This guide is designed to introduce you to the basic principles of cryptocurrencies in a straightforward and easy-to-understand manner. By the end of this guide, you will have a solid understanding of what cryptocurrencies are and how to trade them.
Blockchain
A blockchain is a decentralized, distributed database that is used to maintain a continuously growing list of records, called blocks. Each block contains a timestamp and a link to the previous block, and it is secured using cryptographic techniques.
Blockchains are designed to be resistant to data modification, which means that once data is recorded on a blockchain, it is very difficult to change or delete. This makes them useful for storing records that need to be verifiable and permanent, such as financial transactions or medical records.
Blockchains are used in a variety of applications, including cryptocurrency, supply chain management, and voting systems. The most well-known example of a blockchain is the Bitcoin blockchain, which is used to track the ownership and transfer of the cryptocurrency called Bitcoin.
Bitcoin
Bitcoin is a decentralized digital currency that uses cryptography for security and is not controlled by any government or financial institution. It was created in 2009 by an anonymous individual or group of individuals under the pseudonym Satoshi Nakamoto.
Bitcoins are created through a process called “mining,” which involves using specialized computers to solve complex mathematical equations. These equations verify transactions on the Bitcoin network and add them to the blockchain, a public ledger of all Bitcoin transactions.
Users can send and receive bitcoins electronically for an optional transaction fee using software on their computer or mobile device. Transactions are recorded on the public ledger, and the transfer of ownership of the bitcoin is verified by network nodes through cryptography.
Bitcoin has gained popularity as a store of value and a means of exchange, and it is accepted by some merchants as a form of payment. However, it is also subject to significant price volatility and has been the subject of controversy due to its association with illegal activities.
Bitcoin was created by an anonymous individual or group of individuals using the pseudonym Satoshi Nakamoto. The identity of Satoshi Nakamoto has never been revealed, and the person (or people) behind the pseudonym has remained anonymous.
The concept of Bitcoin was first described in a white paper published in 2008 by Satoshi Nakamoto. The first version of the Bitcoin software was released in 2009, and the Bitcoin network went live in January of that year.
Since the release of the Bitcoin white paper, there have been several claims about the identity of Satoshi Nakamoto. However, none of these claims have been definitively proven, and the true identity of the creator of Bitcoin remains a mystery to this day.
Altcoins
Altcoins are alternative cryptocurrencies to Bitcoin. They are digital currencies that use cryptography and a decentralized ledger, similar to Bitcoin, but they have their own blockchain and are not directly tied to Bitcoin.
Altcoins can be created for a variety of purposes, such as to improve upon the features of Bitcoin, to address specific use cases, or to serve as a means of exchange for a particular community or industry. Some examples of altcoins include Ethereum, Solana, and Ripple.
Altcoins can be traded on cryptocurrency exchanges, and their value is determined by supply and demand in the market. Some altcoins have gained significant value and have become popular among investors, while others have failed to gain traction or have lost value over time.
It’s important to note that investing in altcoins, like any other investment, carries risks and should be approached with caution. It’s always a good idea to thoroughly research an altcoin before investing in it and to diversify your portfolio to spread risk.
Ethereum
Ethereum is a decentralized, open-source blockchain platform that enables the creation of smart contracts and decentralized applications (DApps). It was developed by Vitalik Buterin in 2014 and launched in 2015.
Like Bitcoin, Ethereum uses a blockchain to record transactions and track the ownership of digital assets. However, Ethereum’s blockchain is designed to be more flexible and programmable than Bitcoin’s, allowing developers to build a wider range of applications on top of it.
One of the key features of Ethereum is its support for smart contracts, which are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the transactions are transparent, and the contracts can be executed automatically when certain conditions are met.
Ethereum has its own programming language, called Solidity, which is used to write smart contracts and DApps. Ethereum’s native cryptocurrency is called Ether, which is used to pay for transaction fees and the execution of smart contracts on the Ethereum network.
Ethereum was founded by Vitalik Buterin, who is a Canadian-Russian programmer and cryptocurrency researcher. Buterin first became interested in cryptocurrency in 2011 and eventually co-founded Bitcoin Magazine, a publication focused on Bitcoin and blockchain technology.
In 2013, Buterin published a white paper outlining his vision for Ethereum, which he saw as a platform that would allow developers to build a wide range of decentralized applications (DApps) using smart contracts. He launched Ethereum in 2015 and it has since become one of the most widely used blockchain platforms in the world.
