New to Crypto? Start Here With These Must-Know Basics
- Rachel Johnson
- Jul 28
- 14 min read
It wasn’t until recently that I learned the importance of this emerging and highly lucrative market space. It was a huge eye-opener for me because I always thought of the whole idea of crypto as something involving “high risk”. Guess what? I was not wrong! Yes, it is a volatile market, but I recently learned that if you choose to remain ignorant, you are missing out on something big!
Choosing to trade in the crypto world is completely up to each one’s prerogative, but developing awareness about what cryptocurrency is, what assets one can buy/swap/manage in this ecosystem, what blockchains are, what utility tokens are, etc., is imperative. Ignorance may be bliss, but trust me, gaining knowledge about cryptocurrency is more than power! Without further ado, let’s jump right in, shall we?
What is Cryptocurrency?
It is a digital currency that anyone can hold without the need for a central authoritative body like a bank or government. You can buy them, own them, and just like assets grow in value in the stock markets, your digital asset/cryptocurrency also increases or decreases in value over time.
Some of the famous cryptocurrencies include $BTC, $ETH, $USDC, etc. We will learn more about each of these currencies later in the article. But now, its time to move on to another important concept – Blockchain!
What is a Blockchain?
It is a digital ledger that records every crypto transaction. A blockchain is like a database and uses a consensus mechanism to record every crypto transaction ever made. It also controls additional coin creation and verify the ownership of assets. There are two types of consensus mechanisms: PoW (Proof of Work) and PoS (Proof of Stake). Sounds like rocket science? I know I felt the same when I heard these terms for the first time.
But don’t fret, let’s simplify these!
What is PoW?
Proof of work is one of the two consensus mechanisms used in the crypto world to record transactions in the blockchain. Let me explain it in simple terms:
Imagine how you were once a 10 year old kid in your classroom. Now lets say your teacher gives you a really complex puzzle to solve and you with your other classmates begin to solve the puzzle. Now, if you crack the puzzle before all your classmates, your teacher and other kids might check the puzzle and verify that “Yup! That’s how its done”. PoW works in a similar model!
The computer solving the complex puzzle is called the miner. The puzzle is the math problem and your computer will expend a lot of electricity and power to solve the problem, which is called the work. Once it completes the work, it will share the answer, which is called the proof, with other computers, called the verifiers.
The reward for the miner is often in bitcoins and their answer helps add a new block to the bitcoin blockchain. Several computers compete against eachother to solve a really difficult puzzle, and that’s proof of work. Simple right?
Now that we have explored the concept of PoW, let’s dive into PoS
What is PoS?
PoS is even more interesting as a concept. Imagine you and your friends are competing for the same position in your company, and the way one gets selected is by your boss picking a chit out of a jar. All of you get to write your names and place them in the jar.
But the twist is those with more staked coins get to write their names in several more chits and place them in the jar, increasing their chances of getting picked by several folds.
Fun isn't it? Ok, so what is staking coin? It simply means you lock up a certain amount of your coins in that specific blockchain to amplify your chances of getting picked.
PoW is like racing with several other computers to solve a complex math puzzle, while PoS is like a lucky draw, and the winner gets to solve the puzzle.
Now, PoW is a much slower process that consumes a lot of power and energy. PoS, on the other hand, is relatively fast with very little energy consumption.
PoS is the most commonly used consensus mechanism in the cryptocurrency world because it is fast, consumes less energy and time, and is more environmentally sustainable.
You may ask, who uses PoW and PoS?
Well, the biggest crypto ever known to humanity – $BTC still uses PoW. A few other coins, such as Litecoin and Dogecoin, also employ this mechanism.
PoS, on the other hand, is used by $ETH, the second biggest cryptocurrency. Other coins utilizing the PoS mechanism include Cardano ($ADA), Solana ($SOL), Polygon ($MATIC), Avalanche ($AVAX), and others.
Now that we know some basics. The biggest question remains: I want to buy some cryptocurrency, what do I do?
Let's explore the easy beginner-friendly route first, before we look at DeFi and other ways of buying/managing your crypto. It is a lot easier and less intimidating than it may seem. Here is a step-by-step process on how to get started:
How to Get Started on Crypto?
Step 1: Choose a platform
Several exchanges in the cryptocurrency world act as intermediaries and help you buy, swap, sell, and manage your assets. A few popular options include Coinbase,
Kraken, etc. While they facilitate the trade for you, they will charge a small fee for these services.
