Cryptocurrency, or crypto, is digital money that operates separately from traditional banks. Its growing popularity offers new ways to invest, trade, and make payments globally.
However, understanding how crypto works and knowing where to start can be challenging for beginners. This guide breaks down the basics, from understanding how crypto works to buying your first cryptocurrency.
What is Crypto?
Crypto, short for cryptocurrency, is a form of digital money that operates independently of banks and traditional financial systems.
The term “cryptocurrency” comes from “encryption,” as it uses a secure system called blockchain to verify transactions, which makes it different from other digital currencies. This allows anyone, anywhere, to send and receive funds without a bank.
Cryptocurrencies are fungible, meaning each unit is valued equally to another of its kind, similar to traditional money. Since you can buy sell or exchange cryptocurrencies freely, they’re often treated as investments or used for purchases where accepted.
The first cryptocurrency, Bitcoin, was launched in 2009 and remains the most popular and widely used. It led the way for the hundreds of cryptocurrencies that now exist on a blockchain.
How are cryptocurrencies created?
Mining is mostly associated with Bitcoin and some other major cryptocurrencies.
However, not all cryptocurrencies rely on mining. Some use alternative processes, like staking, where cryptocurrency holders lock up a portion of their funds to support the network and earn rewards.
Both mining and staking help secure the network and introduce new coins in a controlled way.
How does cryptocurrency work?
Cryptocurrencies operate on a blockchain network, a system that records and secures every transaction. Most cryptocurrencies are created through mining, which ensures transactions are verified and added to the blockchain.
Blockchain
If you have heard of cryptocurrency, you’ve likely heard of blockchain. Blockchain technology is the backbone of most cryptocurrencies, acting as a secure digital ledger. It stores records of transactions across a network of computers linked together in a peer-to-peer system.
A blockchain comprises data “blocks” connected in a chronological “chain,” making it nearly impossible for transactions to be hacked or manipulated.
Every time a new transaction is made, it’s added as a new block and is visible to everyone on the network. Multiple copies of the blockchain exist across computers in the network, and all copies must match for the data to be valid.
This system ensures that cryptocurrency transactions are transparent and traceable.
Decentralized Finance (DeFi)
Most cryptocurrencies operate in a decentralized way, so no single individual, company, or government has complete control. Instead, everyone who holds the cryptocurrency shares ownership collectively.
This decentralized structure is key to how cryptocurrencies operate independently from traditional banks or financial institutions.
Cryptocurrencies also use cryptography to secure transactions, adding an extra layer of protection.
Peer-to-Peer Transactions
Cryptocurrencies often support peer-to-peer (P2P) transactions, allowing the sending of funds directly from one person to another without needing a bank or intermediary. This setup is made possible by digital wallets, which enable users to send, receive, and manage their crypto securely.
One potential drawback of P2P transactions is that they can make it harder to resolve issues or disputes, as there’s no bank or third party to step in.
Luckily, not all cryptocurrency transactions rely solely on P2P. Some platforms or exchanges act as intermediaries to facilitate and oversee transactions, offering a more traditional approach for users who prefer it.
Types of cryptocurrency
- Payment Cryptocurrencies: These are designed as digital money for buying goods and services (e.g., Bitcoin, Litecoin).
- Tokens: Tokens are digital assets on existing blockchains, often used in applications or platforms (e.g., Ethereum tokens for smart contracts).
- Stablecoins: Stablecoins refer to cryptocurrencies tied to stable assets like the US dollar to reduce price volatility (e.g., USDT, USDC).
- Utility Tokens: These are tokens used within a specific platform or network to access services, pay fees, or unlock features (e.g., Ethereum’s Ether, Binance Coin on the Binance platform).
Popular Cryptocurrencies (Examples)
Thousands of cryptocurrencies exist, but the top 20 cryptocurrencies make up 90% of the total market. Here are some of them:
Bitcoin (BTC)
Bitcoin, introduced in 2009 by an individual or group under the pseudonym Satoshi Nakamoto, is the first and most well-known cryptocurrency. It was created to enable peer-to-peer electronic cash transactions without relying on trust.
One of the earliest notable Bitcoin transactions involved a user exchanging 10,000 BTC for two pizzas in 2010. Now, 1 Bitcoin is worth tens of thousands of dollars.
