It has been more than 6 years since I started investing in cryptocurrencies. I started reading more and more about cryptocurrencies to go get a sense of things before jumping into the world of cryptocurrencies.

Even today I am far from understanding cryptocurrencies completely, as it is a vast field. But I have learned enough to find my feet. When I started my learning stint, though there were lots of blogs and videos online, they were either very superficial or too deep. They were either too specific or too general. The learning path was not clear. After having spent almost a year learning I am writing this post so that newcomers will find it helpful and know enough to start exploring on their own. I have made it a series of questions and answers. They are structured in the learning path I took. Most of the new users also might end up taking the same learning path and hence I felt that this order made sense.

Before getting started with the article, get a coffee or beer to keep your company. This is going to be a long article. I have addressed all the questions I faced. If there are a few things that you are familiar with, you can skip those questions and move to the next. You can also use this Table of Contents to skip to questions of your interest.

Table of Contents

What is cryptocurrency?

A digital currency in which code based on cryptography controls the generation of units of currency and verification of transactions for the transfer of funds. A cryptocurrency is not backed by a government or a central bank of any country/country. The account keeping is done in a distributed manner. Think of it as a distributed ledger one in which you can’t alter the order of transactions.

In short, you can call it people’s money. Money is created by the masses, for the masses, and controlled by the masses.

Such money has various advantages compared to FIAT currency. That is the whole reason many banks and governments are opposing the adoption of cryptocurrencies. Cryptocurrencies take the power out of centralized power centers, whether they are governments or central banks.

What is FIAT currency?

Currencies that are backed by a government are called FIAT currencies. So most of the currencies we are accustomed to like USD(United States Dollar), GBP(Great Britain Pound or Sterling Pound), AUD(Australian Dollar), CNY(Chinese Yen), JPY(Japanese Yen), INR(Indian Rupee) etc are all examples of FIAT currency. I had never heard of the term FIAT before learning about cryptocurrencies.

FIAT currencies have many disadvantages. They are centralized. These centralized agencies can make the existing money invalid just by a stroke of a pen. Recently India carried out a massive demonetisation drive. They can print currency at will, leading to inflation. Inflation is stealing from the poor and gullible without their knowledge. You need agencies like Visa and Master-card to perform exchanges in business outlets. To store your own money you need to pay fees to banks while they make money in interest by lending out your money. If you want to transfer money across borders you need permission from governments and pay huge fees to companies like Western Union. You pay your fees in percentages whereas it should have been only a fee per transaction. The amount shouldn’t really matter.

FIAT lacks the characteristics of sound money. Cryptocurrencies fill most of these gaps. In addition to all these advantages, it is also distributed which is a great advantage in itself, as we don’t need to trust any third party. All thanks to blockchains we are able to use this form of money called cryptocurrencies.

What is a blockchain?

Blockchain is the technology behind cryptocurrencies. To be fair cryptocurrencies are one of the use-cases of blockchain. Blockchain is an irreversible(chain of order), incorruptible, and distributed ledger of transactions. Incorruptible ledgers form the basis of many valuable transactions. They might be in the field of finance, record-keeping in governments, international diplomacy, or any record-keeping of importance for that matter.

If you want to know the details of how a blockchain works in layman's terms checkout WTF is Blockchain? by

Mohit Mamoria

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What is bitcoin?

Bitcoin is the first peer-to-peer electronic cash. Bitcoin solved a major problem in electronic cash called “double spending”. While there are many resources you can read about bitcoin, you should definitely start by reading the bitcoin whitepaper. Bitcoin is the torch bearer for cryptocurrencies. Most of the other cryptocurrencies owe it to bitcoin which proved that it was possible to build a secure, decentralized mechanism for storing and transferring value using the internet.

For now, just know that double spending is the risk that a digital currency can be spent twice. If the same money can be spent twice the currency will lose its value as it is not secure. Bitcoin addressed this problem and hence opened the flood gates of completely new world order.

Who invented Bitcoin or who is Satoshi Nakamoto?

Satoshi Nakamoto is the inventor of Bitcoin. But who is Satoshi Nakamoto? This has been a long-standing mystery and a very important one as well.

There are many people who believe that Satoshi Nakamoto should get a Nobel prize in Economics and Turing Award(which can be considered a Nobel prize in the field of computers) for the same invention that is Bitcoin. This should highlight the potential of blockchains and cryptocurrencies for you.

What is an Altcoin?

All digital forms of money other than Bitcoin are called Altcoins. Bitcoin was the main digital currency. There are numerous other digital forms of money like clones of Bitcoin(claiming better elements), Smart contract frameworks based on digital currencies, and different other senseless ones too. Every one of these digital forms of money is called altcoins(Alternative coins)...

What is shit-coin?

A derogatory term is used for a cryptocurrency that is deemed to be useless by an individual or a certain group of individuals. While many people reserve this term for useless projects/cryptocurrencies, Bitcoin Maximalists consider all altcoins as shitcoins.

What is Bitcoin Maximalism?

Bitcoin fan-boys believe that Bitcoin is the one true coin and all other coins are useless. Bitcoin maximalists claim that there are no real-world use-cases for other currencies. They believe that all the money, time, and resources should be spent on improving Bitcoin as second-layer solutions on the Bitcoin network can be used for any kind of application. Hence rendering all other altcoins useless.

I have tried to capture the core of Bitcoin Maximalism in this tweet of mine.

What are different altcoins available?

Currently, there are more than 17000 altcoins available. Most of these coins are scams and rip-offs. But you can find a lot of interesting projects in the top 300 altcoins. These gems have the potential to alter the path of humanity. At their current stage, you can compare them to internet giants of the pre-2000 era. Their real potential is yet to be realized. We might know of their consequences and their value only a couple of decades ahead.

Top 4 Altcoins

List

If you want to know what problems these cryptocurrencies are solving check out the list I made on http://www.bitfolio.org/cryptocurrencies-short-summary. I am a part of the team of this website and the website is still a work in progress. We are working on a set of tools that will increase awareness about the world of cryptocurrencies. Please ignore any issues.

Where can I check the list of all cryptocurrencies?

You can check out all the listed cryptocurrencies on https://coinmarketcap.com/ I have used the word listed as this is not an exhaustive list of coins. These are just the coins that have passed clearance criteria to be listed on Coinmarketcap. There are many other projects which are not listed on exchanges and a few are in stealth mode. Hence these projects will not be listed here.

Is this a good time to invest in Bitcoin?

I am long on Bitcoin. In the long term, I think Bitcoin has a lot of scope for growth. I think the Bitcoin bandwagon is just getting started and I will use every dip to buy a few more Satoshis.

Many people whom I respect are bullish on the prospects of Bitcoin. You can check out bullish predictions by many popular crypto personalities on this blog post. Please note that many of these predictions are long-term and don’t have anything to do with the short-time dips or shoot-ups.

Is this a good time to invest in Altcoins?

While I am bullish on Bitcoin I would suggest caution while investing in altcoins. Most of the altcoins have lost more than 80% from their all-time highs around December last year. Many people feel that altcoins might lose further. So invest with caution and only in the best projects that you trust for the long term. Don’t forget to set stop losses though. Know when to exit.

What is an exchange?

An exchange is a website where you can trade one cryptocurrency for another cryptocurrency. These are also generally called crypto-crypto exchanges to highlight that they don’t support on-ramping which is the ability to buy cryptocurrency directly using FIAT.