Step 2: Go to the Play store or App store
Search for the app or platform of your choice. Let's say you choose Binance. Search for Binance in the Play Store or App Store and install it. Make sure you have the official app. Checking the logo, spelling, and user reviews can help you figure out the authentic one from the dupes.
Step 3: Create an account
Creating an account involves three essential parts: Entering your email and phone number, creating a strong password, and completing KYC.
KYC, or 'Know Your Customer,' means uploading government-issued ID information into the app (such as a passport or driver's license). You may also have to take a selfie to verify that it is you using the app.
Step 4: Add money
Now that you have installed the app and created an account, it's time to test the waters. How do you do that? Simple! You need to invest some money to buy your first $BTC or $ETH.
Let's say you are in India and wish to buy some cryptocurrency. There are two ways you can do this: a. Through peer-to-peer (P2P), b. Bank transfer
4.1. Peer-to-Peer (Most common in India)
To send money through P2P, you open the app of your choice, let's say Binance. Tap on the P2P trading option. Choose a coin you wish to buy (let's say $BTC). You will see a list of sellers with this crypto who are willing to sell. You will also be able to see their price, limits (e.g., INR 500 – INR 50,000), payment method (UPI/ bank transfer), and completion rate.
You want to choose a trader with a completion rate of 90% or above, as this indicates how often the seller has completed their trades.
Once you have chosen a seller, click 'Buy' and enter the amount of money you wish to spend. The Binance app will then show you the UPI/bank account details of the seller.
You can then complete the transaction by opening your UPI app or logging in to your bank account.
Once you complete payment, return to the app and tap" I have paid." The seller then confirms the transaction on his end and releases the cryptocurrency into your wallet.
Remember that the app will lock your money in escrow until the seller confirms it, and that's perfectly safe. You don't have to panic.
That's it, you now own your cryptocurrency, and you are ready to hold or trade it.
4.2. Bank transfer/ Card/ UPI
If you are trying to purchase cryptocurrency from India, this option may not be available to you due to Indian banking restrictions. However, few exchanges, such as WazirX and CoinDCX, allow users to pay using direct bank deposits.
Here is how you purchase cryptocurrency using the direct deposit method:
Go to the wallet or funds option in your app and select the 'Add money' or 'Deposit' option. You will then choose a payment method (UPI/Bank Transfer/Credit/Debit card), enter the amount you wish to deposit, and complete the payment. You will have that amount credited into your wallet, and now you can purchase a coin/asset of your choice.
At this time, P2P appears to be a more viable, convenient, and safer option for users in India. Although it is slightly time-consuming, it remains the most common method used in India. While the direct deposit option is fast, most exchanges in India do not currently support this method.
Tips for first-time traders:
Do your research before choosing a wallet/platform.
Invest time and research to understand each cryptocurrency, its tokenomics, presale details, and other relevant information before purchasing a coin.
It is always wise to begin with a small amount. (INR 500 or 1000)
Verify your seller's account number multiple times before sending money to ensure accuracy and prevent any issues.
Make sure to stay within the Binance or wasirX app at all times for safety during a transaction. Beware of sellers who ask you to chat with them outside of the app.
How to Buy Your First Cryptocurrency
Once you have completed the difficult task of choosing a wallet/exchange, the next step is to buy crypto. It is pretty simple. We briefly covered this part in the previous section of the article. However, here is some additional information on how to purchase your first cryptocurrency.
There is an unspoken rule in the crypto world that says, 'only invest what you can afford to lose.' It makes a lot of sense to me because this market is extremely volatile and highly risky, so it's best to start with a small amount and then plan according to your risk appetite.
Moving on to how to buy your first cryptocurrency. The app will prompt you to enter the ticker symbol (e.g., BTC, ETH, Binance Coin, etc.) and the amount you wish to purchase. Once you choose the coin, you can pay using your preferred payment method, and you now own crypto!
How to Store Your Crypto Safely?
You have two options for storing your cryptocurrency. You can store them in either a hot wallet or a cold wallet. However, it is always advisable to keep a large amount of crypto in a wallet that is not the same exchange where you purchased your coins.
Ok, so what are hot and cold wallets?
Hot wallets
It is a type of storage for your cryptocurrency that uses the internet. For instance, you can access a hot wallet via tablet, phone, or laptop. Essentially, you will need an internet connection to access your cryptocurrency stored in a hot wallet.
While hot wallets offer convenience and are easily accessible, they expose your assets to online hacks, security threats, and phishing attacks.
