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What is Crypto Currency and how it works | For Beginners 2022.

What is Crypto Currency for Beginners?

Education is the key to the mass adoption of cryptocurrency. What is crypto currency? Is the most important question to ask before investing in it  or even think of investing in it.  Concepts like blockchain mining and staking are hard to understand and even harder to explain in simple terms, where all your money is going and why. So that's why today I'm going to  explain complex crypto concepts in a way you will understand and even how to answer the questions and address the concerns you're likely to get.  If this is your first encounter with the cryptolibrarynow , my name is "MrCryp" and I'm a crypto geek. I put the highest quality crypto content on this site to counter the rumours and the moon boy hype, News, reviews, coins, tokens, tutorials, tools and more. Let me help you to understand crypto in the easiest and most efficient way possible.

What is Crypto Currency?101 -:

What is Crypto Currency?

If my personal experience is anything to go by, the first question you probably get when you start talking about cryptocurrencies with friends and family is what the hell is crypto currency? Well, here's how I answer that question. Put simply, cryptocurrencies are like regular currencies, except they're entirely digital. Each individual crypto currency coin is fundamentally just a collection of numbers and letters. This sounds complicated, but it's actually not far off from what we see with currencies today. Here's what I mean by that. Almost every physical money bill on the planet has a unique serial number. This serial number corresponds to information like when the bill was printed, where it was printed, and so on. In theory, a record of all money bills that have ever been printed and where they are is kept by a central bank which shares this information with smaller banks and the government. If you have a debit card or credit card, you'll know that you have an account number on there as well. You also have a password or pin number that you use to access the money in that account. Your bank branch knows your account number and your name because you had to provide your personal information to open an account. This info is also shared with the Central Bank and government. Now let's say you have a $20 bill with the serial number ABC's and your bank account number is 123. When you deposit that bill into your bank account, your bank branch, the Central Bank, and the government will see and confirm that the $20 bill ABC has been moved into bank account number 123. This is almost exactly how crypto currencies work. Each individual cryptocurrency coin is like the serial number. You see, on a physical bill, just without a physical bill, just like regular bills, almost every crypto currency can be divided into smaller pieces. In the case of Bitcoin, each BTC can be divided into 100 million pieces, called Satoshis(satoshi nakamoto : Founder Of Bitcoin), which are like cents to a dollar. A crypto currency wallet address is like a bank account, except that there's no physical card that goes along with it. It's just an account number. Because you don't need to provide any personal information to create a crypto currency wallet. This means that your identity is not attached to your crypto wallet like a bank account is. Most importantly, any crypto currency held in your personal wallet is held directly by you, not custodied by a bank like regular money in a bank account. This means that nobody can shut down your crypto currency wallet or block your transactions because you have total control over that account at all Times Now, the trade off here is that if you lose access to your crypto currency wallet or forget to write down the recovery phrase you get when you make one, well, you'll lose your crypto currency. Forever. Instead of banks and the government keeping track of everyone's bills and bank account balances, these records are stored across all the computers connected to a crypto currency network. These transactions and account balances are public and can be viewed by anyone using something called a blockchain explorer. Because computers can earn crypto currency for processing transactions on a crypto currency network, this incentivizes more computers to join the network to process transactions and earn crypto currency. This makes cryptocurrency networks secure because there is no single point of failure. This is called decentralization, and it's the polar opposite of the centralized setups of governments and banks. Now, in case you didn't put two and two together, that means the digital currencies banks around the world are creating are not crypto currencies. They're creating a seriously dystopian payment network. 

What is bit coin , doge coin , ethereum and other crypto currencies ?

doge coin

you'll probably get questions about Bit coin and Doge coin and any other crypto currencies they've heard about. Here's what I would say. While you've probably heard of Bitcoin and Dogecoin, there are actually thousands of crypto currencies, just like there are hundreds of different regular currencies, U.S. dollars, euros, Chinese, UN and so on. The crazy thing is that every cryptocurrency is different and not all of them are designed to be a currency you would actually use for everyday transactions. Broadly speaking, there are two types of crypto currencies, coins and tokens. Now, crypto currency coins belong to crypto currency networks that were built from the ground up and by from the ground up I mean that someone spent a lot of time and a lot of money putting together the code required to create a safe and reliable. Crypto currency network. Cryptocurrency coins are the crypto currencies given to computers when they process transactions for a crypto currency network, for example, BTC(bit coin) is a crypto currency coin because the bit coin network was built from the ground up and BTC is given to the computers that process transactions for the bit coin network. Because crypto currency networks are so hard to make from scratch, only a few dozen crypto currencies are actually coins. The rest are crypto currency tokens. In contrast to crypto currency coins, crypto tokens are easy to make and can often be created in a matter of minutes with little to no effort. This is why there are tens of thousands of tokens. The NFTS you keep hearing about are actually crypto currency tokens that are like digital certificates of ownership for physical or digital art pieces. NFTS are just the tip of the iceberg of what you can do with tokens as well. For example, there's a company called Circle that issues a crypto currency. Token called usdc usdc is fully backed by real U.S. dollars, which means that for everyone usdc in circulation, circle has one U.S. dollar in the bank. You can create usdc by giving them your dollars and redeem your dollars with usdc. Another company called Paxos issues a crypto currency token called PAXG. Each packs due token is backed by one Troy ounce of gold kept in a vault here in London, and you can redeem PAXG tokens for real physical gold or U.S. dollars. The best part is that both circle and PAXOS are fully regulated in the United States and regularly audited to make sure they have the appropriate number of reserves. On hand, backing their tokens as that for security. Now, Speaking of security, the most important thing to remember about crypto currency tokens is that a lot of them are nothing more than scams. This is primarily because crypto currency tokens are so easy to create. All are scammer needs to do is create a token set  a new fancy website, pay for a few ads on social media, pay a few news outlets to feature their shit coin and they can get rich off crypto noobs overnight.

