Cryptocurrency - what is it in simple words and how to use it

Types of cryptocurrencies
There are a huge variety of digital assets in the crypto world, and understanding them can be difficult even for those who have been familiar with the topic of blockchain for a long time. In this article, you will learn what properties truly decentralized cryptocurrencies have, which coins only “pretend” to be them, and what is good about platform tokens and stablecoins.

We will tell you about the types of cryptocurrencies, why altcoins began to appear, and whether they have a chance to “displace” Bitcoin, we will trace the history of the evolution of the blockchain and consider the 5 most popular cryptocurrencies that do not lose their positions at any time.

• Types of cryptocurrencies - what cryptocurrencies are there Decentralized cryptocurrencies
• Pseudo-decentralized cryptocurrencies
• Cryptocurrencies platforms
• Stablecoins

What is cryptocurrency in simple terms

Cryptocurrency is a means of payment and at the same time money on the Internet. They exist only virtually (you cannot touch them with your hands). Sometimes they are called “crypto”, “digital money”, “crypto coins”.

In simple terms, “cryptocurrency” is simply electronic money, funds, a virtual asset. They are not released in physical form, but exist only on the Internet. They do not belong to anyone, they do not have a body that would administer them.

Note that any cryptocurrency can be exchanged for real money (rubles, dollars) through special services called exchangers (more on them below). There are no problems with this. Exchange for money occurs quickly and without fraud. Rumors that crypto money cannot be exchanged for our usual money (rubles, dollars) are just a myth and nothing more.

How and where information is stored

The cryptocurrency database (transactions, balances) is stored in the form of a chain of blocks based on Blockchain technology. Anyone can view information about all transfers. Each new block contains information about previous transfers, commissions and other service information.

New blocks in the blockchain chain appear for each coin at a certain frequency. This interval is known and determined in advance. For example, every 15 seconds (Ethereum), every 2.5 minutes (Litecoin), every 10 minutes (Bitcoin).

Each new block appears as a result of the work of miners. This work (process) is called “mining”.

Miners support the network and allow the cryptocurrency to function: make transactions and protect it from hacking. In return, they receive rewards from transaction fees and the mining of new coins. We'll talk about this a little below.

Many people argue about “can cryptocurrency be called money?” This question requires a detailed answer. To be brief: it’s really difficult to call it money. After all, in our usual understanding, there must be something behind money. In this case, the cost of digital money is determined only by the demand for it. If there is demand, they become more expensive; if there is no demand, they become cheaper. But on the other hand, they can be exchanged for real money.

In 2022, some countries recognized it as a payment instrument (Japan, Germany), but not as money. In 2022, some countries allowed salaries to be officially paid in Bitcoin. In 2022, Korea completely legalized all transactions with crypto money.

What are cryptocurrencies (their types)

There are more than 5,500 cryptocurrencies as of 2022. This is too many even to just know their names. And this is not at all necessary. Many of them will remain unknown and will most likely cease to function over time.

Consider the list of the most famous and widespread cryptocurrencies:

These cryptocurrencies can be found in almost any exchange service or crypto exchange. They are promising and liquid. You can invest in them for the long term; their rate will most likely increase.

I also advise you to pay attention to the following new items:

• EOS (ranks first in Chinese rankings of promising projects);
• ADA (Cardano);
• TRX (Tron);
• BNB (Binance Coin). Token of the most popular crypto exchange Binance;

Read more about promising coins in the following articles:

• The most promising cryptocurrencies;

Top cryptocurrencies with descriptions

Coins that are confidently in the top by market capitalization (03/28/2019):

1. Bitcoin (BTC). The first fully decentralized open source peer-to-peer payment system. The exchange rate today is $4,009, and in December 2022 it rose to $20,000. The disadvantages include the low transaction speed compared to new analogues.
2. Ethereum (ETH). The invention of Vitalik Buterin, a native of Russia. The main innovation that the world saw with Ethereum was full-fledged smart contracts, and not their stripped-down version, as in Bitcoin. Course - $137.
3. Ripple (XRP). Positioned primarily as an effective mechanism for conducting fast and cheap transactions; In this capacity, banks and large corporations are interested in the coin. Rate - $0.3.
4. EOS. It is based on Ethereum and also acts as a platform for application development. The main goal of the developers is security of operations, believing that other systems have problems with this issue. Rate - $4.2.
5. Litecoin (LTC). The first “alternative” to Bitcoin. Powered by the Scrypt algorithm, it has a higher transaction speed and greater throughput compared to its ancestor. Course - $60.
6. Bitcoin Cash (BCH). Another Bitcoin fork, differing primarily in block size. In this way, it was possible to increase the speed of transactions without increasing commissions. Not long ago, Bitcoin Cash also split into two branches. The main coin rate is $167.
7. Binance Coin (BNB). A variant of exchange tokens, which were described in detail above. Today the Binance coin rate is $16.6.
8. Stellar (XLM). The platform is focused on direct transactions between companies and individuals. Transaction costs have been significantly reduced. Rate - $0.1.
9. Cardano (ADA). An application development platform, most notable for the fact that during mining it uses the Ouroboros algorithm instead of the usual Proof-of-Work. It uses less electricity. Cardano exchange rate for today is $0.06.
10. Tron (TRX). A platform focused exclusively on entertainment content - its downloading, distribution, promotion and monetization. Recently, the company integrated with the BitTorrent platform - the result was the emergence of a token of the same name. Tron rate – $0.02.
11. Tether (USDT). The rate of this coin is always $1, since it belongs to the stable coins described above. The USDT token is positioned as a “digitized” version of the US dollar. This makes it much easier for users to convert and use.