Cold wallets
This type of storage isolates your assets from the internet and keeps them safe in a secluded place, such as an external drive. You will have a separate key code and MFA options to safeguard your assets in a cold wallet. Some cold wallets come with an unsurpassed level of security that even physical intrusion or fire accidents cannot compromise, always keeping your cryptocurrency super safe.
What is Decentralized Finance?
DeFi, or decentralized finance, refers to lending, borrowing, and performing other transactions with your crypto without an intermediary or third party, such as a bank. DeFi eliminates the fees charged by banks and other intermediaries in traditional settings, offering users greater autonomy.
Who controls DeFi?
It utilizes blockchain technology to operate, and smart contracts facilitate the transactions. Smart contracts are pre-written codes that enable specific transactions when certain conditions are met. We will delve deeper into these as we progress.
However, for now, you need to know that a significant portion of cryptocurrency transactions is powered by smart contracts, and users rely more on decentralized wallets than centralized wallets in the crypto space.
Some of the decentralized wallets include Trust Wallet, MetaMask, and Trezor. Examples of centralized wallets include Binance and Coinbase.
What are Dapps?
Dapps are software applications that operate on a peer-to-peer network of computers, thereby eliminating a single point of failure or control. Unlike centralized apps, these do not work on a single centralized server but on a blockchain (a decentralized network). Having your crypto not controlled by a single entity, such as an exchange, can offer you greater security, transparency, and autonomy.
So, what do we do on a Dapp?
A Dapp is a gateway for you to interact with blockchain technology. It is just like any other regular app, but runs on blockchain and not a private server. You can do anything from gaming and financial transactions to social media interactions and store and manage valuable information on a Dapp. Here is a detailed look at things you can do on a dApp explained in layperson's terms:
Gaming
Imagine you are playing a game like PUBG or Axie Infinity, and you win a level or score a specific number of points. You can then earn money by winning in cryptocurrency or NFTs on a dApp. It allows you to win real rewards for your win.
Financial transactions
There are apps like Uniswap, Aave, and PancakeSwap that allow you to swap one cryptocurrency for another, lend your assets and earn interest on them, borrow cryptocurrency by locking your coins as collateral, and more.
A Dapp enables you to complete these transactions using smart contracts, eliminating the need for a bank or any third-party interference.
Decentralized social media
You can use social media platforms like Farcaster and Lens Protocol and earn crypto for being active on these platforms. You have complete autonomy over what you post, and nobody can delete your account, or algorithms cannot hide your posts.
File sharing and storage
Specific dApps, such as IPFS and Arweave, allow you to store your files and documents on them without relying on traditional storage options like Google Drive or Dropbox. The most significant benefit of dApps is that they are censorship-resistant. IPFS is entirely free, while Arweave charges a one-time fee based on your storage needs.
You can do more than this on a dApp. You can join DAO and vote on project decisions based on the number of tokens you hold, create, buy, or sell NFTs, stake or farm for passive income, etc.
You may still find a lot of these terms sounding like rocket science to you. Don't worry, I have got you covered. We will discuss what are NFTs, and the concepts of staking and farming, in the following sections.
What is Swap in Crypto?
A swap is essentially trading one token for another—a process facilitated by smart contracts within a DeFi wallet. Swapping occurs in a DEX (decentralized exchange) without a centralized authority. DEXs charge a minimal fee compared to centralized exchanges for a swapping transaction and are much faster and more convenient than the latter.
In a traditional setting or centralized exchange, you will sell your crypto for fiat (regular money) and then use the money to buy another cryptocurrency. In DEX, you can swap one currency for another and significantly reduce fees.
Where can you swap?
You can swap your cryptocurrency in centralized (CEX) or decentralized exchanges (DEX).
Centralized exchanges, such as Binance, Kraken, and Coinbase, act as intermediaries, facilitating swaps and offering a broad range of trading features.
Alternatively, decentralized exchanges are integrated into DeFi apps, such as Best Wallet and Trust Wallet, allowing for direct peer-to-peer swapping. DeFi apps facilitate instant crypto swaps, making it highly convenient and fast.
What is Staking in Crypto?
Let's say you have some SOL or ETH; you can lock these up in their respective blockchains for a specific period and, in return, earn rewards, similar to how you receive interest on money deposited in fixed deposits.
To make this simpler, imagine you have a truck that is sitting idle in your garage. Your friend runs a grocery delivery business. Imagine you give your vehicle to him for 3 months. At the end of three months, he returns the truck back to you and also offers you 1kg of apples and oranges as a reward. That's staking for you.
