Want to invest in crypto but don’t know where to start? You’re on the right page! In this guide, we’ll explain the fundamentals of cryptocurrency. You’ll understand the basics of blockchain, Bitcoin, and cryptocurrencies in general. In addition, we’ll explain how to take your first steps in crypto in a prudent manner. Discover our quick guide on how to get started in cryptocurrency in 2024 below!
Understanding the fundamentals to get started in crypto currency
As in any other field, you must understand the basics of crypto before you start your investment. Discover in broad terms what a blockchain is, a white paper, Bitcoin, cryptocurrencies and the concept of decentralization.
The blockchain
If there is one term to know in crypto, it is blockchain. Why? In fact, blockchain is the main technology that enables the operation of all (or almost all) digital currencies in the world. To illustrate, we could compare blockchain to the engine of a vehicle. The line of the car would represent the crypto in question. But then what is a blockchain?
The term blockchain is an anglicism that translates into French as "chain of blocks". In crypto currency, you should know that transactions are grouped into blocks. To understand the idea, think of a classic transaction that you make with your Visa bank card. Well, in crypto, to be carried out, this transaction must first be grouped with others in order to constitute a block. The size of the blocks (and therefore the number of transactions they can contain) is specific to each blockchain.
Block mining
When a block is formed, some people take care of validating the information and the authenticity of the transactions contained in the block. These people are called "miners". Their activity is called "mining". In fact, mining consists of solving a mathematical algorithm.
The way to validate a block varies depending on the blockchain. On Bitcoin, for example, mining puts all the miners in the network in competition. A competition is then organized between them and the first one who succeeds in finding the mathematical solution validates the block and pockets a reward.
When the block is validated, it is recorded on the blockchain indelibly. The blockchain is therefore to be considered as a public register that traces the history of transactions. But the blockchain has the advantage of preserving the anonymity of users by not giving public access to personal information.
By definition, a cryptocurrency has its own blockchain. This is the case, for example, of cryptocurrencies Bitcoin, Ethereum, Cardano, Dogecoin, Solana, Filecoin, etc. These blockchains have their own characteristics. For example, they differ in particular on the protocol used by the projects, to validate transactions or the way to become a node of the network.
The whitepaper
A whitepaper is defined in French as a "white book". From a historical point of view, this term was first used in 1922 in the United Kingdom. In what context? The white paper then designated a government document (note, report, report, etc.) whose thickness is not important enough to use the blue binding in use at the time.
Concretely, the white paper of a crypto is a relatively concise document which is used to describe its operation. The document is freely accessible to users, and to anyone interested in the project or technology in general. On the other hand, it is often written in English. For an example, you can consult the Bitcoin white paper.
In the white paper of a crypto, you normally find the following information:
- The characteristics of the blockchain;
- The characteristics of the token (emission, distribution, etc.);
- The ambition of the crypto;
- The roadmap.
Normally, every crypto worthy of the name has a white paper. This document was written at the time of the launch of the crypto on the market or a little before. It thus allows to present the crypto to investors.
The temporary usefulness of the white paper
Do you want to take your first steps in crypto as an investor? Then, here is a first good advice! When you want to invest in a crypto but you doubt its reliability, go and look at its white paper. If the white paper does not exist, this should already be a warning signal for you. If the white paper does exist, what is its quality and level of detail? Again, this will say a lot about the developers and their seriousness.
However, keep in mind that a white paper is not always up to date. As mentioned above, the white paper is written very early in the process of creating and launching a crypto. It is possible that after a few years, the community or developers have implemented new steps or modifications on the blockchain. In this case, these changes will not appear in the white paper since they were not originally planned.
Bitcoin
Bitcoin is the first cryptocurrency to be created and is by far the most well-known. The BTC white paper was written in 2008. The Bitcoin crypto was officially launched on January 3, 2009. On that date, the Bitcoin genesis block (first block) was recorded on the blockchain.
The identity of the creator of Bitcoin remains a mystery. All that is known is his pseudonym, Satoshi Nakamoto. Since 2009, many people have falsely claimed to be Satoshi Nakamoto. In addition, many rumors have circulated on the web about the identity of the mysterious Satoshi Nakamoto.
Bitcoin is the king of cryptocurrencies, i.e. digital currencies that operate in a decentralized manner. Unlike CBDCs, electronic currencies managed by central banks (such as euros and electronic dollars currently under consideration), Bitcoin is decentralized and does not involve an intermediary. On Bitcoin, as on most cryptos, there is therefore no central bank that controls and manages the level of liquidity on the network.
The number 1 crypto
Bitcoin is the world's leading cryptocurrency in terms of capitalization. At the time of writing, the capitalization of BTC stands at more than $481 billion. To situate Bitcoin in relation to other cryptocurrencies, you should know that Ethereum is the second crypto in the world. But its capitalization of $209 billion remains more than two times lower than that of Bitcoin!
Currently, Bitcoin's dominance over the entire crypto market is 40%. This means that Bitcoin alone accounts for around 40% of the total capitalization of cryptocurrencies.
Although it has become a safe haven over time, Bitcoin was initially designed to serve as a means of payment. Thus, Bitcoin still aims to coexist with (or replace) cash or card payments for its users.