Ethereum (ETH)
Launched in 2015, Ethereum is a blockchain platform featuring its own cryptocurrency, Ether (ETH). It introduced the concept of smart contracts, allowing developers to build decentralized applications (DApps) on its network. Ethereum is the second most popular cryptocurrency after Bitcoin.
Litecoin (LTC)
Litecoin, created in 2011 by Charlie Lee, is a decentralized peer-to-peer cryptocurrency designed for secure, borderless, and instant transactions. It offers faster transaction confirmation times and a different hashing algorithm compared to Bitcoin.
Tether (USDT)
Tether is a stablecoin pegged to the US dollar, aiming to provide stability in the volatile cryptocurrency market. Each Tether token is intended to be backed by one US dollar, maintaining a 1:1 value ratio.
Solana (SOL)
Solana is a high-performance blockchain platform supporting decentralized applications and crypto-currencies. It is known for its fast transaction speeds and low costs, making it one of Ethereum’s biggest competitors.
Getting started with cryptocurrency
There are several ways to buy cryptocurrency: through crypto exchanges, brokerages, payment services, or Bitcoin ATMs. Each method has unique benefits depending on your needs.
Brokerages
Some traditional brokerages now offer cryptocurrency trading alongside stocks, bonds, and ETFs. Though the cryptocurrency features may be limited and trading costs often lower, brokerages are ideal if you are interested in trading a range of asset types on a single platform.
For example, eToroUSA allows trading in over 24 cryptocurrencies, while Robinhood offers commission-free crypto trades. Other brokerages like Interactive Brokers and TradeStation also support limited cryptocurrency trading options.
Payment Services
Popular payment apps like PayPal, Cash App, and Venmo also enable cryptocurrency purchases. These services are convenient for users already familiar with these platforms, although their crypto features may be simpler than dedicated exchanges.
Crypto Exchanges
Crypto exchanges are the most popular way to buy cryptocurrency. They offer various coins and usually charge fees based on the asset.
Beginner-friendly exchanges like Mular make it easy to buy, store, and swap between cryptocurrencies within the platform. Other well-known exchanges include Binance, Kraken, Gemini, and Bybit.
When choosing an exchange, it’s important to consider which cryptocurrencies they offer, their fees, transparency, and how easy it is to withdraw or perform transactions.
Bitcoin ATMs
Bitcoin ATMs allow you to buy cryptocurrency with cash and are available in thousands of locations. However, they often come with high fees and may not be available in every country. These machines are convenient if you prefer to buy in person, but check availability in your area.
How to Buy Crypto
1. Choose a crypto provider
While there are several crypto exchanges, If you’re new to crypto, a beginner-friendly platform like Mular is a solid choice. Mular offers four popular cryptocurrencies—Bitcoin, Ethereum, Solana, and USDT—and functions as both a wallet and exchange. You can easily swap between cryptocurrencies, pay bills, and make purchases, with the option to spend directly as naira.
2. Sign Up
To get started on Mular, download the app from the Play Store or App Store. Once installed, use your email address and password to create an account. Verify your email address, which takes only a few minutes.
3. Complete KYC Verification
Mular requires Know Your Customer (KYC) verification to keep your account secure. Complete this by verifying your identity using your BVN and a government-issued ID. This step helps protect your account and ensures safe transactions.
4. Fund Your Wallet
Once you’re verified, it’s time to fund your wallet. Open your dashboard and select the “Fund” option.
- If someone wants to send you crypto, such as a friend or client, choose “Receive” for USDT, Bitcoin, or any other cryptocurrency you wish to receive. Select the appropriate network, then copy and share your wallet address with them.
- Alternatively, you can fund your account with a bank transfer. This option allows you to send naira directly to your Mular wallet.
5. Buy Crypto with Naira
To purchase cryptocurrency using naira, go to the “Swap” option on your dashboard. Here, you can convert naira to USDT and swap USDT for other cryptocurrencies like Bitcoin, Ethereum, and Solana. Enter the amount you want to buy, and it will be converted at the current exchange rate. Swaps are quick, taking just a few seconds.
6. Invest, Save, or Make Purchases
Once your crypto is in your wallet, you can:
- Invest in crypto as a longer-term asset.
- Save in dollars for more stability.
- Pay for goods and services directly from your crypto wallet.
This flexibility makes Mular a versatile choice for new and experienced crypto users.
Frequently Asked Questions
Get all your crypto-related questions answered.