Buterin currently serves as the chief scientist of the Ethereum Foundation, a non-profit organization that supports the development of Ethereum. He is also actively involved in the Ethereum community and has made numerous contributions to the development of the platform.
Solana
Solana is a decentralized, open-source blockchain platform that aims to provide fast, secure, and scalable transactions for decentralized applications (DApps). It was developed by Solana Labs and launched in 2020.
One of the key features of Solana is its high transaction throughput, which is achieved through the use of a proof-of-stake (PoS) consensus algorithm and a data structure called a “gossip graph.” This allows Solana to process thousands of transactions per second, making it one of the fastest blockchain platforms currently available.
Solana also has a number of other features designed to make it suitable for decentralized applications, including low transaction fees, support for smart contracts and DApps, and a decentralized governance system. The native cryptocurrency of the Solana network is called SOL, which is used to pay transaction fees and to incentivize network participation.
Solana has been adopted by a number of decentralized finance (DeFi) projects and has gained significant traction in the crypto community.
Solana was founded by Anatoly Yakovenko, who is currently the CEO of Solana Labs. Yakovenko has a background in software engineering and previously worked at Qualcomm and Dropbox before founding Solana in 2017.
Solana Labs is a software development company that is based in San Francisco that focuses on building decentralized infrastructure and applications. In addition to developing the Solana blockchain, the company also provides tools and resources for developers to build on the platform.
Smart contract
A smart contract is a self-executing contract with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the transactions are transparent, and the contracts can be executed automatically when certain conditions are met.
Smart contracts are often associated with blockchain technology, as they can be stored and replicated on a blockchain network. This makes them transparent, immutable, and secure, as they cannot be altered or deleted once they have been recorded on the blockchain.
Smart contracts can be used to automate a wide range of processes, including financial transactions, supply chain management, and voting systems. They can also be used to facilitate the exchange of goods, services, and other assets in a transparent and trustless manner.
To use a smart contract, the parties involved must agree on the terms and conditions of the contract and then encode them into the smart contract. Once the contract is deployed on the blockchain, it can be triggered by events or actions that are defined in the contract code.
Smart contracts have the potential to revolutionize the way that contracts are created and enforced, as they can facilitate the automatic execution of contract terms without the need for intermediaries or manual processes.
Cryptography
Cryptography is the practice of secure communication in the presence of third parties. It involves the use of mathematical algorithms and protocols to encode messages in such a way that they can be transmitted securely and can only be decrypted and read by the intended recipients.
Cryptography is used in a variety of applications, including email, online banking, and secure communication over the internet. It is also used in blockchain technology, where it is used to secure and verify transactions on the blockchain and to ensure the integrity and immutability of the data stored on the blockchain.
There are two main types of cryptography: symmetric-key cryptography and public-key cryptography. In symmetric-key cryptography, the same secret key is used for both encryption and decryption. In public-key cryptography, a pair of keys is used, with one key being used for encryption and the other for decryption.
Cryptography is a complex field that involves the use of advanced mathematical concepts and techniques. It is constantly evolving, with new algorithms and protocols being developed to meet the changing needs of users and to keep pace with advances in technology.
The Basics of Cryptography
Encryption: this is the process of converting plaintext (readable information) into ciphertext (encrypted information) using an encryption algorithm and a secret key. The encrypted information can only be decrypted and read by someone who has the secret key.
Decryption: this is the process of converting ciphertext (encrypted information) back into plaintext (readable information) using a decryption algorithm and the secret key.
Secret key: this is a piece of information that is used in conjunction with encryption and decryption algorithms to encrypt and decrypt data. The key is kept secret and is known only to the sender and the intended recipient of the message.
Public key: in public-key cryptography, a pair of keys is used, with one key being used for encryption and the other for decryption. The encryption key is made publicly available, while the decryption key is kept private.
Hash function: a hash function is a mathematical algorithm that takes an input (called a “message”) and produces a fixed-size output (called a “hash” or “message digest”) that is unique to the input. Hash functions are used to verify the integrity of data and to ensure that it has not been tampered with.
Digital signature: a digital signature is a way of verifying the authenticity of a digital document or message. It uses a combination of a private key and a hash function to create a unique signature that can be verified using the corresponding public key.
Cryptocurrency
Cryptocurrency is a digital or virtual currency that uses cryptography for secure financial transactions. It is decentralized, meaning it is not controlled by any government or financial institution. Cryptocurrencies are based on a distributed ledger technology called blockchain, which allows for secure and transparent record-keeping of transactions.
