to start with an exchange. Think of an exchange like a crypto middleman. It’s an online service that allows you to exchange your fiat for crypto or change crypto into fiat.
If you’re familiar with traditional investing, a crypto exchange functions as a brokerage. You can deposit money through a bank transfer, by wire, through a debit card, and other standard deposit methods. You can expect to pay fees for most transactions.
You can also buy crypto through apps you already might be using, like Venmo, Robinhood, or Cash App.
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In basic terms, a cryptocurrency wallet is an app or physical storage device that allows you to store and retrieve your digital currency. Wallets can hold multiple cryptocurrencies, so you’re not limited to just Bitcoin, for example.
Whether you use an app or a physical wallet, it’s important to note that the currency itself isn’t stored there. Rather, wallets store the location of your currency on the blockchain.
Wallets are split into two main categories: Hot and cold. A hot wallet is, by definition, connected to the internet. The most secure way to store your cryptocurrency is with a cold wallet — one that isn’t connected to the internet.
Physical wallets come in different types but are usually specially designed USB drives that directly store your cryptocurrency for later use. Physical wallets provide you the most protection from hackers.