What Is Cryptocurrency? A Guide For Beginners

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A round image of the author Ramona Depares

Keen on dipping your toes in the exciting waters of crypto casinos but unsure where to start?

Welcome to cryptocurrency basics, where we explain how to go about buying your first digital currency, how to store it safely, whether to opt for Bitcoin, Ethereum or other alt coins, and more.

We’ve made sure to keep things simple so that by the end of this guide you’ll have reached guru level to understanding cryptocurrency and all you need to do is take the plunge.

How does cryptocurrency work?

The good news is that cryptocurrency basics are very similar to fiat money – that’s traditional dollars and cents to you and me. The main difference is that government doesn’t get to dictate the value of your crypto investment – the market does. Let’s explain how this is possible.

Gold and blue bitcoin on pedestal in nature

Understanding DeFi Platforms

All cryptocurrencies operate on a Decentralized Finance Platform – or DeFi for short. DeFi is important when answering the question ‘what is cryptocurrency’, because it is the one essential component guaranteeing 100% independence from government, traditional banking systems or any other third parties.

DeFi operates using peer-to-peer networks (P2P) and very advanced security protocols to allow two parties to exchange crypto without the need to pay interest, administrative fees, or divulge information to anyone else, thus bringing full independence and anonymity to all crypto trading.

What is a blockchain in cryptocurrency?

In the quest towards understanding cryptocurrency, beginners sometimes confuse the term ‘blockchain’ with DeFi. The two terms don’t mean the same thing. However, they’re very closely related and are both part of cryptocurrency basics.

Put simply, the blockchain is a decentralized system where all transactions are recorded using blocks. Every single action that takes place is recorded on a block and verified through an automated process. The block is then closed. The next block will hold all the information of the new transaction as well as that of the previous block, thus creating a chained link of information – hence, the coining of the word ‘blockchain’.

It would be impossible to understand what is cryptocurrency without knowing the effects of this ledger. The entire security protocol is based on this ‘chaining’ of blocks, which means that once information is recorded it cannot be changed without changing all the other blocks that came before it. In other words, it’s impossible.

When understanding cryptocurrency, beginners sometimes ask how the process is kept anonymous. This is because, although every transaction is recorded via smart contracts and given a unique private key or token, no information about the identities of the parties is exchanged. Essentially, we have an almost foolproof security system that does not rely on exchanging your personal data. This is what forms the very basics of cryptocurrency.

Blockchain vs. cryptocurrency: Are they the same?

When talking about what is cryptocurrency, keep in mind that although many terms may appear to be used interchangeably, in reality they all have specific meanings. Thus, while some may talk about the blockchain and crypto as though it’s the same thing, in reality it’s not.

When understanding cryptocurrency, think of it this way: blockchain is a technology that fulfills the function of a conveyor belt for the actual crypto coins. The value is tied to the cryptocurrency, while the blockchain enables its creation and trading.

Types of cryptocurrency

Your cryptocurrency basics wouldn’t be complete without an overview of the most popular alt coins that are available at the best crypto casinos. Our top recommended sites offer a variety of alternatives to fiat currency, making it easy to start gambling with cryptocurrency for beginners. Let’s take a look at your top options below.

Bitcoin

The first Bitcoin currency appeared in 2009, reputedly created under the pseudonym Satoshi Nakamoto. This was the original digital currency, which is why to this date it is the one that is most commonly sought after, including at Bitcoin casinos. However, it has a limited supply of 21 million coins, which was coded in the original protocol by its creator.

Ethereum

Launched in 2015, Ethereum is considered one of the most influential platforms within the DeFi ecosystem. It introduced the concept of smart contracts and the ability to execute programmable contracts automatically, providing a foundation for a vast range of applications and today remains one of the fundamental areas in understanding cryptocurrency. It is also widely accepted at Ethereum casinos.

Tether

Tether has been in use since 2014 and is arguably the most widely used stablecoin, which is another recurring term when understanding cryptocurrency. This means that it is tied to a fiat currency, in this case the trusty US dollar (USD). Whereas most crypto currencies tend to be volatile in value, this isn’t an issue here, making it a great favorite among those who are mastering crypto basics, with many Tether casinos being available to US players.

Bitcoin Cash

2017 brought with it a hard fork in the creation of Bitcoin, ie, a significant change to blockchain protocol, to use crypto 101 language. The new currency addressed the OG’s scalability issues and transaction speeds, enabling easier transactions. The ease with which Bitcoin cash could be bought even by those who were still understanding cryptocurrency led to the proliferation of Bitcoin Cash casinos.

Other Altcoins

Since the advent of crypto, there have been literally dozens of altcoins born. Some disappear within a few months, but others have stood the test of time and are now enjoying excellent trading value and a marked popularity even at US crypto casinos. These include Dogecoin, Cardano, Litecoin, Monero, Solana and Ripple, among others.