Some examples of well-known cryptocurrencies include Bitcoin, Ethereum, and Solana.
How does cryptocurrency work?
Cryptocurrencies use decentralized technology to allow for secure financial transactions. Transactions are recorded on a public ledger called a blockchain, which is a decentralized database that is managed by a network of computers. The computers in this network validate and record transactions using complex algorithms.
Each cryptocurrency has its own blockchain, and transactions are recorded on the specific blockchain for that cryptocurrency. For example, Bitcoin transactions are recorded on the Bitcoin blockchain, while Ethereum transactions are recorded on the Ethereum blockchain.
To make a transaction using cryptocurrency, you will need a digital wallet. This is a software program that stores your cryptocurrency and allows you to send and receive coins. You can think of it as a virtual bank account for your cryptocurrency.
To make a transaction, you will need the recipient’s digital wallet address.
You can then send them the desired amount of cryptocurrency from your digital wallet. The transaction is then broadcast to the network and added to the blockchain, where it is validated and recorded.
Why use cryptocurrency?
There are several reasons why people use cryptocurrency:
Decentralization: as mentioned earlier, cryptocurrencies are decentralized, meaning they are not controlled by any government or financial institution. This makes them attractive to those who want to avoid the traditional financial system.
Security: cryptocurrencies use advanced cryptography to secure financial transactions. This makes them resistant to fraud and tampering.
Low fees: cryptocurrency transactions often have low fees, especially compared to traditional financial institutions.
Anonymity: some cryptocurrencies, such as Monero, offer a high level of anonymity to users.
Accessibility: cryptocurrencies can be used by anyone with an internet connection, making them accessible to a global audience.
However, it’s important to note that cryptocurrency is still a relatively new and highly volatile market. It is not regulated, and the value of cryptocurrencies can fluctuate significantly.
As such, it is important to thoroughly research and carefully consider the risks before investing in cryptocurrency.
Cryptocurrency History
The concept of cryptocurrency can be traced back to the 1980s when researchers started working on creating a digital cash system that would be secure and decentralized. However, it was not until the release of Bitcoin in 2009 that the first functional cryptocurrency was created.
Bitcoin was created by an individual or group of individuals using the pseudonym Satoshi Nakamoto. In a white paper published in 2008, Nakamoto described a new electronic cash system that used a decentralized ledger called a blockchain to record transactions.
The Bitcoin network went live in January 2009, and the first block, known as the Genesis block, was mined. The mining process involves using powerful computers to solve complex mathematical problems in order to validate transactions and add them to the blockchain.
In the years following the release of Bitcoin, numerous other cryptocurrencies have been created. Many of these are based on the same underlying technology as Bitcoin but have been modified in various ways to offer different features and capabilities.
Cryptocurrencies have gained significant attention and adoption in recent years, with many people seeing them as an alternative to traditional fiat currencies and a way to store value. However, the market for cryptocurrencies is still highly volatile and has faced regulatory challenges in some countries.
Cryptocurrency Future
It is difficult to predict the exact future of cryptocurrencies, as they are a relatively new and rapidly evolving technology. That being said, there are a few trends that may shape the future of cryptocurrencies:
Increased adoption: as more people become aware of cryptocurrencies and how they work, it is likely that we will see increased adoption and use of these digital assets. This could be driven by a desire for greater financial freedom and independence, as well as the potential for lower fees and faster transaction times compared to traditional financial systems.
Regulation: in the past, cryptocurrencies have largely operated outside of the regulatory framework of traditional financial institutions. However, as the market for cryptocurrencies grows, it is likely that we will see increased regulatory scrutiny and the development of guidelines and laws to govern their use.
Increased competition: the cryptocurrency market is highly competitive, with many different coins and tokens vying for market share. It is likely that we will see continued innovation and the introduction of new cryptocurrencies in the future, as well as a possible shakeout of weaker players.
Integration with traditional financial systems: while cryptocurrencies are often seen as an alternative to traditional financial systems, it is possible that we will see greater integration between the two in the future. This could involve the use of cryptocurrencies as a means of payment within traditional financial systems or the integration of blockchain technology into traditional financial infrastructure.
Increased use of decentralized finance (DeFi): DeFi refers to financial applications and services that are built on blockchain technology and operate in a decentralized manner. It is likely that we will see continued growth and development of DeFi in the future, as it offers the potential for greater accessibility, transparency, and security in financial transactions.
