Hi, I have been thinking a lot lately about all the information I had to search for when I was a beginner in the blockhain and cryptocurrency world.
So I decided to write a short beginners guide to help out all the new people in this amazing world.
What is blockchain
A blockchain is a distributed database where each node automatically verifies changes and additions made to any of the other nodes.
The original blockchain is the database of the Bitcoin. Since the bitcoin was introduced in 2009, a number of alternative blockchains have been published.
A block contains a set of transactions as well as time stamp and hash that ensure that the block can not be changed without it being detected.
The next block contains link to the previous and its hash. Each block is replicated to all nodes in a network so that each node contains the entire accounting book.
None are original. Therefore, no trusted third party is in charge of the financial transactions.
Exchanges
When you want to buy or exchange coins, you will need to create an account on exchanges. Exchanges let you buy or trade coins.
To find a list over exchanges you can follow this link: https://coinmarketcap.com/exchanges/volume/24-hour/
Wallet
A wallet in terms of cryptocurrencies is a digital wallet where you can store your coins and tokens. When you buy in example Bitcoin, it will be stored in a wallet.
The wallet address consists of an encrypted address made by numbers and letters. Every wallet consists of a public key and a private key.
Public key is the address you share with other people or exchanges when you want to deposit coins into the wallet. You will also need to know the receivers public key of you want to send some of your coins to them.
Private key is your secret key. You should never share this key with anyone as it serves as a pin code does to your VISA card.
When you store your coins on exchanges you will rarely know the private key. But if you store your coins in a personal wallet you will have both a public and private key.
Storing your coins privately is much more secure than storing it on an exchange.
You can use Hardware wallets, desktop wallets, online wallets, smartphone wallets, and paper wallets.
The safest way to store them is to use a hardware wallet like Trezor, Ledger, or Keep Key.
Altcoins and tokens
Altcoins are know as alternative coins and are usually referred to as coins or altcoins. The term for both coins and tokens are referred to as cryptocurrencies.
The main difference between altcoins and tokens is in their structure.
Blockchain projects with their own blockchain is referred to as coins, while tokens are a representation of a particular asset or utility, that usually resides on top of another blockchain.
Tokens can represent basically any assets that are fungible and tradeable, from commodities to loyalty points to even other cryptocurrencies!
Circulating supply and total supply
How many coins that are available in the market is know as circulating supply. Total supply is the amount that are created, but not circulating.
It usually is because a lot of the supply are locked for a specific period after the coins or tokens has been released.
Market cap
The market cap shows the total value of a coin or token. It is the current price multiplied with the circulating supply.
You can find a list of the market cap for the different coins and tokens here: https://coinmarketcap.com/
ICO
When new coins are being launched they usually host an ICO before it hits the exchanges. ICO means Initial Coin Offering and is a way to raise funds for the project.
Investors can buy a coin on a fixed price and get in early before the coin or token is listed on any exchanges. ICO is also known as a token sale.
A lot of this token sales also has phases with private sales and pre-sales before the ICO starts.
Soft cap and hard cap
The soft cap is the minimum goal the project needs to raise to reach their goals. If not the soft cap is met, the ICO is usually canceled and all investments are refunded.
The hard cap is the maximum the project needs to raise to reach all of their goals. When the hard cap is met, the ICO has finished and no one else will be able to buy before it hits the exchanges.
Fork
When a single cryptocurrency splits in two it's called a hard fork. It occurs when a cryptocurrency’s existing code is changed, resulting in both an old and new version.
A soft fork is the same thing, but the idea is that only one blockchain will remain valid as users adopt the update.
Both fork types will create a split, but a hard fork is meant to create two blockchains and a soft fork is meant to result in one.
Bounty
When a project is launching an ICO they often releases a bounty at the same time. The bounty campaign rewards people with tokens from a separate pool for helping them spread the word.
The bounty participants can help writing blog articles, share tweets about the project, put their signature on their bitcoin talk profile etc. When the ICO is over you will receive your tokens.
Airdrop
When a new project launches its own coin/token, it needs some advertising and support from potential investors. Airdrop is a marketing strategy used by the project to spread awareness in a cheap way.
Airdrop is free distribution of that coin/token to those who filled their forms and completed the given requirements to get airdropped free tokens.
The airdrop will be sent directly to your wallet.
Expressions
HODL
The expression Hodl was created when a guy a few years ago misspelled hold. Now it means Hold On Dear Life and is usually used when you need to stick to your coins when it goes through rough times or the cryptocurrency market crashes.
FOMO
This expression mean Fear Of Missing Out, and is usually used when a coin pumps / gains a lot of value in short time and you don't want to miss out on the chance to get decent profits.
If I missed something, just comment below and I'll update my beginners guide.
