What is Cryptocurrency? A Complete Beginners Guide to Crypto & Cryptocurrencies

MyBricks Finance
10 min readFeb 4, 2022

In January 2021 it was estimated that around 106 million people across the globe had invested in crypto. By January 2022, that estimate had almost trebled, with Crypto.com approximating that more than 295 million people had invested in crypto — an increase of 189 million in just 12 months.

Unbelievably, those numbers are showing no signs of slowing down…

In fact, Crypto.com has predicted that over 1 billion people will have invested in crypto by the end of 2022 — a potentially staggering 1,000% increase in the space of just 24 months.

With mass-adoption on the horizon and 1,000’s of new people hearing and thinking about investing in crypto every single day, there’s naturally dozens of people asking the same question: what is cryptocurrency and how does it work?

With that said…

Welcome to the MyBricks beginners guide to crypto & cryptocurrencies.

Here’s what we’re going to cover off:

  • What is a currency?
  • What is a cryptocurrency?
  • Who created Bitcoin, the first cryptocurrency?
  • What is the blockchain?
  • Where can you buy and sell cryptocurrencies?
  • What is cryptocurrency mining?
  • Where do you store cryptocurrencies?
  • What’s in store for the future of crypto?

First up, let’s talk currencies…

What is a currency?

Before we dive deeper into cryptocurrencies, let’s discuss currencies in a more general sense.

Currency stands for: “money currently in use”.

To properly understand what that means, let’s pretend you can travel in time:

  • You travel back in time to 10,000 BC and approach a farmer to buy some of their land… in return they’ll likely ask for grain or livestock.
  • Now, let’s say you travel forward 5,000 years to 5,000 BC and approach a farmer to buy that very same patch of land… this time the farmer will most likely ask you for some sort of metal.
  • Finally, let’s say you travel forward another 5,000 years to Ancient Rome and approach yet another farmer for that same piece of land… this time the farmer will likely ask you for a brass coin (or a gold coin if the farmer deems the land to be worth that).

Noticed what’s happened?

Currencies, i.e. the money currently in use, has changed over time.

Nowadays we use the currency that our governments tell us to use:

  • Sterling in the UK
  • Yen in Japan
  • Dollars in the US

We use these currencies because we have faith in our governments and in our banks, so there’s a demand for it and it has intrinsic value.

Ultimately, however, those banknotes in your wallet are no more than just a bit of paper with a number scribbled on. And if we didn’t have faith in our governments and our banks and therefore our local currency, there’d be no demand for it and the whole system would fail.

Cryptocurrencies are just another type of currency that has value because there’s a demand for it.

If cryptocurrencies didn’t have that demand, they too would fail.

What is cryptocurrency?

Now that you know how currencies work, let’s talk cryptocurrencies…

In their absolute simplest form, cryptocurrencies are decentralised digital currencies designed to pay for things over the Internet.

The first cryptocurrency, Bitcoin, launched in 2009 as a result of the 2007–08 financial crisis. Its creator, Satoshi Nakamoto (more on this later on), feared that banks had become untrustworthy as a result of their influence over the world economy and how it handled our money (risky loans, expensive processing fees etc.), so we therefore needed a new system whereby people could send ‘money’ to one another (otherwise known as peer to peer) without needing to go through a centralised bank.

Enter Bitcoin…

Crucially, as cryptocurrencies are decentralised (i.e. not owned by one main entity), they offer some key advantages over traditional FIAT currencies (FIAT meaning government-issued currencies, like the US Dollar, for example):

  • Cryptocurrency supply is typically finite (for example, Bitcoin has a maximum supply of 21 million). FIAT currencies, on the other hand, can be printed as governments see fit, which can lead to inflation
  • Storing FIAT currencies sometimes requires paying bank fees, which is not the case with cryptocurrencies
  • International FIAT transfers sometimes require permission from governments; again not the case with cryptocurrencies as the entire process is decentralised

These advantages have led to crypto being one of the most popular asset classes of the last decade:

  • As of January 2022, there are over 8,000 cryptocurrencies in existence
  • El Salvador has adopted Bitcoin as it’s national currency
  • Global brands such as Nike, Microsoft, Steam, BMW, KFC, Booking.com, Paypal, Coca Cola etc. have all started accepting cryptocurrency as forms of payment
  • Almost 300 million people have now invested in crypto

With this huge growth in popularity, people have naturally found new ways to utilise cryptocurrencies in more ways than just paying for things over the Internet, which is why you’ll notice crypto being rapidly deployed into some of the largest global industries in the world like banking, tourism, gaming, art, property investing and more.

All of this is possible because of the blockchain, which we’ll touch on in a minute.

Who created Bitcoin, the first cryptocurrency?

As we’ve already uncovered, Satoshi Nakamoto is the name of the creator of the world’s first cryptocurrency, Bitcoin. The (likely pseudonymous) name appears on both the original Whitepaper released in 2008 and on the original Bitcoin software released in 2009.

Whilst many people and groups of people have come out and claimed to be Satoshi Nakamoto, nobody truly knows who they are.

We’re not even sure if it’s a single person or a group of people…

In truth, we’ll probably never uncover their true identity, but their contribution to where we are today in terms of the future of blockchain technologies and cryptocurrencies, cannot be understated.

What is the blockchain?

Blockchain technology is new, complex and often regarded as the biggest thing in the digital world after the launch of the Internet, but what exactly is it?

The simplest way to think about the blockchain is to think of a database.