Is cryptocurrency safe?

We’re not gonna lie, there is no ‘yes’ or ‘no’ answer to this, but for the purposes of understanding what is cryptocurrency we’ll answer it as simply and as honestly as we can. If you’re looking for unchangeable value that’s as solid as, say, gold, the mere basics of cryptocurrency will tell you that this is not the road for you. 

However, this is not to say that crypto is not safe. In actual fact, trading in crypto-currency is as safe as trading in other securities. The actual decentralized platforms are extremely safe and very well-protected from hacking thanks to the use of emergent technology such as two-factor authentication and the like. Provided you keep your secure key safe – more about that later – your data and your currencies are virtually a fortress.

Blue safe in high tech environment with a bitcoin logo

Why are cryptocurrencies so volatile?

Crypto currency is, of its essence, volatile. This means that its value can easily go up and down, because it is not dictated by a central government but by actual market crypto trends. Some coins are less volatile than others, and this depends on several things. Bitcoin, for example, is finite – which means there will always be a demand that protects its value.

To use another example, tether owes its lack of volatility to the fact that it’s a stable coin. Major crypto coins like Cardano and Dogecoin are less volatile as they have built a strong market presence that is unlikely to sustain big market damage without recovering. Other coins may be less resilient. Learning these subtle differences is vital to the process of understanding cryptocurrency so as to be able to trade with confidence.

How is cryptocurrency taxed?

This naturally depends on the law in your country, but in the US crypto is treated as capital gains, so it’s subject to tax in the regular way that property is. If you carry out crypto trading, you’ll need to report any profits or losses to the IRS in your annual tax statement. The same applies if you’re being paid in crypto for any services or goods as this is considered taxable income. 

How do you buy cryptocurrency?

Now, this is the part that tends to confound those who are still figuring out what is cryptocurrency. But believe us, there’s no need to. There are various ways you can get your paws on your favorite digital currency, and you don’t even necessarily need to set up accounts on unfamiliar platforms to do so. Let’s do a quick rundown of the easiest ways to buy crypto. 

Cryptocurrency Exchange: This is the most obvious method, especially if you want to take it further than just learning cryptocurrency basics and would like to start trading and investing.  Popular exchanges include Coinbase, Binance, Kraken, and Gemini, and these tend to offer the best rates and excellent security features.

Peer-to-Peer (P2P) Platforms: Crypto trading platforms like LocalBitcoins and Paxful are where buyers and sellers carry out direct transactions with each other. These platforms often provide an escrow service and various payment options, including bank transfers, cash, and online wallets.

Cryptocurrency ATMs: These are slowly mushrooming across the US and will allow you to buy cryptocurrencies with fiat money using cash or debit card. You can locate a crypto ATM near you using online services, but be aware that fees will be higher than online exchanges. It’s pretty much the same as when you’re changing fiat currency using an ATM.

Fintech Platforms: Ewallets like Revolut and PayPal both offer the facility of buying crypto, although it’ll be limited to Bitcoin and a few other mainstays like Bitcoin cash and Tether. The process is extremely simple and doesn’t even necessitate any understanding of what is cryptocurrency but, once again, rates will not be the most favorable.

Other ways to buy crypto: There are several other methods to get your hands on crypto, although these may be more long winded. Crypto faucets, for example, are sites that offer a small amount of crypto for easy tasks or capchas. You can also take part in Airdrops which is when a project gives out free crypto as part of a promotional campaign.

Step-by-step guide to setting up a cryptocurrency exchange account

If you’re serious about mastering more than the cryptocurrency basics, an exchange is the way to go. Here’s how to buy crypto from an exchange, the hassle free way:

  • Step 1: Select a reputable cryptocurrency exchange that offers the currencies you’re after.
  • Step 2: Create an account by providing your email address and completing any necessary KYC (Know Your Customer) verification.
  • Step 3: Deposit funds by linking your bank account or debit card to deposit fiat currency into your exchange account.
  • Step 4: Navigate to the market section of the exchange and choose the crypto you wish to buy.
  • Step 5: Choose between a market order (buy immediately at the current price) or a limit order (set a price at which you want to buy).
  • Step 6: Transfer your new cryptocurrency to a private wallet for enhanced security.
  • Step 7: Monitor your investment by keeping an eye on the market and your investment’s performance, adjusting your strategy as needed.

Comparing hardware vs. software wallets for cryptocurrency

Hardware (cold) wallets and software (hot) wallets serve the crucial function of storing cryptocurrency, but they differ significantly in security, convenience, and accessibility.

