Beginner’s Ultimate Guide to Cryptocurrency and Blockchain Technology
If you’re new to the cryptocurrency and blockchain space, you don’t need a $5,000 mentorship course to get started.
Read this article to the end and take action!
I get these kinds of questions (and many others) a lot from crypto newbies:
What is Cryptocurrency?
What is Blockchain Technology?
How does it work?
How do I get started?
And of course, how do I make money from it?
In response to these questions, I’d first give a brief history of money, especially as it relates to the emergence of cryptocurrency. Thereafter, dive into the world of cryptocurrency and blockchain technology.
THE MONEY EVOLUTION
Money can be defined as any commodity accepted by general consent as a medium of economic exchange.
Different mediums have served as a means of exchange of goods and services in the history of money.
- The Barter System of Money
As the oldest form of commerce, the system allowed people to exchange their goods and services via the concept of ‘double coincidence of wants’.
For instance, a person willing to exchange his goat for a piece of land has to meet someone willing to exchange his piece of land for a goat.
The difficulty in arriving at the double coincidence of wants led to a new form of money that was considered more efficient.
- Commodity Money
During this era, commodities such as cowries, and metals such as silver, iron, gold coins, etc were used for commerce.
The value of the metal was at first measured by weight, but later on, the government/sovereigns put a stamp on it to avoid the trouble of weighing it, and to make the value known at sight.
- Paper Money
The use of commodity money proved to be inconvenient and susceptible to loss or theft leading to the use of paper money for people who needed to move large amounts over long distances.
Paper money or fiat money is issued by the government through Central Banks. E.g., Naira and Dollar notes are paper money.
- Plastic Cards
Instead of moving about with a large amount of paper notes, plastic cards became a more convenient way to spend money. Plastic money can be in the form of debit or credit cards provided by Issuers like Visa.
- Electronic Money
Electronic money is a currency that is stored in banking computer systems. The prevalence of electronic money has led to the diminishing use of paper money along with plastic money — the cashless economy.
Worthy to note that the era of electronic or digital money gave rise to cryptocurrency as a form of electronic money.
However, while all cryptocurrencies are considered electronic money, not all electronic money can be classified as cryptocurrency.
For example, the Nigerian eNaira is an electronic form of money but not a cryptocurrency.
- Cryptocurrency
Cryptocurrencies are a decentralized form of money that does not require a central authority to function like the traditional financial system, the bank.
They are built on a protocol called blockchain, which serves as a secured and decentralized database for keeping records of transactions.
Bitcoin, Ethereum, and Dogecoin are different types of cryptocurrency.
Money derives its value from its functions; as a medium of exchange, a unit of measurement, and a store of value. All forms of money in the money evolution met at least one of these functions.
Special Offer (Sponsored)
Binance Free $100 (Exclusive): Use this link to register and receive $100 free and 10% off fees on Binance Futures first month (terms).
THE BITCOIN REVOLUTION
During the global financial crisis of 2008, Bitcoin was birthed as a revolution to the traditional financial system.
On October 31, 2008, a person or group of persons identified as Satoshi Nakamoto published the Bitcoin Whitepaper.
In it, Bitcoin was clearly stated as “A purely peer-to-peer version of electronic cash that would allow online payments to be sent directly from one party to another without going through a financial institution.”
The launch and implementation of the Bitcoin Whitepaper took off on January 3 when Satoshi Nakamoto mined the first block on the Bitcoin network, known as the “genesis block”.
Since then, Bitcoin has changed the world, becoming the first cryptocurrency to permit secure and cheap peer-to-peer transactions without intermediaries.
With cryptocurrencies, we don’t need banks anymore because we are our own banks.
The emergence of cryptocurrencies has created a huge impact on the new digital economy, especially on our finance. It has changed how we use, spend and save money as a store of value.
The relationship between blockchain and cryptocurrency is one of which blockchain is the underlying technology behind cryptocurrency.
What is Blockchain Technology?
