An Introduction to Crypto (Simplified for Beginners)

What does crypto mean?

Crypto is just a broad term that doesn’t give justice to what Is happening in the “Crypto” world. Let me explain.

What do you picture when you hear the word “Crypto”?

If you’re new to the crypto world, you might think of all of the hype around Bitcoin, Elon Musk & Dogecoin, or maybe even some story you heard about a picture of a rock selling for a million dollars. (yes, that did actually happen).

Although there is a lot of hype in the crypto world right now, there is also a lot of exciting stuff being built. Stuff with real-world utility. Stuff that could change how money works.

Who is using Crypto technology?

Almost every government and business around the world are diving into the crypto world in one way or another, trying to figure out how they can leverage this new technology themselves.

Check out some of these articles:

“As the Fed considers minting the first digital dollar, it is tapping experts from a crypto company with a stake in the outcome” (Washington Post)

“Ukraine Buys Military Gear With Donated Cryptocurrencies” (Bloomberg)

“An Apple Wallet Upgrade Will Enable Merchants to Accept Crypto With a Tap of an iPhone” (Inc)

“Uber will ‘absolutely’ accept bitcoin as payment in the future, CEO says” (NY Post)

“Disney is hiring experts to spearhead its NFT ambitions” (Business Insider)

So if governments and big businesses are getting involved, don’t you think you should learn about what is going on to better understand the Crypto World?

Crypto defined

To start, it’s best to think of the word “Crypto” as an umbrella term.

The crypto space includes several different areas that are growing rapidly.

This includes:

Blockchains (The foundation of Cryptocurrencies)
Smart Contracts (Such as Ethereum)
DeFi (Decentralized finance)
NFTs (Non-Fungible tokens)
DAOs (Decentralized Autonomous Organizations)
Web 3.0 (Think “Decentralized Internet”)

These are just some popular areas the crypto world is currently expanding into.

For the sake of this blog post (and to keep things as simple as possible), we aren’t going to cover everything in detail.

The goal of this blog post is to give you a simple understanding of the crypto world in general. So keep that in mind.

This isn’t the “end all be all” blog post. I am going to simplify everything as much as possible. I encourage you to do additional research into the concepts that you find interesting.

My goal is to help you realize that there is more to the Crypto world than dogecoin or million-dollar pictures of rocks being sold.

The crypto space is growing rapidly, and new projects are being developed every day.

Although there are a lot of opportunities in the Crypto world, extreme caution should be taken. Many of the projects around today likely won't be around in the future.

The best way to think of the crypto world is to think of it as “the wild wild west.” There are very few rules, and things are changing rapidly.

But with that rapid change brings opportunity.

So why should anyone care about Crypto?

Decentralization (no middleman)
Transparency (everything is shown on the blockchain)
Innovation (smart contracts can change how business is done)
Speed (transactions are faster than traditional banks)
Security (can be stored to prevent hacks)
Trust (you’re in charge of your money, not a bank)

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Now don’t get me wrong. The crypto world is far from perfect. There are a lot of problems that still have to be worked through.

The best way to think of the crypto world is to think of it at the same stage as the internet was back in the 1990s.

It’s not perfect. And it’s not user-friendly.

But one thing is for sure: crypto technology is here to stay.

Yes, most of the projects around today will likely fail. But the world Is changing before our eyes. A lot is going to change over the next few decades.

Let me quickly talk about each of the areas I mentioned at the beginning of this blog post to give you a better scope of what is going on in the crypto world.

Again, this blog post is only meant to give you a broad scope of the crypto world. I can’t possibly go into detail about every area of the crypto world without writing an entire book.

Before we dive in, let me quickly define two crucial terms.

Important Crypto Definitions

Blockchain: In a nutshell, a Blockchain is just a growing chain of blocks (think of them like records) that holds information of transactions taking place all over the web. The blockchain is a way to store data securely. Every block contains data of transactions and is organized in the order that they were received.

Smart Contracts: To put it simply, a smart contract is a contract that is automatically executed once the terms of the contract are met. One of the most popular smart contract cryptocurrencies is Ethereum. These contracts run on a decentralized blockchain where the contract details are open to view, and the rules cannot be changed.

#1: Cryptocurrencies (Bitcoin/Ethereum)

The two most popular Cryptocurrencies are Bitcoin and Ethereum.

There are several other cryptocurrencies with several different purposes. You can see all of the top cryptocurrencies (sorted by market cap) by heading over to CoinMarketCap.

Here is a list of the top 5 cryptocurrency projects from CoinMarketCap, sorted by their market cap as of 3/08/2022:

To keep things simple, we are only going to talk about the top two cryptocurrencies: Bitcoin and Ethereum.

In their simplest form:

Bitcoin is considered an actual “currency” in the crypto world. A store of value, if you will. Some call it digital gold. Think of bitcoin as the “dollar” of the internet.

