Step-by-step instructions for working with cryptocurrency for beginners, a guide with examples and explanations

It has already been 13 years since the appearance of Bitcoin, and even those who initially treated it as a frivolous project are forced to admit: cryptocurrency is gradually entering our lives more and more. The editors of Incryptico.com decided to compile a small guide for working with crypto for those who have just entered this field.

In this article, we will consider such topical issues as how cryptocurrency differs from ordinary money and why it deserves attention, how to get crypto-assets with investments and without investments, how to send and receive it, sell it for fiat money.

What is cryptocurrency and how does it differ from fiat money

Cryptocurrency is an electronic means of payment. It is software code and has no physical counterpart in real life. Cryptocurrency is not backed by anything, just like fiat money, but otherwise it differs significantly from them:

  • Emission . Traditional banknotes are issued by the central banks of countries. At the same time, the output is not limited, which inevitably leads to inflation later on. Cryptocurrency (most types) has a limited emission, due to which it does not depreciate, but on the contrary, increases in price over time. And it is issued not by a single center, but by all willing ones.
  • Release form . Fiat can be presented in paper, metal, plastic, electronic form. Cryptocurrencies exist only on the Internet. This is not a big loss, if you consider that today almost all payments can be made online, and more and more services and stores are connecting the possibility of cryptocurrency payments.
  • Management . Fiat is fully controlled by the government. Its release and distribution are regulated by law, a simple person cannot influence this process. And digital blockchain systems are usually managed by the community, all changes to it are made only after voting by network members. There is no definite center in whose hands the system is.
  • Commissions and speed . The costs of transferring funds abroad are much lower than those of banks. In addition, payments are made faster.
  • Anonymity . The factor that especially worries states and at the same time attracts users to cryptocurrencies. Here, it is difficult to determine the ownership of any transaction or wallet to a specific individual, although it cannot be said that it is impossible.

Of course, it was not without its shortcomings. Cryptocurrencies have very high volatility , i.e. exchange rate instability. And so far there are very few places where you can freely pay with crypto – this is due to government regulation, since few countries are ready to fully recognize digital money as an official means of payment. El Salvador became the first such country .

Promising cryptocurrencies: TOP-10 rating

As of June 2022, the most popular cryptocurrencies by market capitalization are:

  • Bitcoin , $401,441,616,084
  • Ethereum , $ 139,364,659,443
  • Tezer, $66,991,502,127
  • USDC, 55 831 175 016 $
  • BNB, $37,603,612,051
  • Ripple, $17,692,120,272
  • Binance USD, 17 414 150 900 $
  • Cardano, $16,568,679,231
  • Saltworks, $13,183,934,256
  • DOT, $8,895,169,238

Market capitalization is an indicator that reflects the total value of coins currently owned by cryptocurrency users. Along with the exchange rate, it is considered the main parameter from which conclusions can be drawn about the degree of recognition of a particular currency.

Where to store cryptocurrency? Instructions for choosing a wallet

Cryptocurrency itself is not stored anywhere, you need to take this expression in a figurative sense. A pair of encrypted keys is used to access and manage the tools: private and public. Cryptocurrency custody is essentially about keeping those keys safe, and the wallet balance is the difference between the amount of transactions received and sent.

To achieve these goals, there are various programs and methods:

Websites (example Blockchain.com, Guarda). The method is not among the safest due to the high probability of phishing and hacker attacks. Instead, it is very convenient to use – it is considered to be the most functional.

Desktop wallet (example Bitcoin Core, Exodus, Jaxx, Electrum). The private key is stored on the user’s device, so you can use your money only from that device. If the system crashes or the hardware breaks, access is restored using a special passphrase or a backup copy.

Mobile wallet (example – Trust Wallet, Token Pocket, Trustee). Convenient for quick money transfers using a smartphone or tablet. Keys are as secure as desktop wallets because they are stored on the device and not on the server.

Browser extensions (eg Metamask, Binance Chain Wallet, Coinbase Wallet). The best option for working with decentralized finance, DeFi. Allows you to easily connect to sites that support decentralized protocols – DEX exchanges, crypto-credit platforms, blockchain games.

Hardware wallet . This is a physical device in the form of a flash drive that is connected to a computer. While the “flash drive” is turned off, it does not connect to the Internet in any way, and the funds are completely safe. Examples: Ledger, Trezor, Keepkey.