  • Cold wallets are physical devices designed to securely store cryptocurrency offline, which makes them immune to online hacking attempts and are thus ideal for long-term storage of large amounts. They can cost more than the alternative, and if you carry out transactions frequently they can be a bit of a pain to access. Ledger and Trezor are two of the most well-known brands.
  • Hot wallets are applications that run on computers or smartphones, which makes them much easier to access but vulnerable to potential hacking and phishing. The upside is that they’re very user-friendly.

Which should you go for? This depends on how often you’ll carry out transactions and on the amount of crypto you plan to buy. If you’re only moving small amounts for crypto gambling, a soft wallet like Coinbase is probably enough for you.

Tips to keep your crypto safe

No matter which crypto storage method you opt for, the tips below will help you protect your wallet.

  • Change your password regularly and use a password manager for strong, unique passwords.
  • Set up two-factor authentication and use biometric options if available.
  • Diversify risk by spreading your cryptocurrency across multiple wallets, keeping day-to-day transactions and long-term investments separate.
    Ignore unsolicited requests for your private key and be alert to phishing attempts, only logging into your exchange through a secure, known site.
  • Don’t share any information about your wallet, especially on social media.
  • Always verify the recipient’s wallet address before transactions to avoid sending funds to a hacker.
  • Install updates automatically so as to keep updated with the latest security measures.
  • Avoid using public Wi-Fi and use a VPN.
  • Monitor your wallet regularly for any unauthorized activity and take immediate action if something seems off.
  • Install a good quality antivirus.

Are cryptocurrencies a good investment?

We’ve already established that in understanding cryptocurrencies we also need to understand that these are essentially volatile. This can make it difficult for cryptocurrency beginners to decide whether it’s worth investing or not.

Value is pushed by supply and demand, so there can be very wide differences from one week to the next, which is the same as any other securities trading. That said, there are some steps that you can take to minimize these risks.

Guy sitting at computer buying bitcoin

5 tips to invest in cryptocurrency safely

  1. Do your own research (DYOR): Before investing, thoroughly research the cryptocurrency you’re interested in.
  2. Use reputable exchanges and wallets: Look for platforms with strong security measures, positive user reviews, and a track record of reliability.
  3. Avoid ICOs (Initial Coin Offerings) if their creators have no tangible track record to back them.
  4. Diversify your investments: Don’t put all your funds into one cryptocurrency. The cliche “don’t put your eggs in one basket” exists for a reason.
  5. Stay informed on market trends: Things are constantly evolving in the crypto space, so stay updated with crypto news and regulatory changes to make informed decisions.

What is cryptocurrency mining and how does it work?

We don’t need to delve too deeply into this to understand what is cryptocurrency – unless you wish to, of course. All you need to know to understand the full picture is that this refers to the process of validating and recording transactions on a blockchain network using specialized computer hardware.

Miners are asked to solve complex mathematical puzzles to add new blocks to the blockchain, earning crypto coins in exchange. This process is needed to maintain the network’s security and decentralization by preventing double-spending and ensuring consensus among participants.

What is staking in cryptocurrency?

This is another technical aspect that doesn’t need over-explaining if your goal is understanding cryptocurrency for the purpose of gambling. Staking is an essential part of the Proof of Stake (PoS) process, which is a consensus mechanism used to validate transactions and create new blocks. Validators are chosen to create new blocks and confirm transactions based on the amount of cryptocurrency they hold and are willing to ‘stake’ as collateral.

Understanding market capitalization in cryptocurrency

The market cap for crypto refers to the total value of a cryptocurrency in circulation. To calculate it, you multiply the current price of one unit by the total number of units in circulation. Using this formula can help you gauge the overall value and potential of a cryptocurrency, although it doesn’t guarantee future performance.

How do crypto casinos work? How to gamble using crypto

Now, that’s cryptocurrencies explained, it’s time to take the next step to discover how to gamble using crypto. The good news is that crypto casinos work in exactly the same way as fiat casinos, so all you need to do is follow the below steps to register and to start playing real money crypto games.

  • Step 1: Follow the links to our top recommended crypto casinos and click on the ‘Register’ button.
  • Step 2: Fill in your email address and follow any prompts as requested.
  • Step 4: Pick a good password and store it securely
  • Step 5: Navigate to the cashier section and click on the Deposit button
  • Step 6: Choose your preferred cryptocurrency and key in the amount you wish to deposit.
  • Step 7: Start using your welcome bonus money on your favorite games.

What cryptocurrencies to use at blockchain casinos

Our recommended crypto casinos offer all the major currencies like Bitcoin, Bitcoin cash, Ethereum and many others. For our top recommendations for crypto gambling and betting, check out our cryptocurrencies casino page, where you’ll find detailed information about which sites offer specific coins. We advise you to always read the payment terms and conditions carefully to avoid any surprises.

