Beginners Guide to The Crypto Ecosystem
Ready to learn the basics of cryptocurrency? You’ve come to the right place.
Cryptocurrency, whether a token or coin, is a digital currency backed by blockchain technology, the most well-known being Bitcoin and Ethereum. With millions of traders across the world, cryptocurrency is already big business. For those new to this digital industry, it’s important to know what you’re getting into before investing—as there’s so much to learn about ‘crypto’ and its origins. Read on to learn all there is to know about the crypto ecosystem.
Crypto ecosystem: past and present
Although crypto has only recently broken into mainstream media, the concept has existed for decades.
During the 1980s, and coined as ‘cyber currency’, American cryptographer David Chaum invented DigiCash, an electronic money corporation using cryptography to secure and verify transactions. However, despite furthering cryptographic protocols and software, DiGiCash filed for bankruptcy in 1998, due to a lack of adoption from financial institutions.
Fast forward to 1999, and Bitcoin’s precursor, Bit Gold, was developed. Founded by Nick Szabo, Bit Gold attempted to combine cryptography and mining elements to accomplish a decentralised nature—although the project itself was never actually implemented.
Satoshi Nakamoto published the Bitcoin whitepaper in 2008, and, while speculation exists that Szabo is the original creator, the founder remains anonymous. In the whitepaper, Bitcoin was described as a “Peer-to-Peer Electronic Cash System” that didn’t require a third party. In 2010, two Papa John’s pizzas were purchased in Florida for 10,000 Bitcoin—the first time crypto was used as payment for goods.
Though only worth a few pounds in 2010, Bitcoin reached its all-time high value of approximately £56,000, per coin, in November 2021. With now over 10,000 tokens in circulation, cryptocurrency has finally made a home for itself within the mainstream.
But how does the crypto ecosystem function? The answer is blockchain technology.
Powered by blockchain technology
Blockchain is a digital ledger, and it’s not too dissimilar to be thought of as a never-ending spreadsheet. It’s a secure database that stores information and keeps a decentralised record of transactions across a peer-to-peer network.
Data is stored in blocks. Once a block is filled and secured it’s added to a chain, with the next, subsequent block created as more data is added. These blocks are dated and can’t be altered in any way, shape or form.
The crypto ecosystem is dependent on blockchain technology. It allows tokens like Bitcoin to be decentralised as all users have a collective control over the network. Blockchain technology allows for safe and secure transactions to take place in the crypto ecosystem.
Scrying the future: cash, card, or crypto
There’s strong potential for cryptocurrency to become as commonplace as using cash or card. In El Salvador, for example, Bitcoin is already legal tender—adopted in September 2021. Global companies like Microsoft and PayPal, meanwhile, already allow customers to pay in Bitcoin
As the first country to formally adopt crypto into its economy, it’s certainly worth watching events in El Salvador with a keen interest, especially as more industry regulations develop worldwide and adoption increases.
What about the benefits and risks involved with getting involved in the crypto ecosystem?
All investing involves risk, including traditional methods such as stock market value and bonds. The crypto ecosystem too, comes with its own set of pros and cons. However, we think the benefits outweigh the risks when trading responsibly.
Secured finances: Due to the nature of blockchain technology, your finances are safe, as all transactions are secured and stored. Additionally, blockchain technology brings transparency to your transactions, with no hidden fees or charges.
24-hour access: There are no time constraints when it comes to crypto. You can buy or trade whenever you like. There’s no restriction on banking hours and buying tokens is an extremely quick process.
Complete control: You’re single-handedly in control of your crypto wallet, and have access to assets at all times. There’s no central authority when dealing with crypto, so it’s entirely up to you in terms of what you wish to trade and invest in.
User anonymity: Unlike a bank, you don’t need to provide proof of identity. Many crypto exchanges don’t implement ‘know-your-customer’ (KYC) policies, so you can trade safely and anonymously without needing to prove who you are on every occasion.
Highly technical: Crypto isn’t simple. Time and effort are required to gain the knowledge needed to make sure you’re making the right investment decisions.
Volatile market: The market can be volatile, as demonstrated by recent industry crashes. For some, however, this is all part of the appeal. Crypto markets can rise just as much as they can fall, spinning profits or losses at the same time.
Lose your seed phrase and you’ll lose access: A crypto-wallet (more specifically, a non-custodial wallet) is protected by a unique seed phrase. As you’re in full control of your wallet, should you lose your seed phrase, you also lose access to your funds. Custodial wallets, meanwhile, can be recovered.
Now that you know what crypto is, plus the benefits and risks involved, it’s time to explore investing.
Top tips for investing
As the crypto space is huge, where’s best for a new-starter to invest? Well, each trader develops their own trading methods, and it’s likely, in time, so will you. For now, we’ve compiled a list of simple steps to help you along the way.
Research, research, and more research!
You should never invest without first conducting proper research. It’s important to ask as many questions about a specific crypto-token as possible, and only when fully confident about investing, should you do so.
Make sure to explore all the different platforms you can trade on and confirm they match your level of expertise.
Find yourself a trusted crypto wallet
To start investing, you’ll first need a crypto wallet. A crypto wallet holds your currency and allows you to buy, sell, and trade across various exchanges.
The two main types of wallets are custodial and non-custodial.
A custodial wallet is hosted by a third party that secures your keys for you.
A non-custodial wallet is a wallet that you have sole responsibility over.
There’s no right or wrong way to choose a wallet. Go with the option that suits your needs best.
It’s also important to create an effective trading strategy. If you plan out targets and define what you’re willing to gain or lose, it’s much easier to stay on track
When strategising, consider the different trading methods available and see which works best for you. Swap trades, for example, are extremely straightforward, and involve simply exchanging one coin for another. Leveraged trades, meanwhile, can prove more complex. We recommend reading up on all the options at hand before committing to a trade.
Your strategy should also include which trading platform you’ll be using. There are hundreds of exchanges to choose from, each with independent terms and conditions.
When trading in a volatile market, you should always protect your assets in the best way possible. The easiest way to do this is by adding a stop loss limit to your trades. Adding a limit to any potential losses ensures that further trading will be stopped, should the market value fall below your defined threshold.
Equally, you can maximise your profit potential. By confirming a profit target, once reached, the trade will close, capturing your gains and locking them in. This is a great way to prevent getting ahead of yourself.
Although it’s easy to try and push a token to its peak, there’s always the chance things can quickly take a turn for the worse.
Trading advice from us to you
Control your emotions: Don’t be tempted by market surges. If it stops being fun, walk away before it’s too late.
Stay up-to-date with crypto news: Follow other traders and crypto experts across social media to stay involved with the community and pick up insider tips.
Keep an eye on crypto prices: The best time to invest in a particular token is when market prices are down. Buy tokens while they’re available, and hold onto them until they rise in value.
Diversify your wallet: If the 2022 crypto crash has taught us anything, it’s not to put all your money into a single coin. By diversifying your wallet with various currencies, you reduce the risk of losing all of your assets should one have a particularly bad fall.
How do we know? We’re crypto marketers.
At Linguakey, we work hard to help crypto projects establish their voice with premium content. It’s our job to make powerful projects stand out in the community.
Having worked on several amazing crypto projects, we’ve picked up a thing or two about the crypto industry along the way. For more information on our partnerships or knowledge base, visit our website.