Everything you need to know about Crypto as a beginner

Crypto or cryptocurrency is nothing but a decentralized digital currency.

Decentralized means no central agency like US federal or Reserve Bank of India are controlling this.

It’s a currency of future, accepted worldwide. It’s a blockchain ledger based currency.

To understand Crypto better, we can divide crypto into three categories:

• The Ledger
• The Coins
• Where you store them

1. The Ledger

In the accounting world, the ledger is a book of records, maintained to keep a track of all the financial transactions.

Basically, all what comes in and what goes out are recorded and tracked in the ledger, a kind of spread sheet.

In the crypto world, the ledger is not merely a spread sheet, rather a Blockchain based digital ledger, which has thousands of copies in thousands of computers worldwide.

2. The Coins

Here coins mean the crypto coins. As we have Rupees in India, Dollars in the USA, similarly, there’re crypto coins which are traded in the crypto world.

the coins can be divided into three categories.

1. Bitcoin
2. Alt Coins
3. Stable Coins

1. Bitcoin (BTC)

Bitcoin is the original cryptocurrency, created in 2009.

Why it’s so special and popular?

Its supply is limited. There’re only 21 million copies of Bitcoin available in the whole world, which creates value of Bitcoin like the digital gold, as gold also has a limited supply which creates a value for the asset.

its open source, nobody owns or controls it and it’s accepted worldwide.

2. Alt Coins

Any other crypto coin except the Bitcoin comes under Alt coins.

The biggest one among them is Ethereum (ETH).

It’s not just a digital coin/money like Bitcoin, rather a decentralized computing platform.

Like Bitcoin, no one else controls it, no company runs it or no one can shutdown either.

It’s open source since its launch in 2015 and has been running without a single second of downtime, where thousands of operators keep it running worldwide.

Ethereum is not just a digital coin/money, it’s a decentralized computing platform.

it provides

• Automated digital agreements.
• Escrow services.
• Logic driven applications.

simply, it’s more than a digital coin.

3. Stable coins.

As the name suggests, these coins are stable. And generally they’re linked to the physical world coins like US Dollar.

For Eg. USDT or USDC.

India as of now has no such stable coins linked with Indian rupee.

The stable coins like USDT are equal to the the US Dollar.

1 USDT = $1

Their values don’t fluctuate like Bitcoin, Ethereum or other cryptocurrencies, They’re mostly stable.

Let’s understand stable coins bit more better.

For e.g. You bought Bitcoin for Rs.1000 ($10) from the crypto exchange.

and price is increased to Rs.1400 ($14) in few days.

Now if you sell those Bitcoin to USDT, You get roughly $14, instead of $10, Where $1 = Rs.100 INR now.

And if after that the market fluctuates and Bitcoin comes to Rs.700 ($7), you lose nothing as you’ve already converted them to USDT and they’re mostly stable now.

3. How you store it?

As we all know we store the traditional money, Rupee or Dollar in the bank accounts.

Where the bank account, server, database and everything is controlled by third party, the bank.

It’s not under your control.

But in the case of Crypto, it’s stored in a Blockchain based ledgers and the keys to those ledgers are stored in the Digital Crypto wallets.

Let’s understand this better.

Let’s Suppose, you’ve a bank account in SBI, which has Rs.100 in it.

Now you’ve an ATM card and other UPI app connections like PhonePe, Google pay etc.

The ₹100 is in your SBI bank, Your debit card/ATM doesn’t contain this ₹100. Your UPI app doesn’t contain this ₹100. They simply provide access to your account.

If you lose your debit card: Your money remains safe.
Money is still in SBI’s database. You get a new ATM card., You can access the money again.

And Crypto also works similarly.

Suppose you own 0.1 Bitcoin.

Where is it now? It’s in the Blockchain Ledger (The blockchain address), and not inside your wallet whether it’s Coinbase, Coin DCX or Meta mask. Your wallet is just the tool like ATM to access the records/data.

So, with the digital wallets you access your ledger with the Private Key, just like the ATM or UPI PIN.

So, what’s the Private Key? It’s a Complex digital signature, that proves ownership of your funds.

---

Now Coming to the Wallets, we can divide them into two categories, by who controls them.

1. Exchanges controlled wallets.
2. Self-controlled wallets.

1. Exchanges controlled wallets

Also known as the custodial wallets, mostly managed and controlled by third party exchanges or wallets with your private access key.

Examples of Third-Party Wallets:

Pros

It’s easy to use these wallets, transfer the money from the bank accounts, and easy to trade.

Cons

It’s a third party. If this exchange gets hacked, Assets are at risk. No true ownership. Exchanges can freeze withdrawals.

2. Self Hosted Wallets

Also known as non-custodial wallets. You control the private keys here.

Pros

You control everything. Everything under your ownership.
No one can freeze your funds.

Cons

If you lose your password/private key, it’s permanently lost, and you lose the access to the wallet and the ledger. Remember, there’s no forgot password reset here!

By storage method, wallets can be divided into hot wallets, which are connected to the internet and used online, such as Metamask, Phantom, and Trust Wallet.

These are convenient for quick access, frequent transactions, and everyday use.

Cold wallets are offline wallets, designed for better security because they are not constantly connected to the internet. Examples include hardware wallets like Ledger and Trezor, as well as paper wallets and other offline storage methods.

For buying, selling, trading of crypto the exchange wallet is recommended. and for long-term investing or holding of crypto assets, self-hosted wallets are recommended for security, and better control of assets.