With all the advantages and disadvantages of cryptocurrencies, it is absolutely clear that they are here to stay. And change the world. This is already happening. All over the world, people are buying Bitcoin to protect themselves from the devaluation of their national currency. Banks and the government understand the danger to themselves, so they are trying to stop the process, but it is no longer possible to do this - only to delay it.

You can save your money from depreciation using the Matbi wallet exchanger. Here you can quickly and profitably buy Bitcoin and store it in your wallet in Matby. Then wait for the Bitcoin rate to rise and exchange the cryptocurrency back to rubles, making a profit.

Where and how best to store cryptocurrency

Any cryptocurrency is stored using special online wallets. In appearance, the wallet is a regular program (or application) that is installed on a computer (or phone).

For each cryptocoin you need to download your own wallet. There is no universal multi-currency wallet for all coins. But there are multi-currency online crypto wallets with such capabilities.

• COINPAYMENTS
• COINBASE
• MATBEA;

Currently, one of the best multi-currency online wallets is Matbi. It supports Bitcoin, Litecoin, Dash and Zcash. A special feature of this service is that it additionally includes the function of an online exchanger, with the help of which the user can buy and sell cryptocurrency for rubles, as well as exchange one cryptocurrency for another.

Matby has successfully positioned itself on the market since 2014. More than one hundred thousand users have used the services of this exchanger, the number of which is growing every day. All cryptocurrency is stored in “cold” wallets and under reliable protection, since the system meets all security standards.

The most convenient, understandable and reliable crypto wallet for Ethereum is the MyEtherWallet service (https://ru.mewwallet.com). The free MEW wallet mobile app provides users with the most comprehensive set of tools for working with ETH and ERC20 tokens. Here you can store and buy “crypto,” track rates to monitor investments, purchase “wrapped bitcoin” to access Ethereum-based DeFi, and much more. In MEW, buying and selling tokens is as profitable as possible - the application finds the best exchange rate on many decentralized exchanges.

MEW is the #1 app not only for advanced users, but also for getting into crypto. The extensive “knowledge base” contains tips and instructions for working with Ether in Russian. The interface is as simple as possible and at the same time safe. The cryptocurrency is stored locally on the smartphone; even the developers do not know about the state of the wallet. It's no surprise that MEW has more than 3.5 million users worldwide.

Each cryptocurrency wallet has a unique address that is never repeated. By indicating this address in other places, you will be able to transfer funds to your wallet. This is how the entire crypto industry works.

For example, wallet addresses for different cryptocurrencies look like this:

Bitcoin - 3DQtXYUhgjES86MVWGB13oqBqwneC3RgQA Ethereum - 0x3318707031f27e1031363b47f7835c36e88b0924 Dash - XmGXPFxgvVyduRvkPNTbeMaxQ6JpHh1kpt ZCash - t1RmmxbSHKjr5 TpSHTXeGp7VvQm62TQ9Jsx

Cold wallet
The most reliable way to store your virtual cryptocoins is cold wallets.

Cold wallets are devices that connect to a computer to send money (similar to flash drives). Otherwise, they do not have access to the Internet and therefore are considered the safest.

Cold wallets start at $100 (for example, Ledger Nano s or Trezos).
They offer several types for storing cryptocurrencies. All popular coins from the top 10 are there. How to find out the wallet address
You can get the cryptocurrency wallet address directly in the program.

We will not consider wallets in detail in this article. This is a big topic of conversation. I will only note that each cryptocurrency has an official website, where all official wallets are presented. I strongly recommend downloading them only from there.

• How to create a Bitcoin wallet;

Remember! Losing access to your wallet means a complete loss of funds on it! No one will be able to get them out of there. This money will stay with them forever. When creating your wallet, make backup copies of your private keys. Many users, through ignorance and carelessness, have lost millions of dollars in this way, which will forever remain at these addresses.

Sending cryptocurrencies

Carefully check the cryptocurrency sending address. If you make even one typo, the funds will be written off and there is no way to get them back. Also, do not confuse wallet addresses with each other. For example, Bitcoin and Bitcoin Cash addresses are completely different, they have their own Blockchains and, accordingly, their wallet addresses are different.