A blockchain is a Distributed Ledger Technology (DLT) that consists of a chain of blocks for storing records on a Decentralized Network.
A decentralized database managed by multiple participants is known as Distributed Ledger Technology (DLT).
How Blockchain Works
In a blockchain, all pieces of information(blocks) are linked together by codes. Each block in the chain contains several records of transactions, and every time a new transaction or information is added to the blockchain, a record of that transaction is added to every participant’s ledger.
The new block contains some information from the previous block, firmly securing the blockchain and ensuring that no information can be tampered with.
Here are some of the key features of the blockchain:
Decentralized: Operates on a decentralized network of protocols that do not require a third party for a transaction to be performed.
Transparent: On-chain transactions can be transparently viewed using the blockchain explorer which allows anyone to see live transactions
Distributed: The blockchain is a distributed digital record of transactions that is spread out across the nodes on the chain. No one computer holds all the records.
Cryptographically Secured: Cryptography is at the heart of blockchain technology. The codes and protocols used ensure that information is kept secure and not easily hacked. Blockchain Technology is relatively safe, as far as you do all the right things.
How Does Cryptocurrency Work?
Cryptocurrencies are digital currencies not controlled by a Central government but operate using a decentralized technology called Blockchain.
When you send cryptocurrency to someone else, the transaction is broadcasted to the network and verified by these computers. It’s then recorded on a digital ledger, the blockchain.
This ledger is maintained by a network of computers around the world, and each transaction is verified by these computers to ensure it’s legitimate. Once the transaction is confirmed, it’s added to the blockchain and cannot be reversed.
Cryptocurrencies are held and stored in a wallet. The wallet can be either hot or cold. Hot wallets are connected to the internet while cold wallets are kept offline.
Wallets can be custodial and non-custodial. In custodial wallets, a third party like a centralized exchange take custody of the wallets’ private keys.
While a non-custodial wallet, users have full responsibility for their private keys with absolute control.
Cryptocurrencies are traded on an exchange, a digital platform for buying and selling cryptocurrencies. For example, if you want to exchange your $100 worth of Bitcoin for a Dodge coin, you can do so using an exchange.
Here are some exchanges you can signup and get started with:
Like crypto wallets, exchanges can be centralized or decentralized. On centralized exchanges, like the ones listed above, the exchange holds the private keys and has access to your funds. While on a decentralized exchange, you own the private keys to your wallet.
HOW DO PEOPLE MAKE MONEY FROM CRYPTO?
Like any other business, making money from cryptocurrency is a process that requires proper research, time, and risk management.
Basically, people make money from cryptocurrency by doing these things:
Investing
Cryptocurrency investors are long-term gain seekers. Investing in Cryptocurrency requires one to hold crypto for the long term. Long-term could be anything from 6 months to 5 years or even more.
Investors look out for crypto projects with potential, have good use cases, and hodl those assets or tokens until their prices appreciate over a long period.
Early investors of Bitcoin probably bought Bitcoin for less than a dollar. And, $1 invested in Bitcoin in 2009 would have yielded over $8.9M ROI at the end of the decade.
If you need a head-start on investing, then you should be following the Smart Investor.
Trading
While investing looks at the long-term gain for hodling their crypto assets, trading, on the other hand, is a short-term way of making profits from buying and selling cryptocurrencies. It can be spot or futures trading, done on an exchange.
Traders make use of Technical and Fundamental Analysis to determine when to buy or sell cryptocurrencies.
Mining
Cryptocurrency mining is the process by which transactions between users are verified and added to the blockchain public ledger. It is also a way to generate new cryptocurrency by solving very complex computer problems.
Cryptocurrency Mining is done based on a consensus algorithm called “proof of work”. The miner then is rewarded in a cryptocurrency, Bitcoin for instance, for using his computing power to solve cryptographic equations.
Staking
Staking is an alternative to mining as a medium of transaction validation on the blockchain. It involves locking some amount of cryptocurrency to participate in the validation process known as proof of stake to receive rewards. Participants are then rewarded with tokens based on their contribution to the pool.
