Before you get started with cryptocurrencies you need to ensure that you follow some basic principles. We have tried to provide as much basic information here as possible but there are also plenty of links to help get you started. Remember, keeping secure and making backups of your data is key to working with cryptocurrencies at any level! We have several short sections on the topics below and hope our beginners section is helpful, the topics include:
You should try and read up as much as possible in order to understand these basic areas before starting out with crypto currencies. Especially if you have not yet downloaded a crypto wallet.
It may sound a stupid question, but what is a wallet? In cryptocurrency terms, a wallet is a programme and associated files that 'talks' to the cryptocurrency network, stores your sending and receiving addresses, and records every transaction that you make for those addresses.
Remember, your wallet/s are where you hold all your riches so you must ensure that you always download your wallets from secure and trusted locations. For the beginner, it may be difficult to know which sources are trustworthy but many cryptocurrencies have official websites. If the cryptocurrency is new and has no website you can usually find their official threads on the main cryptocurrency forums (See community topic below).
Always virus scan your wallets - you can use an online file scanner like: virustotal.com/uk but be aware that there may be a variety of false positives because of the nature of the software! You should do some research if you are worried and when possible setup your wallet on a spare laptop / PC keeping it seperate from your main working enviroment
Here is an example of a secure website hosting the bitcoin wallet:
When you first download a wallet it will have to syncronise ("synch") with what is called "the blockchain". The Blockchain is the mysterious marvel of cryptocurrencies and stores every single transaction and block created including the 'genesis' block, since the coin launched. You should be aware that it may take several hours or more to synchronise a freshly installed wallet especially with well established See the blockchain section for a little more information on the blockchain
Please Note:There are different types of wallets including 'Web Wallets' (these are stored on the Internet and not your PC) but we recommend locally stored wallets which you control and you are responsible for
Many experienced Cryptocurrency users view all on-line wallets (where you do not have control over the 'private' keys) to be a security risk and prone to disapearing operators or open to organised hacking. This is certainly true in principle but the golden rule is never to store more in these type of wallets than you can afford or are prepared to lose.
By far the most secure storage for your Bitcoin or any other crypto is what is known as 'cold storage' or 'paper wallets'. A Paper Wallet is literally just that; a print out on paper that has the 'Public Address' and 'Private Key' as text and usually a QR Code version that can be scanned into a device. The printed format usually allows it to be folded in three with the Private Key tucked out of sight of prying eyes / devices!
Also, owing to the growing popularity of Bitcoin and the demand for greater security, several devices have been developed specifically for the purpose of keeping your precious Bitcoins safe! A great example is the Trezor...
Protecting your wallet with a passphrase is a brilliant way to ensure when that if anything does happen to your computer or your wallet file is stolen that it would be very difficult to do anything with your funds. To add a passphrase to your wallet, open the wallet program and select Encrypt Wallet from the settings menu (This option may be in a different menu depending on the crypto).
Enter a long passphrase (The recommended length is at least 12 characters long) and make sure its something you remember or keep note of as if you lose your passphrase key there is no recovering it. The passphrase should contain at least one character in each group including lowercase, uppercase, number and symbol
Once you have entered and confirmed your passphrase click Ok - the wallet will ask you to confirm and will inform you that the wallet now needs to close to apply the setting.
When you next open your wallet and go to send funds you’ll be greeted with a box like below, enter your passphrase in here and your funds will be sent
DO NOT FORGET YOUR PASSPHRASE!
...or you WILL lose your coins!
Every wallet has a backup function. You should only backup your wallet after you have encrypted it with a passphrase.
With the wallet open select Backup Wallet from the file menu:
Select where you would like the backup saving and click OK.
Make sure you have encrypted your wallet before you do this!
Backing up your wallet creates a file named wallet.dat - keep this file safe copy it to a USB device or CD and always keep multiple copies.
Mining - what on earth is that? Lots of people with hard hats and shovels?
Well, it's the same principle but instead of the hard hats and shovels - the mining is carried out by computer hardware and software...
In a nutshell - the mining software controls the hardware to perform many thousands of calculations a second. This process verifies transactions and adds them to the "block chain" or public ledger - and releases new "coins" as a "block reward" which also includes transaction "fees". The mining process groups recent transactions into blocks whilst attempting to solve a difficult puzzle. This puzzle has what is known as the "difficulty" set according to the number of miners (computers/hardware) currently connected to the coin's network. The more computational power (known as "network hash rate") at work mining the coin, the higher the dificulty becomes - this is to keep the time to find each "block" as stable as possible, say every 10 minutes. The miner (computer) that solves the puzzle first gets to place the next block on the block chain and claim the "block rewards"...
In theory, anyone with internet access and the right hardware can mine Bitcoin or any other cryptocurrency.
Originally, back in the early days of Bitcoin, the father of all cryptocurrencies; mining was done with CPU's (Central Processing Unit). As the amount of people mining Bitcoin increased, so did the 'difficulty'. The difficulty is set by the crypto coin code and adjusts to ensure that regardless of the number of miners and their 'hash rate', the time between blocks being found remains fairly constant - well, that's the thoery. As the difficulty increased, mining became increasingly hard and progressed to being mined by GPU's (Graphics Processing Unit) and as the difficulty increased even further, requiring ever greater computational power ASIC's (Custom built machines used only for mining cryptocurrencies) were developed. An ASIC (Application Specific Integrated Circuit) is built to perform one task only - in this case, to do the sums required for mining! As alternate algorithms such as Scrypt (Bitcoin uses an algorithm called SHA256) became more popular after the creation of Litecoin, scrypt mining followed the same difficulty and hardware path as Bitcoin.
The Blockchain - what on earth is that? When you first download a wallet it will have to syncronise ("synch") with what is called "the blockchain". The Blockchain is the mysterious marvel of cryptocurrencies and stores every single transaction and block created including the 'genesis' block, since the coin launched. You should be aware that it may take several hours or more to synchronise a freshly installed wallet especially with well established crypto currencies.
Blockchains can be enourmous in size with the bitcoin Blockchain being 157GB (As of Feb 2018). Blockchains grow in size as more and more transactions are added to it.
The Blockchain is seen as the technology which could change our future - the revolutionary idea of storing this public ledger across the internet that anyone can access using the right software. Ideas are being developed constantly that could adopt our current systems e.g. centralised public records management into Blockchain based systems.
An active and thriving Community is a big part of cryptocurrency - bright minds meet exchange ideas and plans are born. Visit and join some of the most popular forums:
Please note that many different crypto currencies have their own forums. You can find their forums via their websites or reading the official coin threads on BitcoinTalk