Crypto for Beginners

Cryptocurrency — also known as crypto, digital assets, tokens, or coins — is a form of online money. Although you may already be familiar with names like Bitcoin and Solana, there are over 20,000 different cryptocurrencies, all with different uses. Some crypto is good for payments, others are good for savings, while others have proven excellent investments.

Over the past fifteen years, cryptocurrency has become the fastest growing type of investment globally, and is emerging as an important part of the financial world. In fact, it’s estimated that over 450 million people own crypto today. 

Crypto offers way for people to send and receive payments to each other, no matter where they are in the world. Instead of using physical cash, it's all done online. You can use crypto to buy goods and services online. And people invest in cryptocurrencies as they would assets like stocks or precious metals, or any kind of investment. Simply stated: Crypto is the digital evolution of money and financial services, and it does it all without the need for governments and banks. 

The most widely known cryptocurrency is Bitcoin. Since its launch in 2009, Bitcoin – also referred to by its ticker BTC – has become the 10th largest currency in the world by total market value, just above the Russian Ruble and the Mexican Peso. Following Bitcoin, the most popular cryptocurrencies include Ethereum and Solana, which are at the forefront of a new generation of tech known as web3.

Although crypto may be new and exciting, it doesn’t have to be complicated. We’ll walk you through everything you need to know...

Although it may seem like new, crypto is the result of decades of progress in computer science and mathematical research. Cryptocurrency gets its name because it uses advanced cryptography (a kind of ultra secure coding) to safely store and transmit assets between users, to verify transactions, and to ensure privacy and security over a publicly available record of transactions known as a blockchain. 

These blockchain ledgers are maintained by digital networks — like the internet you’re using right now — that rely on a distributed circuit of computers all over the world that are responsible for minting crypto assets, executing transactions, and maintaining the public record of everything that happens. The software to participate in blockchain networks is usually free to anyone, so long as they have computer hardware powerful enough to contribute the high computational requirements necessary. 

Blockchain technology is what makes crypto decentralized, meaning it’s not controlled by a single entity like a bank or a government. Blockchain also ensures transparency, as all transactions are publicly logged on its ledgers and can be viewed at any time, while individual user identities are kept private. Blockchains are also immutable, which means once a transaction has completed, it cannot be undone. These characteristics combine to make cryptocurrency free and fair for anyone, anywhere in the world to use.

There are a number of remarkable advantages that make crypto a foundational upgrade on the way money works.

Firstly, blockchain networks are decentralized, which means cryptocurrencies are not controlled by governments or financial institutions. People who hold crypto don’t have to worry about things like currency devaluation, runaway inflation, bank fees, waiting days for wires to complete, or having access to their funds limited or withdrawn. Cryptocurrencies often have much lower transaction fees as compared to traditional financial systems, particularly for international transactions, and transactions happen almost instantly. 

Cryptocurrencies are also accessible to anyone, anywhere in the world, at any time. This offers an unprecedented level of financial inclusion for people from countries with unstable economies or restrictive governments. And because of the advanced cryptography used to secure transactions, cryptocurrency transactions are highly resistant to fraud and error, and can offer high degrees of privacy, appealing to individuals concerned about their financial privacy.

Lastly, many cryptocurrencies are seen as investment opportunities due to their potential for significant returns.

Bitcoin, the first cryptocurrency, was launched in 2009. It’s often referred to as ‘digital gold’ due to its reputation as a long-term investment. Since launch, it has been the best performing asset class in the world, outpacing gold, equities, stocks, and bonds.  

Stablecoins like Tether and USDC are pegged to the price of $1 US Dollar, and are very useful for transferring funds between users or currencies. This stability makes stablecoins suitable for use for payments online to stores or to people, and for savings as a store of value. Stablecoins aim to combine the advantages of cryptocurrencies, such as fast and borderless transactions, with the stability of traditional fiat currency. 

Tokens represent an evolution of digital assets beyond Bitcoin, and are utilized by blockchain networks that offer more advanced capabilities like smart contracts and decentralized applications (also known as dapps) in the rapidly emerging web3 sector. For example, the Ethereum network uses its native token ETH to pay for transaction fees and computational services on the platform. The Solana network uses SOL for its platform transactions, and to fuel key network functions. You can think of tokens as digital assets designed to perform functions beyond being an inert asset. That’s why they’re often referred to as ‘programmable money.’ 

Even with tens of thousands of cryptocurrencies already in circulation, new use cases and options emerge every day.

Now that you have a basic understanding of what cryptocurrency is, it’s time to discuss how you can engage with it. Cryptocurrency is held in digital wallets that come in many forms. Wallets like Solflare are applications that enable you to store and exchange your assets directly from your wallet. 

Crypto is most often traded on exchanges. There are two main types of exchanges. Centralized exchanges like Coinbase and Kraken provide platforms for holding your assets and markets where you can buy and sell assets. Centralized exchanges are custodial, which means they hold your assets in their wallets, and manage your trades for you, while charging a fee for their services.  

On decentralized exchanges — often referred to as DEXes — you can trade your assets directly with other people without the aid of a custodial service. You can think of a DEX as more of an apparatus than a service, and they are often significantly cheaper, while requiring a higher degree of technological competence. DEXs provide the foundation for decentralized finance – known primarily as DeFi – which is an entire industry of innovative financial products and services that are native to cryptocurrency. 

While it’s clear that cryptocurrency is a revolutionary asset and technology, it’s still in its early days, and there are risks involved. Cryptocurrencies can be volatile. Like with any online activity, there’s also the risk of scams like phishing. It’s advisable to take on a fair amount of research to understand how each cryptocurrency and blockchain platform works before engaging. However, after working your way through our curriculum of guides, you’ll be well prepared to participate in this exciting new asset class.

Setting up a Solflare wallet is simple and quick. Here’s how:

• Open a browser and head to Solflare.com.
• From there, click Access Wallet and click I Need A New Wallet.
• Write down your Recovery Phrase and store it in a safe location. Your recovery phrase is like an ultra-secure password that you can use to access your wallet from anywhere.
• Once you have done so, click I Saved My Recovery Phrase. From there, type in your Recovery Phrase to ensure it’s secure, and click Continue.

 

Congratulations! Now you have a digital crypto wallet. That’s all it takes to get online with Solana. 

Now it’s time to learn what you can do on Solana.