Crypto Wallet, block chain, cryptocurrency mining, crypto exchange, marketplace – in this guide you will learn the most important terms around the topic of cryptocurrencies. So you are well prepared to trade Bitcoin, Ethereum & Co. and to participate in the development of cryptocurrencies.
Crypto currencies - Not only speculative
Bitcoin, Monero, Ripple and all the other cryptocurrencies are for many investors a speculative investment. This comes with some risks, but also enormous opportunities. The technical development behind the crypto-boom is unfortunately too often pushed into the background. However, the development of Bitcoin trading and block chaining is a technical revolution. In this article you will learn about the most important terms around the topic of crypto-currencies in the following in a simple and understandable way. Further you may get an idea what distinguishes cryptocurrencies apart from a strong up and down in the exchange rate,
What is a Crypto Wallet?
A Crypto wallet is comparable to an electronic wallet or a “private” current account. A wallet enables you to make transfers with crypto-currencies and to receive digital money. A transfer using Bitcoin or Ripple is basically no different from a transfer using a conventional bank account. Instead of an account number, only a receiving address is required. Because digital currencies are “transferred” directly from person to person without any intermediate authority, there are hardly any fees.
In addition, you can combine all your cryptos in one wallet, regardless of which provider you bought them from. However, you usually need a separate wallet for each crypto currency. So you need a Bitcoin wallet for Bitcoins, a Monero wallet for Moneros and a Stellar wallet for Stellar.
You can set up a wallet on your smartphone, which is perfect for daily use. But you can also store your electronic wallet on the tablet or PC.
Important: If you have installed a wallet on your device, you should protect it as soon as possible with a strong password. If you do otherwise, hackers could steal your crypto money. Write down your password and store it in a safe place. To carry out a transaction, you will then need the access code again.
You can also buy a hardware wallet, which is similar to a USB stick. Then you can transfer your digital money to this “stick” from time to time – and secure it independently of your devices.
Tip: If you lose your hardware wallet, your cryptos saved there will also be lost forever. For those of a somewhat messy nature, a smartphone wallet with a strong password might therefore be the better choice.
What is a Blockchain?
A blockchain is a database that is behind every crypto currency. All transactions are written into the blockchain one after the other. Transactions can be traced by any user at any time due to chronologically and unchangeable nature of the blockchain. This procedure can be compared to a chain, to which new elements are constantly added at the lower end.
Once a block has been completely described, the next block is created. Since each block contains a checksum of the previous block, manipulations can be prevented, even though every user has insight into the block chain. The blockchain is thus comparable to a web-based, decentralized and public accounting system that records all transactions that have ever been made.
The blockchain is the heart of the crypto technology and makes money flows independent of institutional institutions possible in the first place. Bitcoin, the best-known cryptocurrency, made it possible for the first time to carry out financial transactions without the supervision of a central state bank such as the European Central Bank ECB or the US Federal Reserve.
What is Cryptocurrency Mining?
Some cryptocurrencies, including Bitcoin and Ethereum, can theoretically be made by anyone. This process is called cryptocurrency mining. However, the prerequisite for mining is a so-called mining rig, a high-performance computer. This is particularly suitable for “producing” crypto currencies.
In addition to the necessary computing power, “prospectors” also need suitable mining software. You easily may find instructions for building a mining rig in various internet forums. Basic requirements for a mining rig are the most modern hardware components such as fast graphics cards and high performance processors.
If your expertise is more in the stock market we would not recommend cryptocurrency mining without special IT knowledge.
What is a Crypto Exchange?
If you want to buy the crypto currency Bitcoin, you can do so on a so-called Bitcoin marketplace. Crypto traders trade directly with each other. The price is formed by supply and demand. A transaction is concluded when an offer by one user is accepted by another user.
Depending on the marketplace, the operators charge a small fee for the exchange, for the deposit and for the payment of the money. If you want to trade on a crypto exchange, you need to open an account.
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