Cryptocurrency in 5 Minutes
This is a short summary of cryptocurrency for beginners. You can click the links to expand on any topic.
Blockchain and Tokens
A blockchain is basically a network of computers that hosts a database. Examples: Bitcoin, Ethereum, Solana, Hyperliquid, etc.
A token is a record of ownership that lives on a blockchain. Some work as money; others represent a share, a loyalty point, a ticket or a vote.
Most blockchains have their own native token, and those are actual currencies:
| Blockchain | Native Currency | Ticker |
|---|---|---|
| Bitcoin | Bitcoin | BTC |
| Ethereum | Ether | ETH |
| Solana | Solana | SOL |
| Base | Ether | ETH |
| Polygon | Polygon Ecosystem Token | POL |
| Arbitrum | Ether | ETH |
| Hyperliquid | Hype | HYPE |
We cover the other roles tokens can play in the tokens section. For now let's focus on stablecoins, which are the ones you'll use most.
Stablecoins
Cryptocurrencies in general change value every second (they're volatile). Sometimes what you want is to send a payment using an exact value in, say, dollars. That's why stablecoins exist — their value is backed by an external asset:
| Stablecoin | Value per Token | Issuing Company |
|---|---|---|
| USDC | $1 USD | Circle |
| USDT | $1 USD | Tether |
These are the two you'll see everywhere. There are more —pegged to the euro, to the peso, even to gold— and the backing for all of them is held in traditional banks.
→ Stablecoins: which to use, who can freeze them, and what "backed" means
Useful fact
If I want to send money to a friend or make a payment, what I normally do is send them stablecoins. "100 USDC" is the same as saying "100 dollars"; whereas if I send you 0.000012 BTC it's confusing because you don't know how much it's worth and the price relative to dollars changes every second.
Buying Crypto
OK, say you want to buy BTC. How do you do it? The simplest way is to use a centralized exchange (CEX). A CEX is a company that lets you buy, sell and trade cryptocurrencies. It works similar to a traditional currency exchange or broker. Popular CEXs are Binance, OKX, Bitso, Coinbase, Kraken, etc.
Step 1: Create an account on a CEX
- Pick a CEX that operates in your country — Binance, Coinbase, Bitso, Kraken, Buda, Lemon…
- Create the account with your email
- Verify your identity (KYC) — the process of proving who you are: a photo of your ID, a selfie or video, and wait for approval (from minutes to days). The law requires it, same as at a bank
Step 2: Deposit money (fiat)
Step 3: Buy BTC on SPOT
The prices in this guide are made up
We use $100,000 per BTC in every example so the math is easy to follow. The real price changes every second; look it up when you're about to trade.
Useful fact
Inside the exchange you'll see cryptocurrency pairs. For example, BTC/USDT is the pair that lets you buy BTC with USDT, or vice versa. Don't confuse it with BTC/USDC — even though USDC and USDT are both stablecoins backed by dollars, they are different tokens issued by different companies. That's also why you'll find pairs like USDC/USDT, to trade between them.
Start out buying in SPOT. Don't use leverage on your first trades.
What actually happens when you hit "Buy"?
Spoiler: nothing touches the blockchain. Your BTC on the exchange is a row in a company's database. We explain this in Binance vs Uniswap.
Wallets and Addresses
Your CEX will give you a deposit address for each network (i.e. blockchain) you want to receive cryptocurrency on. That's a public address you can share with others.
That address is not your wallet
It's a mailbox the exchange controls. A real wallet is one whose keys you hold. We come back to this further down.
- My address on the Bitcoin blockchain is
bc1q39vq0ueulr36klrtddhgfchedd72h7ffuta0yf. - My address on the Solana blockchain is
D8Lu3ntZPAjtyzSgZvF95G48oaEhUxJCfArdrGy2KD23. - My address on the Ethereum blockchain is
0x834fC75B56580B544b449705b4d0cf583949bB10. - My address on the Monad blockchain is
0x834fC75B56580B544b449705b4d0cf583949bB10. - My address on the Base blockchain is
0x834fC75B56580B544b449705b4d0cf583949bB10. - My address on the Polygon blockchain is
0x834fC75B56580B544b449705b4d0cf583949bB10.
Did you notice that my address on the Ethereum blockchain is the same as on Monad, Base and Polygon? That's because there's a standard called EVM (Ethereum Virtual Machine) that these networks share.
Common mistake
A very common mistake is sending tokens to the correct address but on the wrong network. For example, if someone sends you USDC to your Polygon address but uses the Ethereum network, those funds won't show up on Polygon. Always verify the network and the address before making a transaction.
Block Explorers
Every blockchain has its own block explorer that lets you see the transactions and balances of any address. For example, here's the balance of my address on the Solana blockchain: https://solscan.io/address/D8Lu3ntZPAjtyzSgZvF95G48oaEhUxJCfArdrGy2KD23 There you can see there's $1 USDC. If you want to send me more as a thank you, I wouldn't complain 😉
- Ethereum Block Explorer
- Arbitrum Block Explorer
- Base Block Explorer
- Polygon Block Explorer
- Monad Block Explorer
- Bitcoin Block Explorer
- Solana Block Explorer
Custody: who controls your funds?
A seed phrase is like a master key for your wallet. When you use a CEX, the exchange controls the key, not you.
The main advantage of having a CEX hold custody of your seed phrase — and therefore control of your wallet — is that you don't have to worry about its security.
The downside is that you don't have full control of your funds! If the exchange:
- Gets hacked
- Goes bankrupt
- Freezes your account
- Gets shut down by a government
You can lose access to your funds. And this has happened many times.
Not your keys, not your coins
This phrase is well known in crypto. It's a warning that if you don't control your own keys, you don't control your own funds.
Why an alternative exists where nobody can freeze you — and what using it costs you: Why crypto exists
Congratulations!
Let's pause here. If you made it this far, congratulations! You now know the essentials of cryptocurrency.
Next step: DeFi
Ready for the next level? Read DeFi in 5 Minutes to learn how to use your own wallet, swap on DEXs, and understand the risks of signing contracts.
If you want to go deeper on specific topics:
- Tokenized assets — Invest in shares of companies like SpaceX
- Hardware Wallet — Maximum security for significant amounts
- Smart contracts — Understand what you're signing before you approve
- Seed phrase security — How to protect your master key
- Multisig — Several keys to move the money, when the amount justifies it
3 Golden Rules
- Never share your seed phrase — not with "tech support", not with anyone
- Verify the network before sending — same address ≠ same network
- Don't invest what you can't afford to lose — crypto is volatile
And above all, have fun, but be very responsible about it — it's very easy to lose money in crypto if you're not careful.