In Part 2, I covered the 3 coins you can buy on Coinbase. At this point, you may be interested in what other coins are out there, how to buy them, and maybe what the hell all these "coins" actually are. Before getting into buying, I'm going to explain a little how all this stuff works.
Note: This is not a recommendation to buy any coins mentioned – I'm just providing an overview of the cryptocurrency scene as I would have liked to have it explained to me when I started.
Part 3: How Does It Work? – Blockchain, Altcoins, ICOs & More
Difficulty: Intermediate
Don't let the terms cryptocurrency and coins fool you – not all cryptocurrencies are actually meant to be used as currency. Rather than try to explain it myself, head over to this article, which does an excellent job:
Coins, Tokens & Altcoins: What’s the Difference?
Read that, and then come back here.
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Ok, so now you should have a basic understanding of what blockchains, altcoins, smart contracts, and ICOs are, as well as the difference between coins and tokens.
Let me fill in some details.
Altcoins
While the author makes the distinction that altcoins and coins are the same thing (they have their own independent blockchains), and tokens are something different (they're built on top of an existing platform, like Ethereum), the terms altcoin and coin are generally used to describe all coins & tokens that aren't bitcoin; but token always refers to an asset build on top of another platform. So just like cryptocurrency, altcoin and coin are a bit misleading.
To get a quick rundown of what some of the top altcoins are all about, check out: 100 Cryptocurrencies Described in Four Words or Less.
Blockchain
Blockchain is the backbone of crypto. If you just want to think of it as a secure decentralized database, that's probably good enough for now. Blockchain isn't owned by anyone – it's a technology that can be used for lots of different things. If you want to understand it better, here's more info.
Mining
The act of processing blockchain transactions, which takes place on lots of different computers at once, verifying each others' work to validate transactions. A miner is a computer that does the mining. They get a small amount of coins for their work. This is why you pay a fee when you buy, sell, or transfer tokens. Sometimes that fee is called gas. More info
Blockchain Platforms & Decentralized Applications (DApps)
The author mentions blockchain platforms such as Ethereum & Waves. These are the basis for creating new types of coins (tokens, actually) quickly & easily, and they offer more than "just a currency" because they support smart contracts and the creation of decentralized applications (DApps). That basically means you can run custom code on the blockchain, which can be programmed to do pretty much anything. Check out this list of current & soon-to-be-released Digital assets in Ethereum blockchain. Right now, Ethereum is by far the biggest of these platforms. More info
ICO
Basically the equivalent of an IPO for stocks, but for coins. It's a way for developers to raise money for a new project. It's extremely risky to buy coins in an ICO, so you should probably ignore all those adds that promise "The Next Bitcoin!" More info
Wallets
A record of where coins are stored. You can withdraw coins from an exchange to a wallet under your control, so in case an exchange is hacked or its owners are corrupt, nobody can steal your coins. The downsides of wallets are, your coins are not as accessible – if you want to sell them quickly, you'd first have to import them into an exchange, and then sell them. A wallet is also completely under your control – in other words, if you don't keep it secure, someone could steal it; and if you lose it, you've lost your coins. It is generally recommended to withdraw coins to a wallet, but there are downsides to that as well. I'll cover how to withdraw to a paper wallet in a future post.
More Vocabulary & Forum-Speak
Some of this is straight from Wall Street. Others are crypto-specific slang. If you want to read or chat on forums, these will help.
ATH: All-time high (price)
HODL: Hold as in "Don't sell even though the price is plummeting to the depths of hell right now." Sometimes it's a good strategy, especially for non-day-traders (when the price comes back up afterwords 🙂). Sometimes it's a terrible strategy (when the price never comes back up 😩). Anyway the misspelled term started here.
Mooning: A coin price rising so fast "it's going to the moon!"
ShitCoins: Coins that are shit, at least in the eyes of the person writing it.
Bull: From Wall Street lingo – a trader who believes prices will rise. More
Bear: From Wall Street lingo – a trader who believes prices will fall. More
Whale: From casino lingo: a trader who holds a lot of a particular coin. They may even have enough to manipulate the market, for example, with a huge sell order that triggers a flash-crash. More
BearWhale: A big-time trader who is bearish on the price.
Flash-crash: When the price of a coin drops, possibly almost to $0, and rebounds very quickly. Usually caused by a whale selling a huge order, which triggers automatic stop loss orders and margin funding liquidations, causing a cascading effect. Bots are usually quick to refill the order book with new orders, and recover the price almost immediately. See: Coinbase Ethereum flash crash.
Order Book: The list of all the "buy" and "sell" orders that have been set for a coin. Each exchange has its own order book, but they usually settle on around the same price due to arbitrage. More info
Pump & Dump: The act of an investor or group of investors promoting a stock they hold and selling once the stock price has risen following the surge in interest as a result of the endorsement. More
Bear trap: A false signal indicating a downward price trend. More
Trollbox: A chat box that appears on many crypto exchanges. It got the troll name, because lots of trolls come to pitch a shitcoin they bought; or, just to troll. More
Buy/Sell wall: A huge order placed on a coin, at or near the current price. It basically creates a "wall" because in order to get past it, multiple traders will have to buy/sell at that specified price before the price will move. More
Bagholder: Someone left holding an empty bag – that is, they held too long, and now their coins are worthless. More
Hard Fork: A blockchain splits into two different blockchains/coins. More
Satoshi: The smallest amount within bitcoin, representing 0.00000001 bitcoin – one hundred millionth of a bitcoin. It's named after Satoshi Nakamoto, the name used by the unknown person or people who designed bitcoin. More
MilliBitcoin [mBTC]: Another unit of bitcoin equal to 0.001 bitcoin – one thousandth of a bitcoin.
ERC-20: The "type" of coin that runs on the Ethereum platform & blockchain. More
XBT: An alternate symbol used to mean bitcoin. It's exactly the same as BTC. More
More Resources & Sites to Bookmark
CoinMarketCap.com : The go-to site for tracking coins by market cap.
Investopedia : Investment-based (duh) site, which has added a decent amount of crypto info.
masterthecrypto.com : Good resource for articles like this one – Crypto explained in plain english.
General Crypto news sites:
Tracking Your Crypto Portfolio:
For Mobile:
Both these apps are similar & awesome ways to track your crypto purchases. You have to enter all your transactions manually, but which can be a pain, but they're an excellent way of tracking your portfolio.
Blockfolio: App to track your crypto portfolio. Free. iOS Android
Crypto Pro: App to track your crypto portfolio. $4.99 iOS
Detailed Tracking & Tax Resources
cointracking.info is an amazing site that lets you pull in all the transactions from all the exchanges you use, automatically. It includes more charts than you probably want. The free version allows you to track up to 200 trades. The paid version is a little pricey, but if you have a lot of transactions & don't want to track everything manually, it's actually relatively cheap. The only downside is, most exchanges don't allow your transfers (withdrawals/deposits) to be imported into any site, including cointracking, so you'll have to enter those manually, which can be a pain. But compared to anything else I've found, this site is the shit! It will also come in handy when tax season comes around. Oh, you thought you didn't have to pay taxes on crypto?! You do, just like stock gains. Uncle Sam always gets his cut!
In Part 4, I'll explain how to transfer coins from Coinbase to another exchange and how to buy a whole bunch of coins that aren't offered on Coinbase.
The next article is now available:
Part 4: Transferring Coins to Another Exchange