Locking up your coins in a blockchain allows it to operate, validate transactions, and stay secure. The blockchain rewards you with incentives. The more coins you stake, the higher the rewards.
Some platforms allow you to unstake your coins anytime, but a few others have a specific locking period, during which you cannot take out your coins.
You can always stake through centralized exchanges like Binance or stake pools if you don't have a large number of coins.
How much can you earn through staking?
The answer to this depends on the wallet you are using, the amount you are staking, and the cryptocurrency you are staking. The staking reward can range anywhere from 5% to 10% per year.
Where can you stake?
Just like swapping, you can stake through centralized or decentralized exchanges.
If you choose the centralized exchange route, you can use apps like Coinbase, Kraken, or Binance to stake your cryptocurrency. These can feel extremely simple to use, and they are pretty safe for staking as well. But you have zero autonomy over the process.
On the other hand, you can stake your coins on a decentralized platform, such as Lido or Rocketpool. These DeFi wallets operate on blockchain and offer you more control than centralized exchanges. These can be simple to use, as well, depending on the wallet you use.
How to stake in a DeFi wallet?
Let's say you use MetaMask. Open the MetaMask app and navigate to the Lido website to connect MetaMask to Lido. Now you can stake your $ETH, and Lido will send stETH to your wallet.
Remember, the Metamask wallet is like your backpack, helping you store and connect, while staking your crypto and offering you rewards.
You can also stake your cryptocurrency in a hardware wallet, such as Cypherock or Ledger. This way, you get to store your crypto in a super safe vault and also earn passive income for doing so. Like DEX, storing your crypto in a hardware wallet offers you greater autonomy.
Cryptocurrency is a complex world with new concepts and rules, many of which may feel completely new or intimidating to newcomers. While decoding everything in one article might seem like an overwhelming amount of information for anyone. Let's start with baby steps.
This space is growing beyond one's imagination, and it is pivotal to adopt it early to benefit from this highly lucrative financial model. The news headlines continue to focus on the significant growth of cryptocurrencies over the past couple of months. $BTC (bitcoin) has yielded a 27% return since January 2025 over just 7 months. If that's not a wake-up call, I don't know what is?
Stay tuned for more cryptocurrency-related news and articles from me in the coming weeks. These articles are written for new users to help them adopt the practice and feel more confident trading in the crypto space. Let's simplify crypto – one article at a time!
FAQ –
1. What are gas fees and network confirmations?
Gas fees are the charges you pay to a blockchain for using it. This money goes to the miners or validators who record your transactions on a blockchain. If the blockchain is more crowded, you pay a higher gas fee. The lower the traffic, the lower the gas fee.
For instance, Ethereum charges the highest gas fee ($5–$30+), Bitcoin charges a slightly lower fee ($1–$5), and Solana charges super low fees of under $0.01, and so on.
2. How to track your portfolio?
Tracking a portfolio refers to the list of the assets you own and their quantities across wallets and exchanges. Several portfolio tracking apps automatically sync with your apps and exchanges, providing a detailed view in a single interface.
Wallets that offer portfolio tracking features include Best Wallet, Trust Wallet, Zengo, Coinbase, etc.
3. How to read price charts?
Reading a chart simply refers to checking how the price of a token has changed since its last value. Here is a more simplified approach to reading a price chart for beginners:
Look at the top or bottom of a chart. It will show you the period, such as 1D, 1W, 1M, etc.
For daily trends, use short-term charts. For long-term investing, select 1Y, 1M, or ALL.
On the right side, you can see the price axis (in a currency of your choice). This axis will help you understand how high or low a token's value has risen or fallen.
There are two types of charts: Line charts and candlestick charts. Line charts are easier to read. On the other hand, candlestick charts are more detailed and show a rise in price using green candles and a fall in price using red candles.
4. How to choose the best crypto exchanges?
Choosing a crypto exchange is similar to picking a bank for your money. You want to ensure the exchange you choose is secure. Some exchanges offer multi-factor authentication (MFA) and cold wallet storage.
You also want to ensure that the exchange you choose has a user-friendly interface, supports the currencies you want to buy or trade, charges a lower fee for its services (low gas fees for DEX), and has high liquidity. Exchanges that offer faster trades and less price slippage are said to have high liquidity.
Bigger exchanges, such as Binance and Coinbase, have higher liquidity than smaller exchanges.
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