It’s important to note that these are just a few potential trends and that the future of cryptocurrencies is uncertain. It is possible that we will see other developments and changes in the market that are not mentioned here.
Decentralization
Decentralization is a key feature of cryptocurrencies, and it refers to the fact that they are not controlled by any central authority, such as a government or financial institution. Instead, they rely on a decentralized network of computers to validate and record transactions.
There are several benefits to decentralization:
Independence: because cryptocurrencies are not controlled by any central authority, they are independent of traditional financial systems and can operate outside of their influence. This can be attractive to those who want to avoid traditional financial institutions or who live in countries with unstable or oppressive governments.
Security: decentralization also makes cryptocurrencies more secure, as there is no central point of failure that can be targeted by hackers. Transactions are validated and recorded by a network of computers, making it difficult for any one individual or group to tamper with the ledger.
Transparency: cryptocurrencies are based on a public ledger, which means that all transactions are transparent and can be viewed by anyone. This can help to build trust and prevent fraud.
Censorship resistance: because cryptocurrencies are decentralized, they are resistant to censorship. Transactions cannot be blocked or reversed by a central authority, making them a useful tool for those who live in countries with strict censorship laws.
While decentralization is a key feature of cryptocurrencies and offers many benefits, there are also some challenges and potential drawbacks to consider:
Lack of central authority: because cryptocurrencies are decentralized, there is no central authority to make decisions or resolve disputes. This can make it difficult to address problems or make changes to the system.
Slower and less efficient: decentralized systems can be slower and less efficient than centralized ones, as they rely on a network of computers to validate and record transactions. This can lead to longer transaction times and higher fees.
Vulnerability to certain types of attacks: decentralized systems may be more vulnerable to certain types of attacks, such as 51% attacks, where a group of miners control more than half of the network’s computing power and can potentially reverse or alter transactions.
Complexity: decentralized systems can be complex and may be difficult for some people to understand and use. This can be a barrier to adoption and may limit the accessibility of cryptocurrencies to certain groups of people.
Decentralized Finance (DeFi)
Decentralized finance (DeFi) refers to financial applications and services that are built on top of blockchain technology and operate in a decentralized manner, without the need for intermediaries such as banks or financial institutions. DeFi includes a wide range of applications and services, including lending and borrowing platforms, stablecoins, decentralized exchanges, and more.
How does DeFi work?
DeFi applications and services are typically built on top of smart contract platforms, such as Ethereum, that enable the automatic execution of contract terms without the need for intermediaries. Users can access DeFi applications and services through a web browser or a mobile app, and they often use cryptocurrency or stablecoins as a means of exchange.
Benefits of DeFi
DeFi offers a number of benefits compared to traditional finance, including increased accessibility, lower fees, faster transaction times, and greater transparency. DeFi also provides users with more control over their financial assets, as they can hold and manage them directly rather than relying on a third party.
Risks of DeFi
DeFi carries its own set of risks, including the risk of fraud or hacks, the risk of smart contract errors, and the risk of liquidity issues. It is important for users to carefully research DeFi projects and to diversify their investments to spread risk.
How to get started with DeFi?
To get started with DeFi, you will need a cryptocurrency wallet that supports the Ethereum network, as most DeFi applications and services are built on Ethereum. You will also need to purchase some cryptocurrency, such as Ether (ETH), which is the native cryptocurrency of the Ethereum network.
Once you have set up your wallet and purchased some cryptocurrency, you can start exploring DeFi projects and services that interest you. It is a good idea to start small and gradually build up your portfolio as you become more familiar with DeFi.
Accessibility
Cryptocurrencies are accessible to anyone with an internet connection, which makes them a global phenomenon. They can be used by people in any country, regardless of their location or financial status.
There are several factors that contribute to the accessibility of cryptocurrencies:
Digital wallets: cryptocurrencies are stored in digital wallets, which are software programs that allow users to send and receive coins. These wallets are easy to use and can be accessed from any device with an internet connection.
Low barriers to entry: unlike traditional financial systems, which often require users to go through a lengthy verification process and may have minimum deposit requirements, cryptocurrencies have low barriers to entry. Anyone can create a digital wallet and start using cryptocurrencies with minimal effort.
Anonymity: some cryptocurrencies, such as Monero, offer a high level of anonymity to users. This can make them attractive to those who value privacy and want to avoid being tracked by traditional financial institutions.