Paper wallet . Just a pair of keys printed on paper. The most secure method against hacker attacks is suitable for long-term investment when you are not going to use the money often. The disadvantage is that the paper can be damaged, for example, burned, and then access to the means cannot be restored. Sites for generating private keys: walletgenerator.net; bitaddress.org, xrppaperwallet.com, etc. Some software crypto wallets also provide the ability to create and print a paper wallet.

The type of wallets that do not store keys on servers is called non-custodial. This is the best option, since each user should ideally be responsible for their own funds, and not transfer it to a centralized repository. However, there is a caveat: attacks on the device are not excluded, so you need to ensure its maximum security, install an antivirus, do not download suspicious programs, etc.

The type of wallets that do not store keys on servers is called non-custodial. This is the best option, since each user should ideally be responsible for their own funds, and not transfer it to a centralized repository. However, there is a caveat: attacks on the device are not excluded, so you need to ensure its maximum security, install an antivirus, do not download suspicious programs, etc.

What is a private key and address

Private Key (closed, private key) is a value of letters and numbers that serves to confirm the user’s right to dispose of coins. The keys are stored in special files on the device where the wallet is installed or on the server of the company providing the wallet. Private keys are closely related to public keys, they are also called addresses.

A private key is confidential information that should be stored as far as possible from possible interference by third parties. Serves to enter the wallet and get the ability to manage funds. Public key – public information that can be compared to a postal address or a card number; it must be known to the person who wants to transfer money to you.

Public key (public, open key) is generated on the basis of private. However, it is cryptographically arranged in such a way that knowing the public key, it is not possible to restore the value of the Private Key (this technology is related to one-way encryption). Example

Private (at the bottom of the picture) and public (at the top) key of the Bitcoin cryptocurrency in different formats:

Private (at the bottom of the picture) and public (at the top) key of the Bitcoin cryptocurrency in different formats:

Where and how to buy cryptocurrency

Let’s move from theory to practical problems – instructions for working with digital money. There are several ways to buy cryptocurrency:

Cryptocurrency exchangers

There are now a lot of exchange services that work with crypto. Their essence is no different from fiat-oriented exchangers – the user chooses the direction of exchange, enters details and confirms the operation.

The well-known BestChange service will help you choose an exchanger with the most favorable rates and commissions. Its advantage is also that proven resources get there, so the risk of running into fraudsters is minimal.

Cryptocurrency exchanges

A cryptocurrency exchange is a platform where you can create an account and sell or buy digital money. Many platforms work with fiat, and also provide additional functionality – platforms for conducting IEO sales, numerous charts and tools for trading, means of receiving passive income, etc.

Almost all exchanges require verification of the identity of users who wish to operate daily with larger amounts. For small amounts, verification is often not mandatory.

Popular services:

  • Binance
  • Bybit
  • OK
  • Currency.com
  • Huobi
  • MEX
  • Excellency
  • Kucoin

Crypto wallet

Many wallets, in addition to the storage function, provide the ability to exchange currencies. It is quite fast and convenient, you do not need to register separately on any resources. However, the rate here is often overestimated.

Examples:

  • Matba
  • Trust Wallet
  • Atomic Wallet

P2P sites

Here people trade directly with people. One person posts a buy/sell ad, others respond to it. A kind of OLH for cryptocurrencies, but here the platform acts as a guarantor of the conclusion of the agreement – money from both sides is blocked until both users confirm the fact of the transfer.

The most famous site is LocalBitcoins , which works according to this principle.

Payment systems

There are many electronic payment systems on the Internet that allow you to manage fiat, but later some of them also received functionality for working with crypto. So with their help, you can exchange digital assets very easily and quickly. But you need to take into account that storing cryptocurrency in the payment system is a custodial method, you do not control your keys.

Examples:

  • Payeer
  • AdvCash
  • Capitalist
  • Perfect Money

How to receive or transfer cryptocurrency

Let’s consider the process of receiving and transferring funds using the example of the Atomic Wallet wallet.

Step-by-step instructions on how to get cryptocurrency:

  • Download the wallet from the official website and install it. The service is available as an application both on a PC and on a phone.
  • Select the desired cryptocurrency from the supported ones.
  • Click the Receive button.
  • You will see your current crypto address and the QR code associated with it. Now, to top up, you can copy this address and paste it where the translation is from, and if you are translating from a mobile device, it is more convenient to scan the QR.

