Beginner's guide to cryptocurrency: A manual to avoid pitfalls from basics to practical application
There are no NPCs chasing you to provide strategies here, but with this guide in hand, you can save 80% of the unnecessary expenses to buy milk tea~ Although the crypto world is bustling like a market, there are more pitfalls than discount coupons! Don’t rush into 'big shots', first learn to 'walk steadily', avoiding pitfalls is the real winner~
1. Basic concept understanding: Understand the 'rules of the game' first
Blockchain technology: A 'cheat-proof ledger' that everyone keeps
Core principles: Decentralization, distribution, strong encryption.
Decentralization: No 'ledger admin', all network nodes keep records together, no one has the final say.
Distributed ledger: Everyone holds a complete ledger, changing one part is useless, the whole network will 'alarm'.
Hashing: After encrypting the ledger content, even changing one character will cause errors in the entire chain's records.
Simply put, blockchain is like a 'shared Excel sheet for property fees' in a community group, every household keeps a copy. Who wants to secretly change the property fee amount? The whole group will spot it instantly, there’s no hiding!
Classification of chains: Different scenarios, different plays
Public chain: Like a city park, anyone can enter and keep records (e.g. Bitcoin, Ethereum, low threshold but may be slow).
Consortium blockchain: Like an internal company group, only designated members can keep records (e.g. interbank settlement chains, safe but not very open).
Private chain: Like a personal diary, only you or designated people can write
Basics of cryptocurrency: What does 'money' look like in the digital world?
Digital currency vs fiat currency: Fiat currency is issued by the central bank 'father' (e.g. RMB, USD), backed by national credit; digital currency is created by tech 'giants' using code, with a fixed total supply (not worried about inflation), global transfers don’t depend on banks, but the risks are also higher.
Profile of mainstream coins
Bitcoin (BTC): The 'big brother' of the crypto world, born in 2009, total supply of 21 million coins, known as 'digital gold', highly volatile but has the strongest consensus; - Ethereum (ETH): 'Smart contract expert', can not only transfer but also run various blockchain applications (like DeFi lending, NFT digital collectibles).
Stablecoins (USDT/USDC): The 'anchor' of the crypto world, pegged 1:1 to fiat currency (e.g. 1 USDT ≈ 1 USD), can be used to hedge during market crashes.
Wallet matters
Wallet address: Your 'digital bank card number', others use this to transfer coins to you, it's a combination of letters and numbers.
Public key: The public key is the 'payment QR code', no issue in making it public.
Private key is 'bank card password + ID card + USB shield'!
Lost = coins are gone, never store them in phone notes or WeChat favorites (hackers are more eager to browse your phone than your partner)
2. Market and ecosystem understanding: Understand the 'game map'
Three-layer structure of cryptocurrency: Like building a house
Underlying public chain: 'Foundation', determines the stability of the ecosystem (e.g. Solana is fast but occasionally 'blackouts', Ethereum is stable but can congest);
Application layer: 'Functional areas in a house', DeFi is 'digital banking' (saving coins to earn interest, borrowing money), NFT is 'digital art store' (avatars, artworks), Web3 is the prototype of 'next generation internet';
Derivatives: 'Leverage/insurance for the house', futures and options can amplify returns, but may also cause you to 'return to square one overnight'.
Trading form: Choose the right 'play' before getting on board
Focus on three key points in the white paper:
'Solving what problem': Don't just look at the slogan, check if there is real demand (e.g. 'blockchain + elderly care' may be more reliable than 'blockchain + air');
'Is the technology really useful': Don’t be fooled by jargon, understanding the logic is what truly matters;
'Who gets the tokens': If the team takes too much and unlocks too quickly = warning of a pump and dump, be careful of 'crashing the market after listing'.
3. Practical skills: Safety first, profit second
Safety entry: Protect your 'digital wallet'
Choosing the right wallet to avoid pitfalls: Hardware wallet (Ledger) > Software wallet (Trust Wallet) > Exchange wallet.
(Analogy: Hardware wallet = bank vault, software wallet = home safe, exchange wallet = supermarket locker, of course, you store valuables in the vault!)
