There’s now over 1300 cryptocurrencies being used in the world. and many layers of technologies to understand. The cryptocurrency world can be quite overwhelming for newcomers, and it takes time to research and understand how to get started, and to hopefully avoid costly mistakes.
In this article we’re going to look at some of the terminology around cryptocurrencies.
First of, what is a cryptocurrency? Investopedia defines it as “…a digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of this security feature. A defining feature of a cryptocurrency, and arguably its most endearing allure, is its organic nature; it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation” In other words, it’s a kind of “money” that only exists electronic form, the only way you can physically hold it is to convert it to a regular currency, the kind of money we’re all familiar with like Canadian or US dollars, Pounds, Euros, Yen, Renminbi, etc.
Wallets are like bank accounts for your tokens. I’ll go over all the major types of wallets and how to use them. Crypto Wallets don’t hold anything, unlike a physical one. An important thing to understand is that wallets are simply a secure “window” into the blockchain so you can view your records and transactions. Think of it like Gmail, where your wallet is your Gmail login and password, but you’re not actually storing the emails yourself
Each currency needs it’s own wallet (in most cases)
Every Wallet has its own unique address, so if you trade on 3 different exchanges, you will have a different Wallet and address for each exchange, for each token. Think of them as a different website address or URL.
Different types of wallets
- Desktop wallets: These are wallets usually created by the token developers.
- Mobile wallets: These are app-based wallets that you can download and install on your phone
- Online Wallets: All exchanges offer online wallets, to allow you to send and receive tokens. It is highly recommended to store tokens offline to reduce risks of hacks, phishing attempts, and the collapse of exchanges.
- Paper Wallets: Paper wallets are basically a print out of your wallet’s public and private keys, along with a QR code you can scan.
- Hardware wallets: These are the most secure way to store your tokens. Hardware wallets are completely offline.
Only a few exchanges allow you to buy Bitcoin with regular money (aka Fiat currency, such as US dollars, Euros, etc.). Bitcoin is currently the most common trading pair, meaning to invest in other tokens or projects, you’ll most likely only be able to trade/buy it against Bitcoin. Most exchanges are not regulated, invest at your own risk. Unlike traditional stock markets, crypto exchanges never sleep, it’s global and it trades 24/7.
Some popular exchanges are: Coinbase, Bittrex, Binance, Bitfinex, and Poloniex.
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