Newbies often have similar problems when they get confused and indicate the address of a completely different cryptocurrency in the Bitcoin wallet address and make a transaction. Naturally, the funds do not arrive, and then you can see messages on the forums that they were deceived.

Available on how cryptocurrencies work

First we paid for a cup of coffee. Then we bought plane tickets. A little later, they paid for the training. Now, using the principle of crowdfunding, we are collecting huge sums for incredible inventions and projects. All of the above is united by the fact that payments were made not with ordinary money, but with the help of cryptocurrencies, whose technology is believed to change the world. But how do cryptocurrencies work and how do they differ from other payment methods and the same electronic money? This article will answer these and some other questions.

How it works: the anatomy of cryptocurrencies

Cryptocurrencies are a type of alternative currencies. Unlike multiple electronic money and financial instruments, cryptocurrencies are decentralized, meaning that they are not controlled by any government or organization. Cryptocurrencies are also a peer-to-peer (P2P) tool, which allows individual users to buy and sell goods directly to each other, without the intermediation of third parties, such as, for example, large banks. Some cryptocurrencies are anonymous, but this is not their common feature. If we look at the main cryptocurrencies, we will find that they are all united by a set of basic technologies and concepts that allow them to take responsibility (that is, organize payment services - editor's note) and track transactions between banks and users.

Blockchain

When you make a bank transfer (or any transaction - editor's note), your issuing bank does not actually immediately take the money from your account and transfer it to the recipient's account.
The bank simply stores payment information in its database for as long as it needs and is convenient. Only your bank account balance and possibly the recipient's balance change instantly. Money now moves by changing records in databases, rather than physically. In order for a cryptocurrency to function independently of any centralized intermediary, all participants in the process need to have a way to record and store financial transactions to eliminate the problem of double debiting, which allows you to pay twice with the same cryptographic token, that is, to “buy” goods at double the price. greater than the available amount. In this case, the problem must be solved without using some kind of central server and database, as is done in banks.

Most existing cryptocurrencies use an open, cryptographically secure, distributed ledger of transactions called a “blockchain.” A blockchain is a chain of blocks with transaction records that are linked together and protected using cryptography. Moreover, each block contains its own unique cryptographic identifier, which indicates (links) it with the previous block of the chain.

Once added to the blockchain, blocks cannot be changed without losing data about the entire subsequent chain, which immediately lets other users know that a third-party intervention has been made to circumvent the rules. This makes it possible to simply refuse to use the modified version of the chain (because without recognition of the modified block by the majority of participants in the process, it is useless) and continue to work with the original branch.

Electronic cryptocurrency wallets can be linked to the blockchain to ensure that their balance is correct, and new transactions are verified using data on the blockchain to ensure that each one is real and was generated by cryptocurrency that actually belongs to the payer (or his wallet).

Mining

In order to reach a consensus on which transaction blocks should actually be added to the block chain and in order to trivially create these blocks of data, some users participate in the so-called mining process. understand that in order to use cryptocurrency, it is not necessary to “mine” it, editor’s note).
These so-called miners use the computing power of their hardware to perform increasingly complex mathematical calculations in order to “prove the work.” Proof-of-work is one of the forms of economic regulation of blockchain. It was invented in order to prevent various attacks using computing power, such as false records, transaction refusals, spam, and so on.

Since efficient mining is now extremely expensive (when it comes to “mainstream” cryptocurrencies like Bitcoin), an individual cannot start adding their own blocks outside the rules without the approval of the entire network. Others simply do not recognize them as real. Global changes are possible only with a concentration of 51% of computing power, which will only lead to the creation of a new “branch” of blocks - the so-called fork. In fact, this has happened more than once since the technology is almost ten years old. At the same time, the fork branch is not compatible with the original one, but can develop in parallel.

Wallets

Unlike traditional money, cryptocurrencies are not stored in traditional bank accounts.
Instead, cryptocurrency users use special software and/or hardware wallets. Each such wallet contains a unique cryptographic key that allows the owner to access their savings, which are stored within a public blockchain. In this case, wallets can be either “hot” - that is, located somewhere on the Internet as part of an online service (for example, coinbase or Xapo), or “cold” - cryptocurrency is stored without access to the network. A “cold” wallet is, in fact, a file on a computer, the loss of which will result in a permanent loss of access to the wallet and the cryptocurrency inside it. In this case, the file can be placed in any storage: on a hard drive, removable media, and some startups even offer to buy a physical wallet-keychain, access to which is additionally protected by a user PIN code.

