21.03.22

What is cryptocurrency? What investors should know

In this article we will give the basic knowledge, which will be enough for readers to start their way in the world of cryptocurrency.
It should be noted that this article will focus on the basic services that exist.
The article is divided into three parts: where to store cryptocurrencies, where to buy them and what to buy.
Before we start, let's look at some terms that will make the article more understandable:

  • Blockchain is a blockchain or database with advanced protection against manipulation.

  • Fiat currency is our ordinary money that we use: dollars, euros, rubles, etc.

  • Cryptocurrency is electronic currency, which is designed to store information by its own blockchain.

  • A token is also electronic currency, but it uses a public blockchain.

  • There are so many different projects that allow you to create any project based on a single blockchain. The most popular such project is Ethereum.


Interesting fact: not many people know that Ethereum is actually not a cryptocurrency, but an ecosystem for creating tokens and the native token of this ecosystem is called Ether. To make it easier to navigate, we take Ether with Ethereum as one.


The native token is the control token of the ecosystem. In other words, it is the token in which all deposit and withdrawal fees, rewards, and other elements of the service are paid.
Tokenization is the creation of a token, the value of the token depends on the value of the item to which it is linked.
Stablecoin is a tokenized fiat currency, mostly tied to the value of the U.S. dollar. The most common examples are Tether (USDT), Binance USD (BUSD), USD Coin (USDC), Dai (DAI), TerraUSD (UST), Pax Dollar (USDP), TrueUSD (TUSD) and others.
A private key is the user's primary password to the crypto-purse. This key is generated according to certain algorithms, from which pairs of private and public keys are also created.
The seed phrase is a "human-readable" alternative to the private key. This phrase consists of 12, 16 or 24 English words, which are taken from a specific vocabulary, if followed consistently can recover the private key.
A smart contract is a pre-programmed algorithm that automates operations when certain conditions occur. Any action, condition, or anything that can be digitized can be pre-programmed.

DeFi is a generic name for decentralized finance projects. More specifically, projects that replace the functions of the existing financial system (lending, investing, insurance, etc.).

GameFi - the general name for projects from the field of game projects, which were built on blockchain technology. Most often games whose principle is to earn money (P2E), in such games gamers can earn cryptocurrencies and NFT tokens.
NFT is literally a non-playable token. In other words, each digital token is unique (in contrast, all bitcoins are the same and equal to each other). This is most often perceived in the context of investments as a collection component of the term, but in fact the scope of the technology is much broader.

It is worth noting that these terms are given as a simplified formulation, to get official definitions one should get information on Wikipedia.

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