Understanding Cryptocurrency Basics
2025-04-14
1. What is Cryptocurrency?
Cryptocurrency is digital currency based on blockchain technology. Transactions occur on a decentralized network without central bank or government control. Bitcoin, launched in 2009, was the first cryptocurrency and is called "digital gold." Ethereum added smart contract functionality as a platform. Thousands of altcoins (alternative coins) exist. Blockchain is a public ledger that records all transactions transparently and immutably.
2. Cryptocurrency Wallets
You need a wallet to store cryptocurrency. Hot wallets (online) are convenient but vulnerable to hacking. Cold wallets (hardware) offer maximum security through offline storage. Exchange wallets are convenient but remember: "Not your keys, not your coins." Never share your private key and backup it securely. Losing your private key means permanently losing access to your assets.
3. Understanding Major Cryptocurrencies
Bitcoin (BTC) has the largest market cap and is most stable and widely accepted. Ethereum (ETH) is the foundation for smart contracts and DeFi (decentralized finance). Stablecoins (USDT, USDC) are pegged to the dollar with low volatility. Each coin has unique purposes and technology. Read the white paper before investing to understand the project's purpose, team, and technology. Don't fall for celebrity or social media hype.
4. Investment Precautions
Cryptocurrency shows extremely high volatility. 20-30% daily swings are common. Only invest money you can afford to lose. Allocating 5-10% of your portfolio is safer. Beware of FOMO (Fear Of Missing Out) and only invest after thorough research. Watch out for scam coins and Ponzi schemes. "Get rich quick" promises are usually fraudulent. Take a long-term perspective.
5. Taxes and Regulations
Many countries tax cryptocurrency profits. Korea plans virtual asset income tax (starting 2025), while the US treats it as capital gains. Keep detailed transaction records for tax filing. Cryptocurrency regulations vary by country and change rapidly. Monitor latest regulatory trends and trade legally. Use reputable exchanges registered with financial authorities.