How cryptocurrencies are used

The first decentralized cryptocurrency was Bitcoin, which is now the most widely used and best-known cryptographic token in the world.
Bitcoin was created in early 2009. It was then that its author, someone under the pseudonym Satoshi Nakamoto, launched the network and the first Bitcoin wallets. Some trace the creation of Bitcoin to Satoshi’s publication of the Bitcoin Manifesto in October 2008, in which this anonymous person described the basic principle of operation and regulation of the decentralized network. Who exactly created Bitcoin is still unknown. The author never revealed his real data and withdrew from working on the project in 2010, leaving one million bitcoins in his wallet. It has still not been possible to find it; payments from the wallet are not made. Bitcoin has continued to live its own life and is now accepted as an alternative payment method by thousands of organizations and businesses around the world. This list includes such companies and resources as Microsoft, WordPress, Reddit, Subway, Namecheap, Expedia, Newegg, Steam, Wikipedia, Zynga, Whole Foods, Bloomberg, Suntimes, Shopify. And this is just the beginning of an extremely long list.

Bitcoin is freely exchanged for other cryptocurrencies or fiat (ordinary, issued by state banks - editor's note) currencies. It is also traded on specialized cryptocurrency exchanges such as Bitfinex, Poloniex, Kraken, Coinbase or Bitstamp. All of these platforms help users store their cryptocurrencies, and some even offer convenient mobile wallets for wearable devices (smartphones, tablets) that can be linked to an account.

But Bitcoin is not the only cryptocurrency. There are now more than 1,000 different cryptographic tokens on the market, which, like Bitcoin, are based on blockchain technology. In total, the cryptocurrency market is estimated at $150 billion. Half of this capitalization is accounted for by the first cryptocurrency - Bitcoin.

Why use cryptocurrencies?

Because of their accessibility, immutability, low transaction fees, and potentially high speed (along with anonymity if desired), cryptocurrencies are seeing new uses almost every day.
At the same time, we are yet to find out what this technology is actually capable of. With thousands of small businesses, large corporations and entire nations entering this market, it is only a matter of time before cryptocurrencies become the new standard for financial transactions.

But even though the benefits of using cryptocurrencies are obvious, there are still serious obstacles to their mass adoption. First of all, this is a low level of awareness and misunderstanding of the technology by the general public, lack of regulatory documentation for cryptocurrency transactions and smart contracts, unclear legal status of cryptocurrencies, technical problems, etc.

In a number of countries, all these legal difficulties have already been partially resolved, but the technical complexity of integrating blockchain solutions and the lack of business-oriented products are still the main obstacles to the implementation of cryptocurrencies in the economic activities of businesses.
The private blockchain being built by the Jincor team will allow businesses of all sizes to easily join the crypto economy without any legal, technical or operational difficulties, and at a low cost, regardless of whether you plan to operate in B2C or B2B markets. If you want to know more about our product, you can check out more information on our website or chat with the team and ask any questions in our English-language Telegram channel.

Cryptocurrency mining - issuing new coins

“If no one issues or prints cryptocurrency, then where does it come from?” - any newbie will ask. It comes from a computational process called mining.

Mining (from the English “mining” - to mine) is the process of searching for a Hash, where there is a certain number of zeros in front.

A hash is a hexadecimal number encrypted using an encryption algorithm from a collection of other numbers. The totality of other numbers refers to information about transactions, commissions, time, etc. This variety of numbers also has a random component, by changing which miners get different hashes.

The computer that was the first to find the required Hash receives a fixed reward in cryptocurrency. For example, for Bitcoin this amount is 6.25 btc + commission for 10 minutes (~1..5 btc). This happens approximately once every 10 minutes. Other coins may have different intervals and rewards.

Over time, Bitcoin's rewards decrease. Halving the block reward is called halving. The last Bitcoin halving took place in May 2022, the reward dropped from 12.5 btc to 6.25. Halvings occur on average once every 4 years, or more precisely every 210,000 block.

Network hashrate is the total power of all network participants. The more participants, the more reliable the network and the more expensive the issue of new coins. Therefore, this pushes cryptocurrency prices higher.

Mining is a huge topic of conversation. All the nuances are described in more detail in the article:

• What is cryptocurrency mining in simple words;

The emission of cryptocurrency is in most cases limited, with rare exceptions. For example, Bitcoin and Zcash have 21 million coins, Litecoin has 84 million coins. Therefore, digital money is not subject to inflation and, in general, can only become more expensive (at least in theory). But this doesn't always happen. After the 2022 crash, many are nowhere near their highs.

However, there are those cryptocurrencies that have no restrictions on issue. For example, Monero, Ethereum, Dogecoin.

Note There are cryptocurrencies without mining. There is no need to mine them, since they are all already in circulation. For example, Ripple, Nano, EOS.

How to buy cryptocurrency - 5 options

You can only purchase cryptocurrency online using several options. Let's look at them.