Is crypto currency safe?

Is crypto currency safe?

Naturally, the next question you and your crypto curious compatriots are likely to croak is a timeless classic are crypto currencies safe. After all, I heard they're used by scammers and criminals and I keep reading about all of these crypto currency hacks. Well, this is usually my response to these sorts of questions and comments. Whether a crypto currency is safe or not ultimately depends on the context. For starters, not all crypto currencies are created equal. Some crypto currencies are built to prioritize speed over security, and usually the consequences of that layout quite quickly. Luckily for us, there are always hackers somewhere looking to crack crypto currency networks so they can trick them into creating new coins or tokens. Out of thin air to sell for a fancy profit. Now, this might sound scary, but it's no different to what happens to banks and corporations on a daily basis. When hackers succeed, the affected company usually beefs up its cyber security. The same goes for crypto currencies. This means that most cryptos that have been around for years are robustly battle tested as a consequence of always being under attack by bad actors. If you're not convinced, well, consider this. As I mentioned earlier, some crypto currency networks are made-up of computers spread out around the world. That are constantly double checking transaction histories and account balances. If you wanted to corrupt a crypto currency network, you would have to hack more than half of all the computers connected to the network at the same time. In order to do it. This is impossible to do if you have a crypto currency network like bit coin. That has millions of computers spread around the world. That said, some crypto currency networks have fewer computers processing transactions and are therefore more vulnerable to attack. The same rule applies to centralized crypto currency services like crypto currency exchanges, which is where most crypto hacks have happened. These are much easier and more lucrative to exploit than an individual crypto currency wallet, which is insanely secure. That's why you should always keep your crypto on your own personal wallet. Wherever possible and only keep it on an exchange when you're trading or cashing out. And when it comes to self custody, nothing beats a hardware wallet. When it comes to criminal activities, it is true that ransom demands made by hackers often involve some kind of crypto currency. While the crypto currency these hackers demand is often Bitcoin, they almost always exchange that Bitcoin for a privacy oriented crypto currency like Monero. As soon as they can. This is because Bitcoin and most other cryptos have publicly viewable transactions and wallet balances. This makes Bitcoin transactions very easy to trace by authorities. Even more than regular currencies. So it makes no sense for criminals to actively use and hold a currency that's so easily tracked. Crypto currencies like Monero are completely private, and even the US government can't crack its encryption, which is seriously impressive if you think about it..In some, then, the overwhelming majority of crypto currencies are not used for criminal purposes. There are just a handful of cryptos that are actively used by criminals. The real risk when it comes to crypto relates to investing. Crypto currencies are extremely volatile, meaning their prices can go up or down by up to 50%. Day investing too much in crypto can be extremely dangerous, especially when you push your luck with something called leverage trading, which basically uses borrowed money. that's why you should only invest what you are willing to loose and not a penny more(Disclaimer : This is not financial advice)

why are cryptocurrencies so volatile?

