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Lesson Track: Getting Started With Crypto

Kewyn Appadoo
Founder Web3MadeEasy

Want to get started buying, selling or trading crypto but not sure how? In this blog we will lead you through the process of how to go about it.

Cryptocurrency – The Currency For Now And The Future

Cryptocurrency is a cryptographically-secure digital or virtual currency. It was inspired by the growing distrust in governments and centralized banks and designed to be impossible to counterfeit or double spend. Cryptocurrencies are traded on a decentralized distributed ledger called the blockchain which is the fundamental building block of Web3. Those transactions are verified by other users in the blockchain. Many cryptocurrencies, such as Ethereum, are required to use that particular platform and the decentralized applications (dapps) it offers.

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1. What is Bitcoin?

Bitcoin rose from the ashes of the Global Financial Crisis in 2008 and by the following year became the world’s first cryptocurrency. It was invented by the pseudonymous Satoshi Nakamoto, inspired by a distrust of governments and centralized banks. Their true identity remains a mystery. The idea was to have a world currency which could be traded with trust and confidence, and without the need for a third party or centralized authority. Bitcoin was created as a way of sending money over the internet as well as an alternative to traditional fiat money. It can be traded on the Bitcoin network which can be accessed on the blockchain. Every transaction that is made must be verified by a consensus mechanism called “proof of work”. It requires validators, known as “miners”, to solve a complex mathematical  puzzle in order to verify transactions and discover a new “block” to be added to the chain.

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2. What is Ethereum?

Ethereum is the world’s second largest cryptocurrency behind Bitcoin. The currency is used on the Ethereum blockchain which was designed to facilitate elaborate transactions and an infinite range of applications via the use of “smart contracts”. Transactions on Ethereum and similar blockchains are validated by a consensus mechanism known as “proof of stake” where validators are required to stake a certain amount of crypto. Smart contracts allow users to transact with each other, without the need for a third party or central authority. Users pay to execute these contracts in Ether, Ethereum’s native cryptocurrency. Ethereum can be used to run any software applications on the blockchain, safely and securely housing sensitive data, rather than relying on a server owned by a third party such as Google.

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3. What Does Decentralization Mean?

Decentralization is the process of transferring control of an organization from an individual or group of individuals to a “distributed network”. That means everyone in the organization has a say in how it runs. It is basically giving the power back to the people and removing it from a central authority which cannot necessarily be trusted. Decentralizing the management of a blockchain application breeds greater trust that improved results will be achieved in the interests of all. That trust is achieved by utilizing the key fundamental building blocks of blockchain technology – immutability, transparency and security.  However, not all blockchain applications are necessarily decentralized.

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4. What Does Immutable Mean?

“Immutable” means not being able to be changed. In terms of the blockchain, it refers to one of its characteristics which makes it so impervious to fraud. When a new transaction or record is entered on the blockchain, it is by nature immutable. It is permanent and irreversible. Immutability is one of the cornerstones and foundations of the blockchain. In the new world of Web3, trust is no longer needed because of blockchain’s immutability.

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5. How To Purchase Crypto

To buy cryptocurrency on the blockchain, you must first sign up with a crypto exchange, providing your basic details to complete a security check. The easiest and quickest way is to then transfer your fiat currency (USD, Euro etc) to the exchange and simply purchase the crypto you desire (Bitcoin, Ethereum etc.) The exchange will keep your crypto online in what is called a “hot wallet” which you can access for future trading. There are hundreds of crypto exchanges from which to choose. Most crypto exchanges operate similarly but they do have subtle differences. Reading online reviews is the best way to help you decide which exchange is right for you but there are some important factors you should consider including security, safety, fees and the types of coins they offer.

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6. What Is A Crypto Wallet?

A crypto wallet is a device that allows you to keep your cryptocurrencies safe. They don’t actually store your cryptocurrencies but your private keys (passwords) needed to access your crypto. Crypto wallets prevent people from hacking or stealing your crypto funds. If you lose your private keys, you lose your money and have no way of recovering it. There are two main types of crypto wallets:  

Hot wallets –  sit permanently online and favor convenience and accessibility over security

Cold wallets –  resemble USBs, are disconnected from the internet and are much safer to store large amounts of crypto. The use of both hot and cold wallets is a sensible approach for regular crypto traders.

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7. How To Create A Wallet

The simplest way to create one is to opt for a hosted wallet on a crypto platform or exchange like Binance or Coinbase. You’ll simply need to create an account and then buy crypto with your bank account or credit card. But as long as someone else holds your private keys, you are never really in control of your cryptocurrency. That’s why for greater security, especially when dealing with large sums of cryptocurrency on the blockchain, it is recommended to use a hardware or “cold wallet”. A cold wallet plugs into your desktop, laptop or phone. It’s a longer process but if you are dealing in a lot of crypto, it is essential to keep your funds safe.

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8. What is Metamask?

MetaMask is a cryptocurrency wallet exclusive to the Ethereum blockchain. The wallet allows users to store Ether and other ERC-20 tokens (for smart contracts). It also gives them access to the enormous number of decentralized applications (dapps), opening up a vast range of opportunities on the world’s most diverse blockchain. You can begin trading cryptocurrencies right away. Or you might want to start borrowing or lending money with a DeFi app like Compound which works by depositing your assets into its protocol. If NFTs are your thing, you can start buying and trading them at your whim.

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9. What Are The Different Types Of Coins In Crypto

Technically there are three different types of coins – Bitcoin, Altcoins and Stable coins. Bitcoin was the world’s first cryptocurrency. Altcoins are all cryptocurrencies other than Bitcoin e.g. Ethereum, Ripple or Cardano. Stable coins are cryptocurrencies pegged to a traditional asset like the US dollar or gold to make them less volatile. And then there are tokens which are not technically coins but rather the representation of an asset and are not designed for use specifically as a currency.

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10. How To Avoid Crypto Scams

There are many different types of cryptocurrency scams. Most of them are similar to online scams you should already be familiar with. If it sounds too good to be true, it usually is. If it looks like a dodgy link or pop-up, it usually is. It is possible to protect your crypto by knowing how to minimize the risks of the blockchain to avoid becoming a victim. Many are common sense such as never giving your wallet password or seed phrase to anyone along with always using two-factor authentication.

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Want To Know More About How To Get Started With Crypto?

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