Understanding Cryptocurrency Basics
Frequently Asked Questions
Welcome to our Crypto Basics guide. Whether you’re new to the crypto world or just need a refresher, we’ve got you covered.
Cryptocurrency is a type of digital or virtual currency that uses cryptography for security. It operates independently of a central bank and uses decentralized control as opposed to centralized digital currency and central banking systems.
NFT stands for Non-Fungible Token. It’s a type of digital asset that represents ownership or proof of authenticity of a unique item or piece of content, stored on a blockchain.
Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system. It is essentially a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain.
You can buy cryptocurrency on a cryptocurrency exchange using traditional money or other cryptocurrencies. Common exchanges include Coinbase, Binance, and Kraken.
NFTs can be purchased on various online marketplaces. The process generally involves setting up a digital wallet, buying cryptocurrency (often Ethereum), and then bidding on or buying the NFT using that cryptocurrency.
A crypto wallet is a device, application or service which stores and encrypts the user’s public and private keys, allowing them to send, receive, and store cryptocurrency.
Gas fees are payments made by users to compensate for the computing energy required to process and validate transactions on the blockchain.
Minting is the process of turning a digital file into a unique digital asset on the blockchain, creating an NFT.
Fungible items are interchangeable with each other, like traditional currency coins or tokens. Non-fungible items are unique and not interchangeable on a 1:1 basis, like NFTs.
DeFi stands for “Decentralized Finance”. It’s a term used to describe financial applications that are built on top of blockchain technologies, particularly Ethereum.
A smart contract is a self-executing contract with the terms of the agreement directly written into code. They run on the blockchain, so they are stored publicly and can’t be changed.
Ethereum is an open-source, blockchain-based platform that enables developers to build and deploy decentralized applications (dApps). It is also the blockchain network that most NFTs are built on.
Bitcoin is the first decentralized cryptocurrency, invented in 2008 by an unknown person or group of people using the name Satoshi Nakamoto. It’s a digital currency that you can send or receive using the internet.
An altcoin is any digital cryptocurrency similar to Bitcoin. The term is said to stand for “alternative to Bitcoin”.
Liquidity refers to the ability to quickly buy or sell a cryptocurrency without causing a significant change in its price.
Market cap, short for market capitalization, refers to the total value of all coins in circulation for a particular cryptocurrency. It’s calculated by multiplying the total supply of coins by the current price of an individual unit.
The legality of NFTs and cryptocurrencies varies from country to country. While some countries have embraced them, others have restricted or outright banned their use. Always check the regulations in your specific country.
Like any investment, NFTs and cryptocurrencies come with risks. While blockchain technology provides a high level of security, factors like market volatility, regulatory changes, and technological flaws can pose risks. Always do your research and consider your financial situation carefully.
Yes, anyone can create an NFT. All you need is a digital wallet, some cryptocurrency, and to connect to an NFT marketplace where you can upload and turn your digital file into an NFT.
Almost any type of digital content can be turned into an NFT. This includes digital art, music, virtual real estate, virtual goods, and more.