Assuming it hasn't been asked already, the next question that will land in your lap will be along the lines of why are cryptocurrencies so volatile. What gives them any value to begin with. Here's my counter. What gives the money in your wallet or in your bank,Any value? Now, once upon a time, it was backed by gold, but that changed, and since then all state issued currencies around the world have been losing value. This is because the only thing that backs dollars and euros is ultimately. The trust we have in the governments that issue those currencies and that trust has been eroding for decades. Not only that, but governments have been actively printing and manipulating their currencies to benefit themselves and the corporations that fund them at the expense of the average person. This has caused record levels of inflation that incentivizes spending over saving, which leads to overconsumption and causes the sort of environmental catastrophes they claim to want to stop. You can read my article on this,please click on me,on the massive Fiat Ponzi if they want further context. Anyways. After that rant, I usually go on to address the actual question. Cryptocurrencies are valuable because of what they do. Obviously this value changes depending on which cryptocurrency we're talking about. Bit coin has value because its BTC coin has an economic profile similar to gold. It has a maximum supply and only a small amount of BTC is created each day and that amount is cut in half every four years. Assuming demand for Bitcoin stays the same overtime, this would lead to a doubling of bitcoins price every four years. However, demand for Bitcoin has increased over time as we realize how weak,regular currencies can be, and this awareness has been enhanced by the current pandemic. As basic economics dictate, when something has a limited supply but the demand for it continues to increase, prices inevitably rise. Many investors also see Bitcoin as a safe place to park your capital outside of the current financial system, including me. One important thing to note is that most other cryptocurrencies are highly correlated to Bitcoin, meaning their prices are reliant on what BTC does. Even though that's the case, some cryptos, such as Ethereum have insane value due to the utility they provide. The Ethereum network can be used to create those cryptocurrency tokens. I was talking about earlier and you can even create decentralized applications and websites that can't be censored or shut down. All transactions related to creating and moving tokens and interacting with these applications require ether to pay for gas fees. This means the demand for ETH rises as the Ethereum network gains adoption, and ETHEREUM has seen some serious adoption. Visa is testing payments on the Ethereum network using that USDC token I mentioned earlier, and the European Central Bank even issued a bond on the Ethereum blockchain. Now, the reason why the value of BTC, ETH and every other cryptocurrency fluctuates so much each day is because basically nobody knows what these technologies are actually worth. The prices of stocks and gold and even regular currencies fluctuate every day for the same reason. But cryptocurrencies are much more volatile because what they do is revolutionary. Cryptocurrency networks make it possible to lend, save and borrow without an identity, credit score, or bank. They make it possible to do. Business directly with other people without a middleman taking a cut, meaning service giants like Uber and tech giants like Facebook could become obsolete. They make it possible for communities to pull their funds together and vote on how they should be spent, which could eventually cut out the needs for governments and their crooked politicians. You could even say. That cryptocurrencies are the equivalent of a powerful alien technology that threatens the dominance of the powers that be. Now, this potential makes the average crypto investor very emotional. The slightest possibility of a clamp down on crypto results in a market crash, and the most outlandish rumor can lead to a massive market pump in the longer term. However, you can see that crypto is growing and that growth is unlikely to stop anytime soon.

Which is the best crypto currency to buy?

Now, by this point in time, you've probably more or less convinced your heart and your cohort that crypto is pretty legit,  and that means there's only one question they have left to ask you which cryptocurrencies should I buy? Well, before you answer that question, you must remember to emphasize that nothing you tell them is financial or investment advice. Otherwise you could end up in court if their crypto investments go south , and even if you're legally covered, you could still find yourself eating a knuckle sandwich or two if your guidance directs their greed to a financial gutter. 

That's why I , usually respond with the following:

 Which crypto currencies you decide to invest in boils down to your timeline and risk tolerance in terms of timeline, the crypto currency market seems to follow a four year cycle. We're currently in the bull market phase, which is where prices gradually rise. The crypto bull market could end as soon as this fall and as late as early 2022. And the likelihood that you will sell your crypto currencies when they're at their highest prices is slim to none. Although most cryptos have seen most of their games for this bull market, a 2 to 3X return on investment is still possible, and it's even more likely if you decide to hold until the next crypto bull market. Fun fact, buying and holding cryptocurrency. It will give you about the same amount of profit as actively trading crypto, which I don't recommend you do unless you plan on making it your full time job. When it comes to risk tolerance, it might sound a bit funny considering cryptocurrencies are risky investments, but there are varying degrees of risk even within the crypto market. Logically, the more risk you're willing to take, the greater reward you stand to gain. Now, the easiest way to measure risk and reward is to look at a cryptocurrencies market cap. This is an extremely important metric to check because the dollar value of cryptocurrencies can be misleading. A cryptocurrencies market cap is calculated by the current value of that coin or token times its circulating supply. The reason why Dogecoin is ranked so high is because it has a circulating supply of 130 billion, and when you multiply that by dogecoins, 30 cent price, you get a $40 billion market cap. Now you might think that Dogecoin resents you with an easy opportunity to get rich quick, but getting to just one dollar would require. An additional $80 billion of active investment, and that isn't all that likely to happen. As a rule of thumb, the smaller the market cap, the more potential that cryptocurrency has to grow, regardless of its dollar value. That's because it takes less money to increase its value.Now to use an extreme example,

cryptocurrencies market cap

yearn finance is Wi-Fi token is worth more than Bitcoin, but its market cap is 20 times smaller than Dogecoins. Meaning it would take less capital to push up the price of Wi-Fi. With the exception of Dogecoin and a couple of others, most of the cryptocurrencies in the top ten by market cap could be considered low risk investments. Cryptocurrencies like Bitcoin, Ethereum and Cardano are likely to be around for many years, and they will likely double, if not triple in price. Before this bull market is over. The other 90 cryptocurrencies in the top 100 could still see gains of 3to5X, but the further you move down the list, the riskier the investment becomes, because it also takes less capital to crash their price. I would personally stay away from any crypto that isn't among the top 200 by market cap because most of the quality projects. Have already come out of the woodwork and going any further is just gambling. If you come across any cryptocurrencies that spark your interest, you can learn about those by reading articles wherever you can find a good one,cryptolibrarynow(where you will always find one) watch educational videos on youtube , try to find the main reason , why they were created and how can they be useful in future. 
Let me know by dropping me a comment below , if you have any more doubts. Thank you so much for reading this article. Keep learning-Keep growing!


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