5.1. Buy cryptocurrency on the exchange for rubles

There are sites on the Internet where online trading of cryptocurrencies takes place. Such sites are usually called “cryptocurrency exchanges” or “crypto exchanges”. With the growing popularity and interest in virtual currencies, these sites have also become extremely popular. At peak levels in late 2022, some even closed registration of new users because they could not cope with such a huge influx.

Below are cryptocurrency exchanges that accept rubles and have a Russian interface:

• BINANCE (the largest exchange in the world, there are only cryptocurrencies)
• EXMO (best exchange in Russian)
• BITMEX (possibility of margin trading and bearish play)
• YOBIT

On crypto exchanges you can buy/sell cryptocurrencies at the most favorable rates. You can place limit orders. Perhaps these are the only places where you can exchange large volumes of coins quickly and at good rates. All traders use them.

5.2. Buy cryptocurrency in an exchanger

Exchangers are convenient for simply buying cryptocurrency, but for further use they are unprofitable. Almost all beginners begin their acquaintance with cryptocoins from these sites. Exchange rates here are always a little worse than on stock exchanges. Plus, it is impossible to set your own exchange price here.

Nevertheless, exchangers are in great demand among beginners. They are convenient for entering the “crypto market”, but not for further speculating (making money from rate fluctuations).

Exchange rates are constantly jumping. Prices for exchange directions are also constantly changing (for example, from Qiwi, from Yumani, from bank cards). Below are the top reliable exchangers that always have a decent rate and exchange reserves:

• XCHANGE
• PROSTOCASH
• 60CEK
• MATBEA
• WW-PAY

5.3. Mine cryptocurrency

Almost any cryptocurrency can be “mine” or, in Russian, “extracted.” To do this, you will need special equipment (a regular “powerful” PC will do), but it is better to use specialized equipment (a computer with several powerful video cards or ASIC controllers).

Usually, mining is carried out by more or less experienced users who understand the risks and the essence of everything that is happening. A good mining farm costs about 150-200 thousand rubles. During operation, it consumes a lot of electricity, so these costs must be taken into account when calculating the profitability and payback of the farm. And not everyone is ready to invest so much money in hardware.

On average, these investments will pay off in 12 months, and then the net income begins. The payback rate depends on the difficulty of mining and the cryptocurrency rate, and these two variables are constantly changing. It is not possible to predict the exact amount of profit.

An alternative mining option is to rent power from special services (they are called cloud mining sites). There is little choice here, since almost all the capacity has already been purchased. The idea here is that you pay a fee for 1 year of using the equipment. After that, the mined crypto coins are credited daily. The advantages of this approach are that the starting investment amount is only $0.6, and there is no need to administer the entire process.

List of reliable cloud mining farms that sell power for rent

• CRYPTOUNIVERSE (Bitcoin and Litecoin mining)
• GENESIS-MINING
• NICEHASH

5.4. Earn cryptocurrency for free through faucets

There are sites on the Internet that give away cryptocurrency for free (in the form of bonuses). The size is extremely small, but if you receive bonuses regularly, a good amount can accumulate over time.

These sites are called "Taps". Payment is made for simple actions: entering a captcha or surfing (website browsing). There are dozens of similar resources. There are many scammers in this area who scam users and do not make payments.

We have selected proven and reliable Bitcoin faucets that pay accurately and have been around for many years:

• FREEBITCOIN (best faucet, 10-100 Satoshi every hour)
• SATOSHIHERO
• ADBTC

On these sites, the payout is in Satoshi (one hundred millionth of a Bitcoin). In addition to these taps, there are others. For example, faucets for Ethereum, Litecoin, etc. But they are less popular. Let's highlight those that make the largest payments:

• Free Ethereum (Ethereum, ETH)
• Free Litecoin (Litecoin, LTC)

5.5. Direct cryptocurrency exchange (p2p)

People are divided into two camps: those who want to get into cryptocurrency and those who want to get out of it. You can find a user who is ready to make a direct exchange: you pay him money (cash, card, WebMoney, etc.), and he transfers you cryptocurrency. Such a transaction is also called p2p (peer to peer).

You can find users for such an exchange on an ancient exchange service (LocalBitcoin does not work with most providers, you need to log in through Tor):

• LOCALBITCOIN

When there were no crypto exchanges yet, many used it as the only alternative to entering/exiting crypto coins.

How to use cryptocurrency - brief instructions

To use cryptocurrency, you only need access to your wallet. Once you have access to the wallet, you can send your coins to any other crypto wallet (paying a small fee).

Using cryptocurrency is as easy as using any other payment system. The advantage of cryptocoins is precisely that this payment instrument simultaneously includes both the platform and the money itself.

For example, this is what the interface of one popular online crypto-wallet in Russian, “Cryptonator”, looks like:

To send funds, you must click on the “Send” button:

Fill in the recipient's wallet address and enter the sending amount:

Next, you will receive an SMS confirmation. After entering the code from SMS, the cryptocurrency will be sent to another wallet.

