Blockchain101: A Beginner’s Guide to Cryptocurrency
Cryptocurrency is probably one of the most hot topics and investments nowadays. Many people may only know Bitcoin. But actually, the development of cryptocurrencies is at a fast growing rate. More than thousands of coins are available on the market right now.
In the following article, we will state the concept of cryptocurrency clearly for someone who is interested in but has no experience in crypto investing.
What is cryptocurrency?
Cryptocurrency is the decentralized digital money. Its creation and management are controlled by cryptography. The underlying technology behind cryptocurrencies is Blockchain, which is a data storage technology that prevents anyone from changing the data stored on the Blockchain.
There is no centralized server to manage the Blockchain. Instead, they are run by thousands of computers distributed around the world. Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger.
What makes cryptocurrency unique?
Decentralization is one of the key concepts of cryptocurrencies.
In the traditional world, when the centralized server is shut down, users are not able to access the services provided by the server, just like the outage of Meta’s products, including Facebook, Instagram and Whatsapp, on October 4, 2021. You might not be able to log into your Instagram account on that day.
But in the crypto world, users are able to send and receive cryptocurrencies without any intermediaries like financial institutions. Unlike fiat like USD, there is no centralized intermediate like banks and governments control the issuing, account management, transaction verification of cryptocurrencies and changing the rules without reaching consensus.
Such as the Bitcoin system, which is run by thousands of computers distributed around the world. The network participants run software that connects them to other participants so that they can share information among themselves.
Therefore, cryptocurrencies are able to function 24/7/365. Transactions are carried around the globe at any time and place without any interruption from anyone. Even if a computer is shut down, it won’t affect the function of the Bitcoin system. We can do transactions on the internet without any third party verification.
What is public and private key cryptography?
Public-key cryptography is what users rely on to send and receive funds. In order to use or transact Bitcoin, you need a wallet to store your coins, like opening a bank account.Anyone can create a new wallet by generating a pair of public and private keys. The public key is for encrypting and a private key is for decrypting the data.
The public key acts as an address for the wallet that can be deposited in cryptocurrency. If you want to receive cryptos in any transactions, you have to disclose it to the sender so the sender is able to send you the coins.
The private key acts as the password of the wallet that can prove your ownership of the wallet. A private key is a massive number that would be impossible for anyone to guess. You should keep your private key secret. If you don't back up the private key and lose it, you can no longer access your bitcoin wallet unless you figure out what your private key is.
You can also create digital signatures by signing data with your private key. It is similar to a signature on a document in the real world. When you make a transaction, there will be an announcement of the transaction, which is signed and added to the crypto’s blockchain.
Verifying the signature is valid or not by comparing it with the matching public key. In this way, the process of identity verification is simplified as the user doesn’t need to reveal their private key to prove their ownership of it.
What is the difference between cryptocurrencies and tokens?
It seems there is no difference between cryptocurrencies and tokens. They can all be exchanged and stored on the blockchain.
Act as money, such as a medium of exchange, store of value
Can be used like cryptocurrencies but have Greater variety of usage, such as the smart contract function in Ethereum.
Non-fungible or fungible
Just take an example, cryptocurrency is similar to the concept of money. The value of every 100 usd note is completely the same.
The token is similar to the concept of stamp, as the design of each stamp may be different. The identical and special differences sometimes make its value reach over millions of dollars.
Where to buy cryptocurrencies?
There are several ways to buy cryptos, including:
You can purchase Bitcoin directly from another individual in person or over the web in your own way. The transfer of the coins is done by sharing the public key of your wallet with the sender.
DEX (Decentralized exchanges)
Decentralized exchanges (DEX) is a type of cryptocurrency exchange which is set up for direct peer-to-peer cryptocurrency transactions to take place online without any intermediates.
CEX (Centralized exchanges)
Centralized exchanges (CEX) is a type of cryptocurrency exchange which is set up by a third party to verify the transaction and manage the account. It acts as an intermediates of the buyers and sellers in the crypto market.
It may be the simplest and most convenient option for crypto newbies as CEX acts like a guardian to lead them in the volatile cryptomarket with reliable security and regulations to prevent cheating from happening.
How to buy cryptos on Bitget?
There are several ways to buy cryptos on Bitget, including:
Buy Bitcoin with Credit Card, Apple Pay Google Pay on Bitget
Bitget supports the deposit of more than 200 cryptocurrencies, including Bitcoin and Ether. You can first deposit in your Bitget account. Then, you can exchange for Bitcoin at the rate you desire on the market.
Don’t you have an account on Bitget yet? Register a Bitget account now.
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