The address is generated anew each time to increase privacy.

And now a step-by-step guide to transferring cryptocurrency.

  • This time, instead of Receive, click Send.
  • Insert the address to which you want to transfer the money in the appropriate field.
  • Enter the amount.
  • Pay attention to the possibility of setting the fee (Set Fee). By moving the slider, you can increase the fee you are willing to pay for the transaction. In this case, the translation will be much faster.
  • Click Send and confirm the entered parameters.

Immediately after creation, the transaction is not yet confirmed (however, modern blockchains are able to process the payment in just a few seconds, which cannot be said about BTC or ETH. Next, we will consider how to track the status of the transaction).

How to check the status of a cryptocurrency transaction

Go to https://www.blockchain.com/ru/explorer or another blockchain browser that supports the desired cryptocurrency.

In the search field, insert a public address, a page with transaction data for this address will open.

Multiple confirmations from miners are required for the money to be credited to the account, although many wallets display the balance replenishment immediately. But you can’t use them yet.

If you want to know about the time that the transaction will take, go to https://bitcoinfees.earn.com .

  • Make sure Satoshi per byte is selected in field (1).
  • In column (2), find the value of the commission you set during the translation.
  • Column (3) shows the approximate number of blocks left to be confirmed.
  • Column (4) indicates the approximate time range in minutes for which the transaction will be fully confirmed.

How to earn cryptocurrency

The following guide is for those who want to earn additional income in cryptocurrency.

Investments

To invest money in crypto, and after some time to pay off the investment with a surplus is the goal of investors. Of course, investing is a serious matter, you need to know many different nuances, understand the prospects of one or another currency, be able to analyze the background of the news and be completely sure that the selected asset will sooner or later increase in price.

Given the high volatility of digital currencies, investing is always risky, but often the risk pays off in full.

Mining

Mining is the earning of cryptocurrency for a reward and for supporting the network with the power of your equipment. Miners’ equipment continuously performs calculations, forming blocks of transactions, and each block gives the network a reward.

Today, the effectiveness of mining is in question – the complexity of top cryptocurrencies is high, a lot of money goes to paying for electricity, providing cooling, noise insulation, updating equipment.

But there is also an option for cloud mining: it is renting capacity from large corporations, then the problems listed above disappear, but you will have to give the company a certain percentage for services. Examples: IQMining and other cloud mining sites.

Trading on the stock exchange

Cryptocurrency trading or trading is earning from fluctuations in cryptocurrency rates, which is usually based on the principle of “buy cheaper, sell more expensive.” Professional traders know how to competently analyze even the smallest changes in the position of the crypto market and almost always trade only on the plus side.

Beginners are advised to start with small amounts, carefully study the guides and listen to the advice of experts, but even this does not insure against initial failures. We have already provided a list of quality exchanges above in the article.

Cranes

The case when you don’t need to invest money, but you will have to spend a lot of time. A cryptocurrency faucet is a site that gives out free crypto every few minutes for simple actions like entering a captcha. Earnings from one faucet are literally pennies (thousandths of bitcoin/ether or other cryptocurrency).

Therefore, those who want to make tangible money need to use several faucets in parallel and devote a lot of time to it. Examples: FreeBitcoin, SatoshiHero, FireFaucet.

Airdrop

Airdrop is a free distribution of tokens of new (and sometimes old) cryptocurrencies for the purpose of advertising and increasing audience loyalty. For example, owners of Ethereum wallets can sometimes detect replenishment from an unknown source – this is how developers periodically create information drives.

Conclusion

We hope that the given guide helped you – you will learn the rest of the subtleties of working with cryptocurrencies over time on your own, if the topic really interests you. Let’s highlight the main nuances once again.

First, get a reliable crypto wallet, preferably a non-custodial one, that is, one that allows you to be responsible for the safekeeping of cryptographic keys.

Secondly, also choose only quality services for buying or selling assets. Here we have listed many options and provided links to articles where these issues are discussed in more detail.

Third, invest and trade wisely, using only free money for this, in no case take out loans for these purposes. The crypto market is unpredictable, no one gives guarantees.