You can make transactions in this simple way. It is no more difficult than in any other payment system.

But it is best to store money on your computer or in hardware wallets.

Main types of cryptocurrencies

At least 3,000 cryptocurrencies have already been created in the world, and their classification has spontaneously emerged, allowing one to understand this diversity. The vast majority of coins are based on Bitcoin or Ethereum (a phenomenon called a “fork”). A fork takes the base code of a cryptocurrency and updates it, adding features that network participants deem necessary.

One of the most popular classifications offers the following types of cryptocurrencies :

Currencies Coins

The largest share of all cryptocurrencies falls on this type – monetary systems that allow the exchange of amounts of money. They are most often called “coins”. They can be used to purchase goods and services like regular money, but with decentralization, anonymity, and ease of use.

Two examples of extremely popular blockchain coins:

Bitcoin:

• the very first and most popular cryptocurrency;
• can be used to buy anything in the virtual space;
• uses immutable blockchain technology to prevent double spending and fraudulent transactions;
• limited emission effectively prevents inflation.

Litecoin:

• appeared as the first fork of Bitcoin;
• allows for fast transactions with low commission fees;
• uses the Scrypt mining algorithm, which is more resistant to ASIC;
• considered one of the most convenient options on the market.

Platform Coins

Quote from one blockchain investor: “The shovel makers made the most money during the gold rush.”

The idea is that perhaps the best strategy is to invest in the tools that cryptocurrency users can't live without. In this case, “shovel manufacturers” are considered to be cryptocurrency exchanges, exchangers and platforms for developers. Let's focus on the latter for now.

During a market crisis, we sadly look at the wreckage of collapsing ships, but against their background it is the platforms that look the most reliable and confident. A crypto platform is a network based on Blockchain technology that allows software developers to write smart contracts. Smart contracts are programs that automatically control the transfer of funds between two or more parties based on specified conditions.

Platforms are the closest to this type of system. The most famous platform coin is Ethereum. In 2022, the rates of many similar currencies have risen significantly. Why do people like to invest money in them so much?

The main answer is versatility, multi-purpose focus. People can create various services and applications based on these platforms, thereby achieving an almost unlimited number of use cases. By investing in infrastructure, a person is confident that he is not investing in a marketing trap, but in real innovation.

Cryptocurrency Exchanges

Recently, a large number of cryptocurrency exchanges have been issuing their own coins to increase the liquidity of the remaining coins within the platform and help less popular coins trade better. After all, if it is impossible to sell a certain coin for any other, investors are not inclined to take risks by purchasing it. But if the exchange guarantees that you can always sell this coin for an exchange token, then the risk is significantly reduced.

Although the main purpose of the emergence of such tokens is to facilitate trading on the exchange (including saving on commissions), over time, and this is not surprising, coins have become independent investment objects. The fact is that they have guaranteed liquidity and the support of large and reliable organizations - exchanges.

Such coins also have a drawback: it is unlikely that their value will ever increase significantly. It is doubtful that you will see them as a popular means of payment in any stores. In addition, binding to a specific site means close dependence on the position of this site. Exchange collapsed under hacker attack? At the same moment, its tokens will collapse.

In general, exchange token prices will most likely be in line with the overall direction of the market. Quite a lot of people are entering the cryptocurrency world, which means more and more people are using exchanges, getting the opportunity to use tokens in the process of transferring funds from one coin to another.

Today, the tokens of the KuCoin, Binance, and Huobi exchanges are especially well known.

Utility Tokens

In another way, such tokens are called App Coins, because they are closely related to the utility of a particular decentralized application for which the team opens an ICO.
Almost all such utility tokens have a limited supply, and after the ICO the team tries to further promote it as an investment option, since the value of the token will of course increase if the application becomes popular. But such tactics are now under the watchful eye of the US Securities and Exchange Commission, so you need to have a good understanding of economics to work with them.

Security Tokens

“Security tokens” are issued to investors during an ICO. On their basis, dividends are paid and profits are divided; they can also be invested in other assets. In a number of countries (for example, the USA) such currencies are prohibited.

However, not everyone knew about this - some companies, in the wake of euphoria from blockchain startups, issued such tokens, as a result of which they were subject to reprisals from the US SEC.

To avoid falling into the same situation, developers should remember the so-called “Howey test”, developed back in the first half of the last century. So, a token is considered a security if it implies:

• investing money
• ...into a common enterprise
• ...with the expectation of profit
• ...with the participation of outsiders.

All four conditions must be met simultaneously. The SEC is generally not against ICOs, but this commission is closely monitoring their regulation.

Crypto Commodities

Crypto Commodities is a general term used to describe a tradable or fungible asset that can represent a good, feature, or contract in the real or virtual world using special coins.

For example, an application developer could use tokens to pay for hosting, or a user could pay to watch online content on a blockchain platform. A trader can use them to make trades, and the tokens can also be used to virtually support real contracts.