Private key backup guide: Write it down on paper! Lock it in a safe! Don't take photos! Don't send it via WeChat! (Remember: hackers can crack your phone, but can't open a safe).
Anti-fraud tips
Phishing websites: Look exactly like legitimate exchanges, but the URL is missing a letter (e.g. writing 'binancd' instead of 'binance'), logging in will cause you to lose coins, always manually enter the official website address;
Fake customer service: Suddenly messages you about 'account issues', sends a link for you to 'verify', click and you might get scammed (real customer service won’t rush you to transfer coins or ask for your private key!).
Trading basics: Start learning from 'grocery shopping'
Exchanges classification:
Centralized (Binance/OKX): Like a 'proper market', there are administrators, transactions are convenient but require real-name verification;
Decentralization (Uniswap): Like 'street vendors', no one manages it, anonymous trading but slightly complex to operate.
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Order placement tips:
Limit order: 'Boss, I will only buy this coin at 300 yuan, don't sell it if it's too expensive' (suitable for times of price volatility, controlling costs);
Market order: 'Boss, I want this coin right now, no matter the price' (suitable for when you need to get in/out quickly, may buy high or sell low).
Beginner's trial-and-error method: Start with 100-500 yuan to practice, consider it as a newbie gift for 'crypto games', if you lose, it's not painful, if you earn, it's a pleasant surprise~
4. Risk management: Surviving is necessary to become a big shot
Capital management: Don't put all your eggs in one plastic bag
Never go all-in: No single investment should exceed 5% of total assets (e.g. if you have 10,000 yuan, spend a maximum of 500 yuan to buy one coin); - Stop loss like 'return home key': Set a -15% stop-loss line, sell if it drops beyond that (like quickly returning home when health drops by half in a game, don’t hold on until 'team wipe');
Position allocation example: Spot 50% (stable investment) + light positions 30% (small thrill-seeking) + reserve fund 20% (flexible to make up positions or hedge), don’t put all your money into one project!
Black Swan response: Have a plan when the sky falls
Exchange attacks/shutdowns: Regularly withdraw coins to your own wallet (don’t keep everything on exchanges, what if they 'run away'?);
Policy changes: Keep half of your stablecoins (like USDT) on hand, just like keeping some cash at home, so you won't starve during policy shifts.
5. Advanced learning: From 'newbie' to 'understanding brother'
Technical deep dive: Understand the code to avoid scams
Smart contracts: Learn Solidity language as an introduction (like learning to cook by first understanding the recipe, knowing the code logic will help avoid 'vulnerable coins');
Layer2 solutions: Is Ethereum congested? Take the 'bypass' (Arbitrum/Optimism) for faster and cheaper transactions, suitable for daily transfers;
On-chain tools: Etherscan to check transfer records (like checking bank statements), Dune Analytics to view project data (like looking at company financial reports), data doesn't lie.
Industry trends: Follow the wind
Web 3.0 and the Metaverse: In the future, the internet will not only allow chatting and video watching, but also owning your own digital assets (like a virtual house or identity);
DAO governance: Coin holders can vote on major project decisions (like community members voting for property management, your coins are the 'ballots');
Regulatory dynamics: Singapore and the UAE are relatively friendly towards cryptocurrency (like a green-lit racetrack), pay more attention to the policies in these places, avoid 'red-light areas'.
6. Resource recommendations: Reliable tools + community
Key reminder: Survival rules are more important than money-making skills
For the first 3 months, don’t trade frequently: Watching the market every day = giving your eyes 'overtime', the returns may not even cover eye drops;
Weekly review: Write down 'why you bought this coin' and 'what the result was', just like keeping a diary, so you won’t fall into the same pit twice next time;
Information firewall: Block 'rapid price surges' and 'insider information', focus on the project itself (otherwise, you will be led by emotions);
Tax compliance: Some countries require reporting cryptocurrency taxes, don’t let the tax bureau calculate your profits before you do~
The essence of cryptocurrency is a game of 'high risk + high information asymmetry', it is recommended to use 'money you won't mind losing' as 'tuition', spending 1-6 months to build a cognitive system. Remember: in the crypto world, those who survive can wait for opportunities to make money~
