Beginner’s Guide: Understanding Cryptocurrency Basics

Just 10 years ago, few people knew what cryptocurrency was. This narrow circle of people included only the developers of innovative financial means and a narrow circle of technical specialists capable of comprehending and managing the latest technologies. But just a few years later, millions of citizens showed interest in cryptocurrency and the possibility of making money on it. All over the world, the number of people wishing to receive truthful information about what electronic money, cryptocurrency, is and an explanation in simple words of how to make money on it is increasing.

What Is Cryptocurrency in Simple Words?

The concept of “cryptocurrency” entered everyday life in 2011 after the publication of a feature article in Forbes magazine. In simple terms, cryptocurrency is virtual money that has no expression in tangible metal or paper money and exists only in electronic form.

The essence of cryptocurrency is that it is not just money in the familiar concept but a mathematical code (representing the language of cryptocurrencies), protected using a special cryptographic technology. This is where the name of this digital money comes from: cryptocurrency (crypt) is money protected by a cryptographic signature.

Digital assets offer fast, cheap, and global transactions. They can also offer a level of anonymity that traditional currencies do not. However, there are also risks, such as potential hacks, so to maintain privacy and protect against fraud, users often use virtual eSIM cards when registering wallets and on exchanges. Yesim.app offers a convenient cloud service for obtaining an eSIM card that gives you complete freedom and control over your crypto operations around the world.

How it works

The operating principle of any cryptocurrency payment system is based on the blockchain system, which is an anonymous way of storing information about operations (transactions) and transactions. A currency transaction is considered completed when information about it enters the blockchain. To understand how this works, you need to imagine what path the transferred funds take from one client to another and what to do so that information about the transaction reaches the blockchain.

To transfer a sum of money, the client opens the transaction using a digital key and indicates the address of the person to whom the transfer is intended. After this, the operation gets queued for creating a block (the miner will do this)––a cell that combines several transactions.

When transferring money from one electronic wallet to another, it does not go directly but through several intermediate points. Information about the operation will be included in the blockchain if the entire sequence is solved and a special header code is found. For the creation of each block, the miner receives a reward in cryptocurrency and a commission for solving the next header code.

The Most Popular Cryptocurrencies

There are many cryptocurrencies and their derivatives, which are called tokens. The most popular type is Bitcoin. This is the first cryptocurrency, on the basis of which others were later created. Other popular types of cryptocurrencies for 2023 include:

Where to Get Cryptocurrency

In this business, like in any other, you cannot do without investments. There is one exception: you can earn crypto on special sites where you need to spend many hours playing games or constantly entering code words (captcha). These actions confirm presence on the site, which is what the owners pay for. But such earnings are microscopic.

The main methods of mining cryptocurrencies are:

1. Crypto exchanges: are online platforms that allow you to buy/sell or exchange crypto (for another crypto or for traditional currencies). To buy cryptocurrency, you need to create an account on the exchange using private mobile phone numbers in the form of a digital SIM card, provide some basic personal information, and link a payment method such as a credit card or bank account.
2. Mining: is a way of making money for people with special equipment and education. The process of mining cryptocurrency consists of sequentially performing mathematical calculations (the basis of cryptocurrency) and solving codes, for which the miner receives a reward and commission expressed in cryptocurrency.

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Where to Store Cryptocurrencies

Mined cryptocurrencies need to be stored somewhere. For this purpose, special wallets have been created, which are divided into “cold” and “hot”.

Hardware (“cold”) wallets are autonomous devices for storing currency that have a physical embodiment. It could be:

• a paper wallet (created on a special website), which is a printed sheet of paper with secret codes that give access to the wallet and the ability to manage it;
• a hardware wallet, which is a device similar to a flash drive or modem that can be connected to a computer and work with virtual money.

“Hot” wallets are virtual storage. These include:

• mobile wallets for computers and mobile applications, which are special programs;
• online wallets: internet resources (for example, exchanges) that make it possible to open a virtual wallet;
• Blockchain, which is a wallet service only for Bitcoin, makes it possible to view statistics of transactions, exchange rates, etc.

Your First Step in the World of Cryptocurrency

Interest in cryptocurrency is growing every day. Understanding the basics of cryptocurrency is the first step to making informed investment decisions in this market.

Start by choosing a reliable cryptocurrency exchange and wallet. Research the different types of cryptocurrencies before investing. Don’t invest more than you can afford to lose. And be aware of the risks associated with market volatility.

And most importantly, keep learning and exploring this budding world of cryptocurrencies.