Crypto Jobs
It is no surprise that the crypto and blockchain industry has paved way for job opportunities — both technical and non-technical roles.
There is a high demand for skilled individuals to fit in roles such as blockchain and web development, UI/UX, product development, marketing, community management, graphics design, crypto coaching, etc. Anyone fit for these roles, can get a job and be paid heavily.
Here are a few sites to look for crypto jobs:
- crypto.jobs/
- Cryptojobslist.com
- Cryptocurrencyjobs.co
- Coinality.com
NARRATIVES IN CRYPTO
The cryptocurrency market is largely controlled by narratives otherwise known as trends. These narratives control how money flows in and out of the market.
In 2020 we had the Defi boom that spans into 2021, in 2021 we saw a shift in the narrative to NFTs, Metaverse, and GameFi, and in 2022 we saw a new narrative in MoveToEarn and Perp DEX.
In all of these narratives, one thing is clear, early adopters make the most money off the market before the mainstream adopters.
Decentralized Finance (Defi)
Decentralized Finance is simply financial services on a blockchain. This excludes financial institutions (banks, brokers) as a mediator.
It includes all financial services such as savings, loans via a lending platform, mortgages, dex trading, etc.
DeFi projects are based on smart contracts and are mostly built on the Ethereum protocol. They have decentralized autonomous organizations (DAOs) consisting of many people who decide on the guidelines of the financial services instead of one person alone.
DeFi is a very hot blockchain technology trend. The Total Value Locked of all protocols in Defi peaked at over $230 Billion in 2021.
Following the FTX saga of 2022, Faith in CEX was greatly sabotaged leading to greater participation in decentralized finance, especially DEXes. In 2023 and beyond Defi is still a very promising narrative to look into. A lot of VC money has been invested in Defi in the past months.
Non-Fungible Tokens (NFTs)
NFTs are digital representations of things such as artworks, pictures, tweets, or anything at all.
They are created on a blockchain and can be bought or sold, with the transfer of ownership managed solely on the blockchain.
NFTs had been around since 2014 but boomed in 2021 raking over more than $10 billion in valuation as it grew from $250 million which it was worth around 2020.
Watch my Youtube Video on what are NFTs.
GameFi
GameFi means Gaming and Decentralised Finance. It is an incorporation of gaming with decentralized finance.
It is an evolution from the conventional gaming format of investing money (pay-to-win) to playing games and for an experience. Now you can play-to-earn and still get the best experience.
GameFi is a booming trend in the world of blockchain. Players would need crypto wallets like MetaMask to connect and marketplaces or exchanges offered by DeFi to transform their earnings into actual money.
Metaverse and NFTs are also integrated into the world of GameFi, allowing users to mint NFTs, sell their gaming collectibles, and enjoy the virtual experience of the metaverse.
Metaverse
The metaverse is simply a virtual universe. It is a digital world that has many features of the real world, and where anyone can interact anytime without boundaries.
In the metaverse, you can create a digital avatar and be anything you want, as there are no rules or boundaries.
The metaverse has many possibilities and has attracted huge investments from key personalities such as Mark Zuckerberg, the CEO of Facebook, who has keyed into the future of the metaverse for social media.
Every day, new innovations on how to improve the metaverse experience come up. Virtual Lands can be bought and sold on the metaverse.
There are virtual classrooms, NFT marketplaces, virtual e-commerce stores, and virtual events on the metaverse. Boson Protocol is launching a commerce toolkit that will enable anyone to easily sell physical things as NFTs within the metaverse with a simple click and drop.
If you found this article helpful, give me a clap and tell me how you feel about this guide. Also, let me know what area(s) needs to be addressed.
If you’d love to give a tip, USDT(TRC20): TNUxCa9WcNjuKyP1q7KCJQWasrssBAa97K
Follow Me on Twitter: @ojhayfunds | LinkedIn: John Okoi
Instagram: @johnokoi.eth