Global reach: cryptocurrencies are not limited by geography, and they can be used by anyone with an internet connection. This makes them accessible to a global audience, regardless of location.
While cryptocurrencies are generally accessible to anyone with an internet connection, there are still some challenges that can limit their availability or adoption. Here are a few examples:
Regulatory hurdles: some countries have stricter regulations on the use of cryptocurrencies, which can make it difficult for people in those countries to access or use them. For example, some countries have banned cryptocurrencies outright, while others have placed limits on their use or required them to be registered with the government.
Technical complexity: cryptocurrencies can be complex and may require a certain level of technical knowledge to use. This can be a barrier to adoption for some people, especially those who are not familiar with the technology.
Limited acceptance: while the use of cryptocurrencies is becoming more widespread, they are still not accepted by all merchants and vendors. This can make it difficult for people to use cryptocurrencies in their daily lives.
Security risks: cryptocurrencies are vulnerable to fraud and cyber-attacks, and users must take steps to secure their digital wallets and protect their coins. This can be a challenge for some people, especially those who are not familiar with security best practices.
Applications
Cryptocurrencies have a wide range of potential applications, both as financial assets and as technology. Here are a few examples:
Store of value: cryptocurrencies can be used as a store of value, similar to gold or other precious metals. They are not subject to inflation or the devaluation of traditional fiat currencies, and some people see them as a hedge against economic uncertainty.
Medium of exchange: cryptocurrencies can be used as a medium of exchange, allowing users to buy and sell goods and services without the need for traditional financial institutions. This can be especially useful in countries with unstable currencies or limited access to financial services.
Remittances: cryptocurrencies can be used to send money across borders quickly and cheaply, making them useful tools for remittances. This can be especially useful for immigrants who want to send money back to their home countries.
Investment: some people see cryptocurrencies as an investment opportunity, and buy and hold coins with the expectation of selling them for a profit in the future. However, it’s important to note that the cryptocurrency market is highly volatile and investing in cryptocurrencies carries significant risk.
Decentralized finance (DeFi): DeFi refers to financial applications and services that are built on blockchain technology and operate in a decentralized manner. These applications can include lending and borrowing platforms, stablecoins, and prediction markets, among others. DeFi offers the potential for greater accessibility, transparency, and security in financial transactions.
Smart contracts: cryptocurrencies, particularly Ethereum, are often used to facilitate smart contracts, which are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. Smart contracts can be used in a variety of applications, such as supply chain management, real estate, and more.
Security in Crypto World
Cryptocurrencies are digital currencies. They may not be able to be stolen physically, but digitally they can. For instance, there are several types of malware that make you lose all your assets simply by approving a transaction. Therefore, always beware.
Buy a hardware wallet
A hardware wallet is a USB device that stores your private key. It has a PIN code lock to keep crooks from getting into it. To use a hardware wallet to do a transaction, you connect it to your PC. You can only use a hardware wallet if it’s connected to the internet.
Wallet types
Before we look deeper into the different types of crypto wallets, it is useful to know what a wallet is. In the crypto world, the term “wallet” refers to offline (cold wallet) or online (hot wallets) software on which a crypto owner stores their cryptocurrency.
A crypto wallet can be thought of as your “address” on the blockchain network on which a cryptocurrency operates. There are different wallet providers per blockchain. As far as we know, there is no multi-chain wallet yet. In the following pages, some wallet examples for the Solana and Ethereum blockchain will be given.
Hot wallets
A hot wallet is a wallet stored on an internet-connected device, like a desktop, laptop, or smartphone. Hot wallets are simple and convenient to use. But your crypto can be stolen if your device gets infected with malware. So you may want to consider only keeping spending money in your hot wallet, leaving the bulk of your investments in cold wallets. A hot wallet may be a desktop, mobile wallet, or browser extension.
Popular hot wallets for Solana
1. Phantom
2. Solflare
3. Backpack
Popular hot wallets for Ethereum
1. Metamask
2. Coinbase
3. WalletConnect
Desktop wallets
The first wallet ever invented was Bitcoin-Qt, a desktop wallet. Today, desktop wallets are still the most used crypto wallets for beginners. To install a desktop wallet, you must download it from the developer’s website and set it up. And, as you might have guessed, desktop wallets can also be used on laptops.
Mobile wallets
If you ever need to do transactions while on the go, you’ll need a mobile wallet.