This ‘database’ stores irreversible, incorruptible and distributed records of information. For example, if you send 1 Bitcoin to your friend, that transaction will be publicly stored on the blockchain, or database in our example, forever.

Crucially, the utility of the blockchain extends further than just peer to peer payments.

The blockchain can be used for supply chain management, digital ID (as being tested by Microsoft), retail loyalty programs, voting systems, medical-record keeping and so much more.

It’s use case is endless because it’s:

  • Decentralised: No single entity controls what is entered on the blockchain; all transactions are validated to avoid manipulation
  • Transparent: Everybody can see transactions on the blockchain made by an individual, but cannot know the true identity of that individual
  • Immutable: Records added to the blockchain cannot be reversed and tampered with

If you’re looking for a more detailed explanation of what the blockchain is and how it works, check out this comprehensive guide aptly called “WTF is the Blockchain

Where can you buy and sell cryptocurrencies?

Thankfully it’s incredibly easy to buy and sell cryptocurrencies nowadays compared to 2009 when Bitcoin was first created.

Interestingly, it was rare to buy Bitcoin back then; most were discovered through mining (more on this below) or exchanged for something else; like the guy that exchanged 10,000 Bitcoins for a pizza (in case you’re wondering, that means that when a single Bitcoin is priced at $37,500, the total cost of that pizza is over $370,000,000… hopefully it tasted nice 🙂).

Centralised exchanges, like the ones below, are the reason it’s easier:

  • Coinbase
  • Binance
  • Kucoin
  • Robinhood
  • OKEx

These centralised exchanges allow any crypto beginner to buy and sell cryptocurrencies in just a few minutes.

All you need to do is download their respective apps on your phone, complete a couple of security checks, connect your bank card to fund your account and you’re done. You can start investing in crypto.

The one thing that’s worth considering are the fees that you’ll pay when trading on the exchange. You can use this website here to compare cryptocurrency exchange fees or just head to Google and search for “Compare cryptocurrency exchange fees”.

What is cryptocurrency mining?

Buying cryptocurrency from a centralised exchange isn’t the only way to get your hands on some crypto.

You can also get it by mining it.

And by mining it, we don’t mean people are digging the earth in search of Bitcoin. Cryptocurrency mining is where people (or people’s computers) solve complex functions and record data to the blockchain and then collect cryptocurrency as a reward.

Sound confusing?

In other words, miners are verifying that a transaction has happened and that person A has sent a cryptocurrency to person B.

This is done to stop the ‘double spending’ issue.

To give you some context: When you hand somebody a £10 note for a crate of beer, that £10 note is no longer in your possession, so there’s absolutely no risk of you heading to the shop next door and spending that same £10 note on a box of chocolates.

This is similar to what a miner does.

They verify the transaction and ensure that the cryptocurrency has moved from person A’s wallet to person B’s wallet, therefore ensuring person A is unable to spend the same cryptocurrency twice.

As a reward for their hard work, the miner is given cryptocurrency to spend as they wish.

By the way, we’ve made it sound simple, but cryptocurrency mining is extremely complex and you’ll need immense computing power in order to do it and make money from it.

You can read all about the intricacies of mining cryptocurrencies here.

Where do you store cryptocurrencies?

In the same way that we keep our cash and cards in a wallet, cryptocurrencies need to be stored somewhere so that you can access it should you ever need to sell it or use it for something else.

Generally, cryptocurrencies can be stored in three ways:

Custodial / Exchange wallet

When you buy cryptocurrencies from an exchange like Binance & Coinbase, your crypto is stored in what’s called a custodial wallet, i.e. a wallet that’s in the custody of the exchange.

Whilst it’s the simplest and cheapest option to storing crypto, it’s also the riskiest. There have been multiple instances where exchanges have been hacked and their user’s crypto stolen (like Bitmart in December 2021, when over $150 million was stolen).

If you choose this option, ensure that the exchange has a reputation for top security and maybe only keep a nominal amount of crypto inside.

Hot wallet

A hot wallet is the next step up in security; this is where your crypto is stored in an application like Trust Wallet or MetaMask, outside of an exchange.

Hot wallets are free, easy to use and are only accessible on your device. In order to access the wallet on other devices, you’ll need to input a specific recovery phrase that only you will know. Hot wallets are prone to hacking, however, especially if you try and access some unfriendly websites!

Also, if your device is stolen and the thieves access your wallet, they’ll not only have your device, they’ll also have access to your cryptocurrency to do as they wish.

Cold wallet

A cold wallet, or a hardware wallet as it’s sometimes referred to, is a small device that stores your crypto offline. The only way to access your crypto is to connect it to a computer and from there, connect it to the Internet.

It’s without a doubt the safest method of storing crypto because it’s disconnected from the Internet, but it can be a little inconvenient if you’d like quick, instant access to your crypto.

What’s in store for the future of crypto?

Since the launch of Bitcoin in 2009, the crypto landscape has changed almost beyond belief.

Cryptocurrencies are no longer exclusively used as a means for peer to peer payments. Instead, we’re seeing cryptocurrencies and blockchain technology being utilised as a gateway to other opportunities; NFTs perhaps being the best example.

As we head into the future, it’s almost inevitable that this integration between cryptocurrency and the ‘real world’ will become seamless and reach mass-adoption.

We, MyBricks, are an example of that as we seek to use cryptocurrency (BRICKS), blockchain technology and NFTs as a means to lower the barriers to entry in the property space.

Head over to our website to find out more and see how you can get involved in the future of property investment.

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