FAQ basics cryptocurrencies

Cryptocurrencies are digital currencies based on cryptographic technology and decentralized networks - in other words, they function without a central authority such as a bank. The best-known cryptocurrency is Bitcoin.

They are based on blockchain technology, in which all transactions are stored in a decentralized digital ledger. You can find out more in the Blockchain article.

A blockchain is a continuously expandable chain of data blocks in which transactions are stored permanently and tamper-proof. You can find details in the Glossary entry Blockchain.

A wallet is a digital purse that you can use to receive, store and send cryptocurrencies. More about this in the Wallet-Guide.

The private key is the secret access to your wallet. Anyone who knows it can access your balance - which is why it must be kept particularly secure.

Decentralization means that no central organization controls the system. Decisions and validations are made by a distributed network of participants (nodes).

The public key is the public key of your wallet - i.e. the address to which coins can be sent. Comparable to an IBAN.

Mining is the process by which new coins are created and transactions are validated. Miners use computing power to solve cryptographic tasks.

Proof-of-work is a consensus mechanism in which computers solve complex computing tasks to validate transactions - including Bitcoin. The process is energy-intensive, but very secure.

Proof-of-stake is an alternative method in which participants "stake" their coins to validate transactions and receive rewards. It is considered more energy-efficient and is used, for example, with Ethereum.

A token is a digital unit that usually runs on an existing blockchain platform - for example on Ethereum. Tokens can have various functions, for example as a means of payment, access key or voting right in a project.

Coins have their own blockchain (e.g. Bitcoin), while tokens are based on an existing blockchain such as Ethereum. Tokens often fulfill specific functions within a project. More on this in the Comparison of coin and token.

Stablecoins are cryptocurrencies whose value is pegged to a stable reference such as the US dollar or euro. Well-known examples are USDT, USDC and DAI.

A white paper is a technical document that describes the concept, technology and objectives of a crypto project. It is often the basis for investor decisions on new projects.

You can buy cryptocurrencies via exchanges such as Binance, KuCoin or Bitget purchase - by SEPA, credit card or other payment methods.

A seed phrase is a recovery phrase that usually consists of 12 or 24 words. It allows you to access your wallet in the event of device loss or reinstallation. Never save it online!

Gas fees are network fees that are incurred for transactions or smart contracts. They depend on the utilization of the network. You can find tips on how to save in the Gas fairy guide.

With a blockchain explorer, you can search through every transaction, address or block in real time. Popular tools are Etherscan (Ethereum) or Blockchain.com (Bitcoin).

A fork is a spin-off of an existing blockchain - e.g. Bitcoin Cash as a spin-off of Bitcoin. A distinction is made between hard forks and soft forks.

HODL is a crypto insider term that means "Hold On for Dear Life". It describes the strategy of holding cryptocurrencies for the long term - regardless of price fluctuations.

DApps (decentralized applications) run on the blockchain - without central servers. Among other things, they enable decentralized financial applications (DeFi), games or NFT platforms.

An ICO (Initial Coin Offering) is a form of financing in which new crypto projects sell tokens to raise capital. It is similar to an initial public offering (IPO), but is less regulated.

Blockchain technology is considered secure. Risks usually arise from user errors, phishing, insecure wallets or lost access data. You can find out more about secure use in our Wallet FAQ.

Advantages: Decentralization, transparency, global availability, fast transactions and innovation potential. Particularly relevant in countries with weak currencies or limited access to banks.

Risks: High volatility, possible regulatory intervention, technical errors, loss due to hacks or forgotten access data. Only invest what you are prepared to lose.