Mobile wallets carry the additional risk that your phone or tablet might get lost or stolen. So you may want to have a PIN code lock on your phone in case this happens. It’s also essential for a mobile wallet to have a strong password. You also may want to limit the amount of crypto you keep in your mobile wallet. When it runs out of funds, you can always transfer more crypto to it from your desktop.
Mobile wallets can usually be downloaded from Google Play or the Apple App Store. But you may want to follow the link from the developer’s website instead of searching for it in the store to ensure that you’re getting an authentic copy of the software.
Cold wallets
A cold wallet is a wallet that is not connected to the Internet. You can’t do transactions on a cold wallet unless you connect it to a device with Internet access. So cold wallets can be inconvenient for users that perform frequent transactions.
However, cold wallets are also more secure than hot wallets. They usually can’t be hacked without being physically stolen.
With this in mind, cold wallets are best used for the long-term storage of large amounts of crypto. A cold wallet may be either a hardware wallet or a paper backup wallet.
Hardware wallets
A hardware wallet is a USB device that stores your private key. It has a PIN code lock to keep crooks from getting into it. To use a hardware wallet to do a transaction, you connect it to your PC.
The device sends a signature but never sends the private key itself. Theoretically, this should prevent any malware on your PC from being able to steal your crypto.
The safest way to get a hardware wallet is to purchase it from the manufacturer’s website. The links to these websites are given down below. They range in price from $50 to $180.
1. Ledger
2. Trezor
3. Safepal
Paper backup wallets
When you first set up a desktop wallet, you’ll be offered a set of seed words that can be used to access your accounts if your device crashes (again, we’ll discuss this more in the next section). Under normal circumstances, these words are just used as a backup.
But you can also use these words as a form of long-term storage. Just take the following steps:
Write your seed words on a piece of paper and store them somewhere safe and secure.
Transfer crypto to your desktop wallet.
Delete the wallet from your PC. (Make sure you’ve done step 1 first!)
Once you’ve done this, the crypto is essentially stored on the piece of paper. This means an attacker shouldn’t be able to steal your crypto even if they install malware on your PC (as long as it wasn’t already infected). They would need to steal the piece of paper to get your crypto.
Wallet functionality
A crypto wallet does not use a password to authorize transactions. Instead, it uses a string of characters called a private key. When you authorize an action (such as sending cryptocurrency or posting a message), your wallet encrypts a message using this key. This encrypted message is called a “signature.”
If you log in to a website, the website never needs to know your private key. So it doesn’t need a copy of your private key on its servers. This means an attacker can’t get your private key by hacking the websites you visit. This is one of the security advantages that a wallet provides over a traditional password-based login system.
Although wallets don’t use passwords for authorizations, they do require a password for unlocking. This is an additional measure that exists in case an attacker gets physical access to your device. But wallet passwords are never sent to a remote server and are not used to make authorizations.
If anyone ever gets the private key to your account, they can pose as you on wallet-enabled websites or even steal all of your cryptos. So if anyone asks you for your private key, they’re probably up to no good.
Your public key
When you first set up your wallet, your private key is run through an algorithm that produces a second string of characters called a “public key.” This second key can be used to decrypt any message that is encrypted with the first one.
There is no known way to derive the private key from the public one. So you can safely give your public key to anyone you want. Even if you were to give your public key to a known hacker, the hacker would still not be able to guess your private key unless he had billions of years and hundreds of supercomputers.
When you authorize a transaction using your wallet, you send a copy of your public key to the website or network validator. The validator then tries to decrypt your signature using your public key. If it succeeds, this proves that you are the person who created this particular crypto account.
On wallet-enabled websites, your address is your public identity. Everything you do is tied to your address. So a crypto address is an identifier, just like an email address or username.
When you authorize a transaction on a crypto network or wallet-enabled website, the validators hash your public key to determine your address. This tells them which account is supposed to be performing the transaction.
You can also send someone else your address if you want them to send you crypto. For example, you can give your address to an exchange like Coinbase or Binance.US to make a withdrawal from the exchange.
Seed words
Seed words are a set of words that can be used to recover your crypto accounts if your device crashes. They’re shown to you when you first set up your wallet.
You can generate an unlimited number of crypto accounts or identities using the same seed words. As long as you have your seed words, they can all be recovered.
If you lose your seed words and your device crashes, you will lose all your accounts. So you may want to write these words down on a piece of paper and store it in a place where they can’t be damaged or destroyed.
If anyone gets your seed words, they can steal all of the crypto accounts associated with these words. So you might not want to let anyone other than your legal heirs know where they are.