Hi all! This is going to be a VERY long post, I did my best to explain the things I struggled with at the beginning of my Crypto journey. I am not an expert by any means, but I feel I can provide valuable information to those newer than me who are trying to get started but are overwhelmed by the amount of information on the internet.
I also have a Crypto/Finance Youtube Channel and the text below is the transcript of my video. If you will gain some useful knowledge and have some time, I would really appreciate if you’d take a look. 
TOPICS I COVER IN THIS POST:
- Cryptocurrency
- Centralized vs Decentralized
- Distributed Ledger
- Blockchain
- Satoshi
- Bitcoin
- White Paper
- Proof of Work
- Mining
- Proof of Stake
- Ethereum
- Smart Contracts
- Coin vs Token
- Tokenomics
- Exchanges
- Wallets
- Mnemonic Phrases
- Types of Crypto
- DeFi
- DEXs
- Lending and Borrowing DAPPs
1. Cryptocurrency
Let’s start from ground zero: cryptocurrencies.
Everyone has heard of this term, but few know what it means. It derives from two words: cryptography and currency. Cryptography is at the basis of all cryptocurrencies as all of them depend on it to secure transaction records, to control the creation of additional coins, to verify the transfer of coins, and most importantly, to make them decentralized.
Secondly, they’re called currency because well, cryptos are a currency… for the most part.
Now, a cryptocurrency is a form of digital asset, so online, based on a network that is distributed across a vast number of computers, and they are based on something referred to as a distributed ledger, or, more specifically, blockchain technology.
2. Centralized and Decentralized
The difference between centralized and decentralized is that in a centralized system, as the name suggests, the power and control are in the hands of a central authority, usually a very small and limited group of individuals, such as the owner of a business, or the director of a bank, whereas a decentralized system is controlled by everyone who partakes in that system. In the case of crypto, it can be you, me, and everyone else.
The main point of cryptocurrencies is that they are decentralized, which contrasts with traditional monetary payment systems such as banks and financial institutions, which are heavily centralized.
3. Distributed Ledger
A distributed ledger is a PUBLIC decentralized database that is shared and synchronized by multiple people who have equal access to all the information shared across that network and can own an identical copy of it. Nobody is cut out, and everyone who wishes to partake in it can do so.
One of the types of these distributed ledger databases is none other than blockchain, which is what cryptocurrencies are fundamentally based on.
4. Blockchain
A blockchain is a database that is shared among the participants, also called computers or nodes, of a network, and it stores information digitally. They are best known for their crucial role in cryptocurrency systems for maintaining a secured and decentralized record of transactions.
This technology guarantees the security of data stored in it without the need for a trusted third party. You don’t see a bank’s internal transactions; you don’t see a company’s financial statements, but you see each Bitcoin user’s balance and transactions.
A blockchain collects information together in groups, known as blocks, that hold sets of information together. These digital blocks have certain storage capacities, for example, each Bitcoin block is 1MB and can contain on average 2500 transactions.
When a block is filled and completed, it is linked to the previous completed block, forming a chain of blocks containing data, known as a blockchain.
5. Satoshi
This brings us to Bitcoin, created in January 2009 by the pseudonymous Satoshi Nakamoto. The true identity of Satoshi remains unknown, leading to speculation that they may be a group rather than one individual. Satoshi had a strong dislike for banks and the powerful people controlling financial systems, as seen during events like the 2008 housing crash.
Satoshi is said to own close to 1 million Bitcoins, potentially placing him at a net worth of around 40 billion dollars today—if he is still alive.
6. White Paper
Satoshi published the Bitcoin white paper in October 2008. A white paper is a document released by a crypto project’s funders. It gives technical information about a project and its roadmap. Satoshi’s vision for Bitcoin was to allow direct online payments without going through financial institutions.
7. Consensus Mechanism
The consensus mechanism helps nodes in a blockchain reach agreement about the validity of transactions. This is crucial in preventing malicious attacks, such as the double spending problem, and ensuring that everyone agrees on transaction legitimacy.
8. Proof of Work
Proof of Work (PoW) requires network participants to spend computational power to solve complex mathematical equations, also known as mining. This prevents manipulation of the system.
When Bob sends Alice $10 in Bitcoin, a code, or hash, is created and recorded in a block with other transactions. If Bob tried to alter the transaction, the block’s hash would change, invalidating subsequent blocks and requiring control over more than 51% of network power to manipulate the blockchain.
9. Mining
Mining allows new coins to enter circulation and confirms new transactions. It requires participants to use powerful mining hardware, called ASICs, to solve complex equations. Whoever solves it first creates a new block and is rewarded with new coins. Mining consumes extensive electricity and resources, making solo mining impractical for most small investors.
10. Proof of Stake
In contrast, Proof of Stake (PoS) involves participants locking their coins as collateral to become validators for transactions. It consumes significantly less energy and resources compared to PoW, but critics argue it rewards wealthier individuals since they are more likely to be chosen to validate blocks.
11. Ethereum
Ethereum is the second largest cryptocurrency behind Bitcoin, featuring smart contracts, a technology that allows various applications to be built on its blockchain.
12. Smart Contracts
These are automated programs that operate on the Ethereum blockchain, allowing users to build various applications. They are fully controlled by code and cannot be altered once deployed.
13. Coin vs Token
A coin is native to its own blockchain (e.g., Bitcoin), while a token is created on an existing blockchain (e.g., Shiba Inu on Ethereum).
14. Tokenomics
Tokenomics refers to the supply and economic factors of cryptocurrencies, which include:
- Maximum Supply
- Total Supply
- Circulating Supply
- Market Cap
15. Exchanges
Cryptocurrencies are typically bought on centralized exchanges that serve as intermediaries. Exchanges charge small commissions on trades and list various cryptocurrencies.
16. Wallets
After purchasing crypto, users must choose how to store it safely. There are two types of wallets: Custodial and Non-Custodial.
- Custodial Wallets store users’ assets on exchanges. While convenient, they can be risky due to hacking incidents.
- Non-Custodial Wallets provide users with more control over their assets but require careful management of security, including mnemonic phrases and hardware wallets.
17. Mnemonic Phrases
When creating a wallet, users receive a mnemonic phrase that acts as a password to access their crypto. Losing this phrase can result in permanent loss of access to funds, stressing the importance of securely storing it.
18. Types of Cryptocurrencies
Common types of cryptocurrencies include Store of Values (e.g. Bitcoin), Smart Contracts (e.g. Ethereum), Stablecoins (e.g. USDT), Payments (e.g. Litecoin), Privacy coins (e.g. Monero), and Sh*tcoins (e.g. Dogecoin).
19. DeFi
Decentralized Finance (DeFi) consists of financial services built on smart contracts, allowing for lending, borrowing, and trading without intermediaries. Decentralized exchanges enable anonymous trading of cryptocurrencies, although they often come with high transaction fees.
20. Conclusion
If you had the patience to read through these ~5500 words, thank you so much and I hope you gained some value!
