Demystifying Cryptocurrencies: An Introduction to Cryptocurrencies for Beginners


5 mins read July 12, 2023

Cryptocurrencies have taken the world by storm, captivating people's attention with their potential and revolutionising the traditional financial landscape. If you're new to the world of digital currencies, you've probably heard of popular ones like Bitcoin, Ethereum, Tether, Solana, Cardano etc.  But did you know there are hundreds of cryptocurrencies with unique use cases? In this article, we'll delve into the fascinating realm of cryptocurrencies, covering everything from their meaning, how they differ from fiat currencies and their intriguing history.

What is cryptocurrency?

Cryptocurrencies are slowly becoming a must to learn about as their revolutionary nature changes the world as we know it. Why? They offer the benefits of traditional fiat currencies and much more, making them the interest of millions across the globe. What, then, are cryptocurrencies? The simple meaning of cryptocurrency is digital currencies. Unlike fiat currencies, they cannot be touched or moved physically. Cryptocurrencies only exist strictly in the digital form. 

What is the difference between Crypto coins and crypto tokens?

In your journey through the world of cryptocurrencies, you may come across the terms "coins" and "tokens." While these terms are often used interchangeably, they have distinct characteristics. Coins, like Bitcoin and Ethereum, operate on their blockchain and serve as a means of exchange. On the other hand, tokens, such as Tether (USDT), leverage the blockchains of existing coins, like Ethereum, to represent assets or facilitate specific functionalities.

Tokens can be a digital representation of an asset, such as NFTs or company shares, transferred from one person to another. This is distinct from coins because crypto coins do not move; only account balances change. When you transfer money from one bank to another, it does not leave your account. The bank adjusts the balances of both accounts and charges fees.

Brief History of Cryptocurrency

The idea of the existence of digital currencies has been around since the end of the 20th century. That idea was first shared with the world by David Chaum, a cryptographer when he came up with ecash which was electronic money that used cryptography to protect users’ identities. He implemented the idea through Digicash in 1995, but the company declared bankruptcy 3 years later. Although Digicash used cryptography protocols to encrypt data about a person withdrawing money from a bank and sending it to another party, it was a way to ensure that electronic transactions were untraceable.

In 1998, Wei Dai and Nick Szabo described other electronic cash systems called b-money and bit-gold. The concept behind these ideas was the existence of anonymous electronic cash. However, these concepts were never implemented.

It wasn’t until 2009 that the first cryptocurrency, bitcoin, was created. Bitcoin was developed by a person or group of persons under the pseudonym Satoshi Nakamoto. Bitcoin was first mentioned in a white paper titled "Bitcoin: A Peer-to-Peer Electronic Cash System”. Since the creation of Bitcoin, other cryptocurrencies have been created similar to bitcoin and others quite distinct from it for specific purposes.

Cryptocurrencies are built on a blockchain; for instance, bitcoin is built on a Bitcoin blockchain. The blockchain contains all the transactions on Bitcoin and records them as blocks. Learning how the Bitcoin blockchain works helps us see that new blocks are added to the blockchain through mining, which involves validating the authenticity of blocks added to the blockchain network for a reward.

Fiat Currency (Traditional currencies)  vs Cryptocurrency

Fiat currencies like dollars, naira, cedi, shillings and cryptocurrencies facilitate transactions and can be used as a store of value. Yet, certain distinct features differentiate fiat currencies and cryptocurrencies that help explain crypto better.

  1. Tangibility
    Cryptocurrencies are entirely electronic and can only be exchanged digitally, while fiat currencies can be touched and handled physically. 
  2. Centralised/decentralised nature
    Fiat currencies are issued by a central authority or governing body responsible for issuing and keeping transactions of the currency. Cryptocurrencies, on the other hand, are not issued or run by a governing authority but by thousands of nodes spread across the globe.
    This introduces another feature of cryptocurrencies which is pseudonymity. This means that cryptocurrencies provide a level of anonymity that allows anyone to perform transactions without revealing their private details. All transactions performed by a person are, however, tied to their crypto address. Banks, however, require that you reveal your personal details to own an account to store fiat currencies.
    Cryptocurrencies are borderless because of their decentralised nature, which means cryptocurrencies can go anywhere at cheaper transaction rates and faster. Fiat currencies are usually tied to a particular country or region and one would need to exchange their local currency, say Ghanaian cedis, for another country’s currency, say rand, if they were to travel to South Africa.
  3. Supply Limit
    Fiat currencies often do not limit how much of their currencies can be in supply. However, many cryptocurrencies are structured to have a finite or limited supply. For instance, there can only be 21 million bitcoins in supply. The limited supply of cryptocurrencies such as bitcoin makes it resistant to inflation (deflationary), making it a great store of value.
  4. Exchange Medium
    Fiat currencies can be exchanged physically (direct contact) and digitally (banking app, and payment platform apps such as PayPal). However, cryptocurrencies can only be transferred digitally. Therefore, you need a cryptocurrency wallet to exchange cryptocurrencies.
  5. Storage
    Fiat currencies can be stored in cash or in banks and accessed electronically. Cryptocurrencies are stored in a crypto wallet, either in cold or hot storage.

How to buy cryptocurrencies


The creation of cryptocurrencies marks a significant turning point in the financial world. They offer a fresh perspective on monetary systems and present potential advantages over traditional fiat currencies, such as decentralisation, anonymity, speed and more. Understanding these basics would equip you to navigate the ever-growing crypto space better.

Disclaimer: This article is meant to provide general guidance and understanding of cryptocurrency and the Blockchain network. It’s not an exhaustive list and should not be taken as financial advice. Yellow Card Academy is not responsible for your investment decisions.

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