The first thing to say is that you can use a cryptocurrency without knowing how it works, just as you can drive a car or use software without knowing what’s going on ‘under the bonnet’. If you can use a smartphone, you can use a cryptocurrency.
They’re decentralised digital currencies protected by encryption, that have no ‘centre’ controlling their supply. Transactions are ‘peer-to-peer’, with a public ledger – i.e. they are controlled by everyone involved, and the action happens on individuals’ computers around the world. The big difference is not that they’re encrypted – it’s that they’re decentralised. They can’t be controlled by banks, states or any other centralised authority.
Click here, here and here for introductory information and resources on cryptocurrencies and blockchain technology.
What to do
Obtaining and spending cryptocurrencies
- Practice: you don’t have to know the technical details to be able to use cryptocurrencies. But be careful – check everything out for security; and get some experience first. Read as much as you can, talk with people who’ve done it and/or attend a tutorial (find them online).
- Choose a coin: for a complete beginner, it’s probably best to try Bitcoin first, as it’s big and secure, and there’s more information out there about it than any of the others. Fraudulent traders might buy enormous amounts of a relatively unpopular coin, which causes a stir and raises the price, after which they will sell all their stock, make a huge profit, but cause a slump which may mean the end of that particular coin. The more resilient a coin, the less likely this is to happen. CoinGecko ranks coins based on their relative strength.
- Get a wallet: each currency will have a page on its website where you can download your wallet, with instructions on how to use it, add a password and back it up. Just like a real wallet, you want to keep it secure if you don’t want to lose your money. Here’s some information on that, and here’s a reputable place to get a wallet. Your wallet will provide you with your address, that you’ll need to make transactions.
- Get some coins: you’ll probably buy them rather than ‘mine’ them (more on mining, and whether to mine or buy here; more on mining pools here, and here’s a list of pools). To buy coins, go through an exchange. Coinbase is a reputable one – just follow instructions. You’ll need to enter your bank details. Or search online for ‘buy Bitcoins’ and browse. There are many online marketplaces that put buyers in touch with sellers, listed by price. Just click on a seller and buy via bank transfer. Coins will be delivered to your wallet. See here for more information about buying coins, and here to find Bitcoin sellers local to you.
- Spend your coins: put whatever you want to buy, plus Bitcoin (or another coin) into a search engine (e.g. buy laptop Bitcoin) – the number of retailers that accept cryptocurrencies is growing all the time, especially Bitcoin). You can make payments to any individual or business with a wallet. Just go to your exchange account, enter the address of who you want to pay, and how much, and away you go. Here’s a short video on how to make payments online from your wallet.
Accepting payments in cryptocurrencies
for businesses wanting to accept coins (mainly Bitcoin), there are several options. It can be done face-to-face via smartphone apps; Bitcoin payment terminals for Bitcoin-based debit cards; payment buttons and plugins for online shopping carts etc. There are lots of companies providing payment services (here’s one), but this market is going to be changing fast – best to do some research, and talk with specialists. Here’s some more info.