One recent and very popular application for such crypto goods was the game CryptoKitties on the Ethereum network, which allowed people to use Ethereum to trade and breed virtual cats using smart contracts. The more unique the cat was born, the higher its value.

Essentially, any platform that offers a tradable or fungible asset that provides access to value, services or functionality on a blockchain network through the use of unique tokens constitutes a crypto-commodity ecosystem. The mechanism of self-regulation and fair transactions in Crypto Commodities is ensured by linking the rules for the valuation of tokens and the operation of contracts through programmable code in the form of smart contracts of decentralized applications.

Stable Coins

“Stable coins” are cryptocurrencies whose volatility is minimized by being tied to a stable asset, such as the dollar or gold. The most famous cryptocurrency of this kind is Tether, although over time more and more of them appear.

Pros and cons of cryptocurrencies

Cryptocurrencies have conquered the world for a reason. They have a number of strong advantages.

Pros of cryptocurrencies:

• Speed ​​of transactions. Transfers in cryptocurrencies are carried out directly from one wallet to another. Therefore, the speed of transfer is equal to the speed of transaction confirmation. And this time takes on average up to 30 minutes. In just half an hour you can send money to any wallet in the world without intermediaries!
• Low commissions. There is a commission for transfers, but it is small (even for Bitcoin it is only $2 and this is the largest commission). In this case, you can transfer any amount of money. At least millions of dollars. The commission will not change depending on the amount. But there are cryptocurrencies where this commission is less than $0.01 (for example, DogeCoin).
• No intermediaries (peer-to-peer, p2p). The transfer is carried out directly between one wallet and another. There are no third parties who could “steal” funds or take an additional commission.
• Transparency of translations. Every transaction is displayed on the Blockchain and can be tracked.
• Limited edition. Since the production of coins is limited, according to the rules of economics, cryptocurrency can only rise in price. It is not subject to inflation.
• Anonymity. Despite the fact that all transactions are publicly available, the wallet addresses themselves are anonymous. We don't know who is behind them.
• An alternative to storing value. Some would argue that cryptocurrencies have some value. But so far everything is going exactly this way. This asset resembles the properties of gold, only even more convenient (you can call it gold 2.0).

Disadvantages of cryptocurrencies:

• Cryptocurrency is still illegal. Cryptocurrency is not controlled or regulated by anyone. Therefore, you can do whatever you want on it. This creates a number of big problems that have not yet been solved.
• New crypto coins. The emergence of new promising cryptocurrencies threatens the existence of old ones. Who needs outdated technology? Therefore, it is impossible to say for sure that a new super-fast and reliable coin will not appear tomorrow.
• Few places accept payment. In fact, there are no places where you can pay with cryptocurrency. In Western countries this situation is better, but still not enough to call it easily applicable.
• Risk of extinction. Not everyone expects growth from this market. Some investors are confident in the complete collapse of all digital coins.

Answers to frequently asked questions about cryptocurrencies

8.1. What is a cryptocurrency fork?

A cryptocurrency fork (from English “fork”) is the emergence of a new currency due to a fork in the cryptocurrency network after some block in the Blockchain.

For example, some group of people decided to modify the Bitcoin code. For example, increasing the transaction block size from 1 MB to 4 MB, and the majority of network participants are against this implementation.

But since there is a decent group of followers who support it, it is possible to branch off from the parent (make a fork). To do this, you need to create your own wallets, change the source code, find miners who will support the new network. And from a predetermined block you branch off from the main branch. As a result, a new cryptocurrency appears with the same history before the fork block. Those who had coins in their old wallets will receive new coins.

The most famous forks: Ethereum Classic in the summer of 2016, Bitcoin Cash on August 1, 2022, Bitcoin Gold on October 24, 2022, Bitcoin ABC and SV on November 15, 2022. These currencies are actually copies of their parents, with only minor modifications in the code.

Types of cryptocurrencies - what cryptocurrencies are there

What cryptocurrencies are there
? The more cryptocurrencies appear in the world, the more difficult it becomes to classify them, because each coin has its own unique set of characteristics and functions that are constantly being improved.

Although there is no official breakdown of cryptocurrencies by type, we will try to give you the clearest idea of ​​what cryptocurrencies are.

Decentralized cryptocurrencies

Almost every coin released calls itself decentralized, but is it really so? Let's look at what features truly decentralized cryptocurrencies should have:

• Independence from a central authority: such cryptocurrencies are not territorially or economically dependent on any state. A decentralized cryptocurrency is controlled by the community, it does not depend on the issuing company and developers, who could single-handedly make decisions on its further development;
• No intermediary: cryptocurrencies are managed by users of the public blockchain, who transfer them to each other without the participation of banks, financial institutions and other third parties. In addition, if you have decentralized cryptocurrencies in your wallet, only you can manage them using a private key;
• Decentralization ensures an adequate level of security for transactions within the system;
• Not susceptible to DDOS attacks and hacking.

