To enter the world of cryptocurrency, you first need to understand two basic concepts: cryptocurrency itself, and the underlying technology that supports it—blockchain. Don’t worry, we won’t use complex technical jargon, just simple analogies to help you get it instantly.
Imagine the US dollars, Euros, or Yen in your wallet. These are all issued and managed by governments (central banks), making them ‘centralized’ fiat currencies. You can touch and see them, and transaction records are controlled by banks.
On the other hand, Cryptocurrency, like Bitcoin (BTC) or Ethereum (ETH), is a digital asset that exists entirely online. Its biggest difference is ‘decentralization.’
In simple terms, if you buy something with fiat currency, the bank records the transaction for you. If you use cryptocurrency, tens of thousands of computers around the world record it together, making it public, transparent, and difficult to tamper with.
💡 CashbackIsland Tip: Think of cryptocurrency as a kind of ‘digital gold.’ Like gold, it has a limited supply (e.g., Bitcoin’s total supply is only 21 million), is easily divisible, but is much easier to carry and transfer globally.
If cryptocurrency is the train, then Blockchain is the track it runs on. It is a distributed public ledger technology.
Imagine an entire village sharing a single ledger. Any transaction (e.g., A transfers 1 Bitcoin to B) is recorded and broadcast to everyone. This record is packaged into a ‘block’ and then linked one after another like a ‘chain,’ complete with a timestamp.
The security of this structure is reflected in:
Before you start trading, you must familiarize yourself with these terms:
With the theory covered, it’s time for the exciting practical part! Follow these four steps to easily complete your first-ever cryptocurrency transaction.
Exchanges are our gateway to the crypto world, so choosing a secure, reliable, and user-friendly platform is crucial. For beginners, consider the following factors:
Once you’ve chosen an exchange, the registration process is generally similar. You’ll need to provide an email address or phone number and set a strong password. To prevent money laundering and financial crime, all legitimate exchanges require users to complete identity verification (KYC, Know Your Customer).
The KYC process usually requires you to upload:
This process is a necessary step to secure your account. Please be sure to use your real information for verification. The review time can range from a few minutes to a few days.
After your account is verified, you need to deposit funds into the exchange to start buying crypto. This step is called “funding” or “depositing.” Common methods include:
Once your funds have arrived, congratulations, you’re just one step away! You can now go to the exchange’s “Trade” or “Market” page, find the coin you want to buy, such as the BTC/USDT pair (which means using USDT to buy BTC).
You will see two main types of orders:
Enter the amount you want to buy, click “Buy,” and once the order is filled, you will see your very first cryptocurrency in your assets page!
There are thousands of coins in the crypto market, but for beginners, it’s safest to start with the largest and most established projects. Here are five of the most representative cryptocurrencies on the market. You can check the latest rankings and information on authoritative websites like CoinMarketCap.
As the first-ever cryptocurrency, Bitcoin’s position is unshakable. It is hailed as “digital gold” and has properties of a store of value and an inflation hedge. With its fixed supply of 21 million coins, its scarcity makes it a top choice for many institutions and long-term investors. If you plan to invest in cryptocurrency for the long term, BTC is an essential part of your portfolio.
If Bitcoin is digital gold, then Ethereum is a “decentralized world computer.” It pioneered smart contracts, allowing developers to build various decentralized applications (DApps) on its blockchain, covering popular fields like DeFi (Decentralized Finance), NFTs, and GameFi. Ether (ETH) is the fuel that powers this ecosystem.
USDT is a stablecoin pegged 1:1 to the US dollar. In the highly volatile crypto market, many investors convert their profits into USDT to lock in value or hold USDT as a safe haven during uncertain times. It acts as the US dollar of the crypto world and is the most important bridge between fiat and cryptocurrencies.
BNB was initially issued by the world’s largest exchange, Binance, as a utility token to get discounts on trading fees. With the development of the BNB Smart Chain (BSC), BNB has become the core asset that drives its vast ecosystem, with wide-ranging applications including paying for on-chain transaction fees (Gas) and participating in new project launches.
Solana is a high-performance public blockchain known for its “high speed and low cost,” aiming to solve the congestion and high fee issues of the Ethereum network. It can process tens of thousands of transactions per second (TPS), far exceeding other mainstream blockchains. This has attracted a large number of developers and projects, making it one of the so-called “Ethereum killers” and a highly watched project in recent years.
The high return potential of cryptocurrency attracts countless people, but high returns often come with high risks. Before investing your hard-earned money, be sure to understand and evaluate the following three major risks.
This is the most significant characteristic of cryptocurrency. It’s common for prices to rise or fall by more than 10% in a single day, and they can even be cut in half during extreme market conditions. This sharp volatility can bring amazing profits, but also lead to huge losses. Therefore, only invest with money you can afford to lose. Never borrow money or use funds necessary for daily living.
The decentralized world means “you are responsible for your assets.” Common risks include:
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As an emerging field, the regulatory attitudes and laws regarding cryptocurrency are constantly changing worldwide. The release of a new policy, such as stricter regulations or banning certain trading models, can have a short-term impact on market prices. Investors need to stay informed about relevant regulatory developments.
Congratulations! By reading this far, you have transformed from a complete novice to a beginner with a systematic understanding of cryptocurrency. From the basic principles of crypto and blockchain, the four-step guide to opening an account and trading, to the introduction of major coins and warnings about potential risks, you have now mastered the complete map for entering this new world.
When investing in cryptocurrency, the biggest mistakes are having partial knowledge and blindly following trends. Remember, knowledge is your best shield. Before making any investment decision, be sure to do your own research (DYOR), and start with a small amount of capital to experience the market’s pulse firsthand.
The world of cryptocurrency is full of opportunities and challenges. It is not just an investment tool but a financial technology revolution in progress. Now, start your crypto journey by choosing a trustworthy exchange!
CashbackIsland continuously updates trading educational resources. Traders can visit the “CashbackIsland Guides” section to master more financial knowledge and investment skills.
Not at all! This is a common misconception. Although one Bitcoin costs tens of thousands of dollars, you can buy fractional units, such as 0.001 BTC. Many exchanges have minimum transaction amounts of just a few dollars, equivalent to the price of a cup of coffee. It is recommended that beginners start with small, periodic investments, such as a dollar-cost averaging plan of $50-$100 per month, to gradually accumulate assets and become familiar with the market.
After purchase, your cryptocurrency is stored in your “wallet.” For beginners, the easiest way is to keep it in your exchange account (which is a type of hot wallet). The advantage is that it’s convenient for trading at any time. However, if your assets grow to a significant amount and you plan to hold them long-term, it’s recommended to learn how to use a cold wallet and transfer your assets for higher security.
This depends on the tax laws of your country or region. In the United States, for example, cryptocurrency is treated as property for tax purposes, and you must report capital gains or losses. In many other countries, regulations are still evolving. It is advisable to consult with a professional accountant and stay updated on the latest regulations from your local tax authorities.
Yes. Besides buying low and selling high, there are several other ways to earn returns in crypto. For example, “Staking,” which is similar to earning interest in a bank savings account; and “Liquidity Mining,” where you provide funds to a decentralized exchange to earn a share of the transaction fees. These methods often involve more complex operations and higher risks, so it is recommended to fully understand them before trying.
“Trading financial derivatives involves high risks and may result in the loss of funds. The content of this article is for informational purposes only and does not constitute any investment advice. Please make decisions carefully based on your personal financial situation. CashbackIsland assumes no responsibility for any trading derivatives.”
