Getting Started

At its simplest, Cryptocurrency is just digital money. You can use it to send payments, buy things, and hold value, but it only exists on computers. The magic of cryptocurrency is that it doesn’t need a bank or a government to work. This is possible because of two main ideas: the Blockchain and Decentralization.

The Blockchain Analogy

Think of the Blockchain as a giant, public, shared ledger—like a Google Sheet—that everyone in the world has a copy of.

• Every time someone sends money, the transaction is written down as a new row on the sheet.
• Everyone can see every row, meaning the ledger is completely transparent.
• The most important rule is Trustlessness: Once a row (transaction) is confirmed and added, no single person, company, or bank can go back and erase or change it. The data is locked forever. This means you don’t have to trust a middleman to know the transaction is real.

Decentralization

Because thousands of computers around the world hold a copy of this public ledger, the network is Decentralized.

Decentralization means that no one central person, server, or company controls the money or the rules. If one computer fails, thousands of others keep running the network. This makes the system very secure and fair.

Coins and Tokens

The word “cryptocurrency” generally refers to digital value:

• Coins (like Stellar’s XLM or Bitcoin) are the native currency of their own blockchain. They usually pay the transaction fees.
• Tokens are other digital assets built on top of an existing blockchain (like a digital USD or a company stock that runs on the Stellar network).

What Is a Crypto Wallet?

When you first hear the word “wallet,” you probably think of leather and cash. A cryptocurrency wallet is very different.

Your crypto is NOT stored inside your wallet. All crypto funds are stored only on the Blockchain (that public, shared Google Sheet we talked about).

Instead, think of your crypto funds as being locked inside an online safe.

• The Wallet App (or Website): This is the program on your phone or computer. It’s just the window to the safe. It lets you look at your balance and shows you the buttons to hit “Send” or “Receive.”
• The Keys: The Public Key and Secret Key (or Seed Phrase) are the only things that can open the safe and prove the money is yours. The wallet simply manages these keys for you.

Hot Wallet vs. Cold Storage

Wallets are grouped into two main categories based on how they connect to the internet. This is the difference between speed and security.

Hot Wallet (Convenient)

A Hot Wallet is any wallet that is connected to the internet—like an app on your phone or a browser extension.

• Example: A wallet app on your phone, or a wallet connected to a trading website.
• Pros: They are fast, easy to use, and perfect for small amounts of money you want to spend or trade quickly.
• Cons: Because they are always online, they carry a greater risk if your computer gets hacked or infected with a virus.

Cold Storage (Most Secure)

Cold Storage is any method that is never connected to the internet. This is the safest place for large amounts of crypto you don’t plan to touch for a long time.

• Example: A hardware wallet (a small device, like a special USB drive) or simply writing your Secret Key down on paper and storing it in a physical safe.
• Pros: It’s the highest level of security. Your keys cannot be hacked online if they are not online.
• Cons: They are slower and less convenient when you actually need to make a transaction.

Your Crypto Keys: What They Are and Why They Matter

When you make a crypto wallet, the network gives you two very important keys. Think of your digital money as being locked in an online safe.

1. Public Key (Your Address)

• What it is: The Public Key is your wallet’s address on the blockchain. It’s a long string of letters and numbers that usually starts with the letter ‘G’ on the Stellar network (like in our practice wallet).
• Analogy: This is your Email Address or your bank Account Number.
• Safety Rule: The Public Key is safe to share. You share it with people when you want to receive money from them. If they know your Public Key, all they can do is send you funds.

2. Secret Key (The Master Key)

• What it is: The Secret Key is the main password that gives you complete control over your money. It’s a long string of letters and numbers that usually starts with the letter ‘S’ on the Stellar network.
• Analogy: This is the PIN number and the password and the signature for your bank account, all in one.
• Safety Rule: The Secret Key must NEVER be shared with anyone, and you must never store it on a computer connected to the internet. If a hacker gets this key, they can instantly steal all your money.

Two Other Names for the Same Thing

The terms Private Key and Seed Phrase are just different ways of talking about your Secret Key.

Private Key

• What it is: This is just another name for the Secret Key. It means the key is private to you and only you.
• Why it’s used: It’s often used when talking about the technology behind how the key works.

Seed Phrase

• What it is: Most modern wallets don’t use the long, complicated Secret Key string anymore. Instead, they give you a Seed Phrase, which is usually a list of 12 or 24 simple words (like apple, truck, house, dog).
• Why it’s used: It’s much easier for a person to write down and read a list of words than a long string of random letters and numbers.
• The Connection: The computer uses a special math trick to turn your simple Seed Phrase back into the long Secret Key. They both do the exact same job—they unlock your funds.

The most important thing to remember is this: If someone asks you for your Secret Key, Seed Phrase, or Private Key, they are trying to scam you!

How Crypto Transactions Work

When you send money on the blockchain, a lot of steps happen very quickly. This process is called a Transaction.

The Email Analogy

The easiest way to understand a crypto transaction is to compare it to sending an important, signed email:

1. The Recipient: You need to know the person’s correct Public Key (their wallet address). This is like typing their email address. If you get one letter wrong, the payment goes to the wrong place!
2. The Message: You decide the amount of money you want to send.
3. The Signature: You use your Secret Key (or Seed Phrase) to cryptographically sign the message. This signature proves to the network: “Yes, I own this money, and I approve this send.” This is the only way a transaction can be authorized.

Confirmation and Immutability

Once you hit “Send,” the transaction doesn’t happen instantly. It has to be confirmed by the decentralized network.

• Confirmation: The transaction goes to the network where computers (called nodes) quickly check two things:
  1. Do you have enough money?
  2. Is your Secret Key signature valid? If the answer is yes, the transaction is bundled with others into a block and officially added to the Blockchain. This step is called Confirmation. On fast networks like Stellar, this takes only a few seconds.
• Irreversible: After the transaction is confirmed and written onto the Blockchain, it is permanently locked into that public ledger. This is the most important rule of crypto: Transactions are Irreversible. You cannot call anyone to cancel or reverse a confirmed payment. This is why checking the recipient address is so vital!

The entire process ensures that money is sent securely without needing a bank to approve or manage the transfer.