Such a rare number of cryptocurrencies with a high level of decentralization include Bitcoin, Tezos, IOTA, Elastos and Zilliqa coins.

Pseudo-decentralized cryptocurrencies

There are cryptocurrencies that claim to comply with all the principles of decentralization, but if you dig deeper, this is far from true. What do these cryptocurrencies “hide” and how are they characterized:

• Centralized issue of coins: such cryptocurrencies do not involve mining. Their release depends on a cryptographic algorithm, in which the time of release of new coins and their quantity are predetermined. Such an algorithm is a kind of regulator that controls the release of cryptocurrency;
• Cancellation of transactions: if necessary, network arbitrators can cancel transactions, return funds to the user’s wallet and unfreeze them;
• False freedom: These cryptocurrencies are controlled to some extent by a closed group of people. For example, despite the opinions and wishes of the community, the developers and founders of the company make decisions at their own discretion;
• Subject to registration. Depending on legal regulations, many cryptocurrencies must be registered with the relevant authorities. In case of violations, they may be subject to legal proceedings;
• Your accounts may be blocked. Despite loud claims about their decentralization, some companies can confiscate or block your funds in their subsidiaries at any time if you are suspected of suspicious activity or illegal activity.

Bitcoin Cash, EOS, Tron can be classified as pseudo-decentralized cryptocurrencies.

Cryptocurrencies platforms

Cryptocurrency Exchanges
There are cryptocurrency exchanges and platforms that create their own internal tokens. Let's briefly look at their main functions:

• Universal platform tool. Such tokens are tied not to securities, but to the infrastructure of the platform, contributing to the development of the exchange and attracting new users. Platform tokens are an integral part of their ecosystem, as they are a unit of account and support the operation of the network;
• Increase in trading volumes. The exchange can pay traders a certain amount of its tokens as a reward so that traders make more trading transactions on it;
• Additional bonuses for token holders. Those who have internal platform tokens can receive a discount on participation in the IEO, which will be held on this site. Traders can use internal tokens to cover transaction fees. For example, holders of BNB tokens from Binance receive a discount on fees;
• Exchange for other tokens. If an exchange adds its own token, it will be exchanged for many popular cryptocurrencies such as Ethereum and Bitcoin, forming separate trading pairs;
• Right to vote. Holders of such cryptocurrencies can vote on issues related to the development of the platform. This opportunity is provided by HT tokens from the Huobi exchange;
• User protection. The same crypto exchange Huobi spends part of its profits to buy back its tokens, which it then transfers to the Investor Protection Fund. If users suffer any serious losses in case of hacks, they will be compensated from this Fund.

The types of cryptocurrencies from the platforms include NEM, Waves and KuCoin tokens.

Stablecoins

Stablecoins
Stablecoins are a type of digital asset with a stable price that are not subject to high price fluctuations, unlike regular cryptocurrencies. Such tokens are tied to national or digital currency, precious metals, oil, diamonds or other physical goods.

There are three main categories of stablecoins:

1. Stablecoins backed by government currencies. Let's look at their main characteristics:

• Each such token is tied to fiat currency in a 1:1 ratio, which guarantees their stability with full security. For example, Tether's USDT tokens are pegged to the US dollar. As for DigixDAO coins, they are backed by gold;
• Currency reserves are held by a centralized authority. This gives rise to such a disadvantage as centralization. That is, the security deposit is not located on the blockchain, but is placed with a third party, for example, in a depository bank, to ensure reliable protection of funds;
• Minimal risk of vulnerabilities and hacker attacks, given that the funds are located outside the blockchain;
• Strictly regulated by the state and various financial authorities. Audits are often carried out to determine whether the amount of collateral corresponds to the number of tokens released to the market;
• They are slowly being transferred to fiat, and at great expense.

2. Stablecoins backed by cryptocurrency or a range of digital assets. What is characteristic of this type of stable coins:

• Their crypto asset backing typically exceeds a 1:1 ratio due to the high volatility of cryptocurrencies. To maintain the stability of the coin even with sharp fluctuations in the exchange rate, “over-collateralization” is necessary;
• Higher level of decentralization, because you can do without the participation of a third party;
• No audits are carried out. Thanks to the high level of transparency, monitoring can be carried out by anyone;
• The least stability compared to the previous type of stablecoin, because the “life” of such a coin depends on the cryptocurrency to which it is tied.

3. Stablecoins without collateral. Their features:

• The highest level of decentralization, since the coin is not tied to either fiat or cryptocurrency;
• More complex financial policies. The stability of the exchange rate of such a coin is achieved with the help of seigniorage
  - the income received by the issuer from the issue of coins;
• Unpredictability and vulnerability in the event of a cryptocurrency market collapse.

Types of cryptocurrencies