Good and bad of crypto gambling

Pros Cons
You benefit from less stringent KYC processes. At first glance it may appear to be complicated for beginners.
You can play anonymously and without sharing financial data. The value of crypto is more volatile than fiat.
You enjoy faster payouts than with fiat money.  
You pay less or no transaction fees.  

Major events in the history of crypto

  • 2008: An anonymous person or group publishes the Bitcoin whitepaper, outlining the concept of a decentralized digital currency using the name using the pseudonym Satoshi Nakamoto.
  • 2009: Bitcoin network is officially launched with the mining of the genesis block, known as Block 0.
  • 2010: Bitcoin is used for the first time in a commercial transaction when programmer Laszlo Hanyecz pays 10,000 BTC for two pizzas.
  • 2011: The Bitcoin market price surpasses $1 for the first time.
  • 2013: The US acknowledges cryptocurrencies as a form of virtual currency.
  • 2015: Ethereum conducts its Initial Coin Offering (ICO) and raises over $18 million.
  • 2017: Bitcoin undergoes a contentious hard fork, resulting in the creation of Bitcoin cash (BCH).
  • 2017: Bitcoin’s price experiences a historic bull run, reaching nearly $20,000.
  • 2018: The cryptocurrency market experiences a major correction, leading to a decrease in the prices of most cryptocurrencies.
  • 2020: Bitcoin undergoes its third halving, reducing the reward for miners in half from 12.5 BTC to 6.25 BTC.
  • 2021: Tesla, Inc. announces a $1.5 billion investment in Bitcoin and plans to accept it as payment for vehicles and the total market capitalization of cryptocurrencies surpasses $3 trillion for the first time.
  • 2023: Users send Binance in tilt by withdrawing more than $788 million in 24 hours and the FTX exchange goes bankrupt, with its founder Sam Bankman-Fried found guilty of fraud. Meantime, Tether mints 4 billion new tokens and the price of Solana skyrockets.

What is the future of cryptocurrency?

With alt coins becoming more popular and a more convenient way of gambling, understanding crypto has never been more important to gamblers. The increased number of US casinos that have embraced digital currencies has also led to better bonuses, game choice and an overall better gambling experience. Cryptocurrency remains very much a rising star, and it is very likely that the future will see an even stronger prevalence.

The most popular cryptocurrency terms – glossary

Term

Description

Alt Coins

Cryptocurrencies that aren’t Bitcoin.

Bear Market

When a currency declines for a longer period of time (around 3 months or longer).

Blockchain

A decentralized ledger that enables transactions and minting.

Bull Market

A currency that is seeing a continuous rise in value for a longer period of time (around 3 months or longer).

Cold Storage

An offline crypto wallet.

Decentralized

A blockchain that is not controlled by one person or group.

DeFi

Currencies that run on a decentralized platform.

Fork

Splits in a blockchain due to community disagreement.

Hodl

Aka, hold on for dear life and don’t sell your crypto.

ICO

Initial Coin Offering for the launch of a crypto.

Ledger

A record of transactions.

Market cap

The total value of circulating coins.

NFT

Non-Fungible Tokens, so called because they’re unique and can’t be copied.

Peer-To-Peer

P2P, or crypto transactions that take place without an intermediary such as an exchange.

Proof-Of-Stake

A consensus mechanism that validates blocks.

Public Key

A code to generate a public wallet address.

Smart Contract

A computer program that runs on the blockchain.

Token

The digital asset that signifies ownership.

Whale

A person or group who controls a large amount of a particular currency.

 

Frequently asked questions

How does cryptocurrency work?

Cryptocurrency works in the same way as fiat (traditional) currencies, except that its value is dictated by the market supply and demand, rather than by governments or financial institutions.

A cryptocurrency wallet is an online or offline way to store your digital coins, and acts like a bank or safe. You can choose between cold wallets, where you store your coins offline with a unique digital key, or hot wallets, which are online apps. Each method comes with different levels of security and convenience.

Cryptocurrencies are safe as long as you maintain a good level of security when using your wallet. However, they are more volatile than fiat currencies in terms of value as they are very dependent on market supply and demand.

Blockchain is a decentralized platform that records all cryptocurrency transactions using a highly secure protocol that guarantees anonymity and that cannot be changed.

Yes, all recommended casinos on cryptocasinos.com accept a variety of cryptocurrencies. Check out our individual casino reviews to find out which currencies are accepted on specific sites.

Author: Ramona Depares

updated

Updated 20 July, 2024

A round image of the author Ramona Depares

Meet Ramona, who brings to the crypto casino content scene a rich blend of expertise in journalism, authorship, and iGaming. With over 15 years of experience in writing, her storytelling skills and eye for quality content are unparalleled. At the heart of her work lies a passion for data and statistics, empowering players with the knowledge they need to make informed decisions.