Some people consider Bitcoin as a way to essentially exit the current financial system and hedge against it.

Whereas you can think of Ethereum as the “infrastructure” of the crypto world.

How? Because Ethereum can be fully customized thanks to its “smart contract” technology.

Think of Ethereum as the building blocks of the crypto world.

There are several competitors to both Bitcoin and Ethereum. And there is no guarantee that either of the two will be the “ones” that accomplish what they say they will do.

The crypto project that is actually able to “change the world” might not even be around yet.

#2: DeFi (Decentralized Finance)

This is the space I’m most excited about. The finance world is long overdue for some disruption. The best way to think of “DeFi” is that it gives people the ability to be their own banks. Hence, the Decentralized Finance part.

There are projects in the DeFi world that allow people to take out loans, earn interest on their crypto, or even pool money together with a bunch of other investors to invest in different things.

Here is a list of projects on the Ethereum blockchain organized by financial and technical categories:

*Image Source:* *DeFi Interactions— Composition of Objects and Actions*

The possibilities are limitless in this space. And the beauty of it all is that it does all of this without relying on middlemen such as banks by using smart contracts on the blockchain.

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#3: NFTs (Non-Fungible tokens)

I’m sure by now, almost everybody has heard about NFTs.

Especially after the viral story of a Rock NFT selling for $1.3 Million.

So what is an NFT?

An NFT is any digital token that lives on the blockchain, making it unique and verifiable. In other words, NFTs are essentially proof-of-ownership records that are stored on the blockchain.

Many people roll their eyes at NFTs because they hear the stories of people making wild speculations trying to get rich.

Yes, there is a lot of hype. Yes, there is a lot of people trying to get rich quickly. And whenever that occurs, there will inevitably be people who try and take advantage of that by scamming others.

However, there is more to NFTs than meets the eye.

It doesn’t only have to be art.

For example, someone could build a digital registry where instead of having a paper title for something you own like a car, you could own the NFT. This would be better than a paper title in the sense that all the knowledge of the title would be publicly verifiable and impossible to copy if this was implemented correctly.

I’m not saying this is where things should go next with NFTs, but there are real use cases that could be implemented with this technology.

#4: DAOs (Decentralized Autonomous Organizations)

Before we dive into a DAO, let’s talk about what a Centralized Organization is.

A centralized organization is any modern-day existing company or government. It’s an organization or government that is centrally managed by a select group of people.

A Decentralized Autonomous Organization (DAO) on the other hand, is a type of organization that isn't managed by people. It’s managed by the blockchain. This allows a DAO to function by itself without the need for any centralized human control.

DAOs automate functions that would've otherwise been done by humans, through the use of many smart contracts.

DAOs operate by a token system where holders of the tokens get voting rights to make decisions and changes. This encourages its community to vote on changes that will be in the best interest of the organization as a whole, limiting any potential for corruption of those who would normally be at the top.

*Image Source:* *A Complete Guide To Get You Started In DAOs*

#5: Web 3.0 (“Decentralized Internet”)

Generally speaking, Web 3.0 indicates major changes in the way we use the internet.

In a nutshell, web 2.0 was the transition from static desktop (as seen below) websites to data-driven mobile websites (such as Facebook, Twitter, etc).

Web 3.0 refers to the new era we are possibly entering. For example, it may soon be possible to have “one profile” that works across the entire internet, rather than needing to create a new account for each platform, thanks to the blockchain.

Let me explain this a bit better.

Web 1.0 is the term used for the earliest version of the Internet. This was essentially the “first stage” of the internet evolution.

Web 2.0 refers to the era we are currently in. Think Facebook, Google, Twitter, etc. Where websites are user-friendly and emphasize user-generated content. The internet is essentially centralized among the platforms that have built infrastructure to make it easier for people to use.

Web 3.0 refers to the new era we are possibly entering, thanks to the blockchain. The idea behind Web 3.0 is that you get to own your data, everything is transparent and secure, you can get paid for ad revenue instead of companies like Google/Facebook.

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Should you Invest in Crypto?

Well, first off, I wouldn't invest anything you can't afford to lose.

Although there are a lot of opportunities in the Crypto world right now, there is also a lot of risks.

As a general rule: never invest what you can’t afford to lose. Especially in the crypto world. 99% of the projects around today will likely fail.

Whatever you decide to do, I highly recommend doing your own research and not investing in anything until you fully understand what you're getting into.

There are a lot of moving parts in this space, and the crypto world is constantly changing.

I hope this blog post helps give you a better understanding of the crypto world.

If you want to learn more, I encourage you to spend some time on YouTube and Google learning about each of the topics we went over in this blog post.

There is so much to learn in this space, and it’s almost impossible to be fully up to date with everything going on.