Basic Concepts of Cryptocurrency

Crypto Assets are decentralized digital assets based on blockchain technology, aimed at achieving peer-to-peer value transfer without intermediaries, ensuring transaction security through cryptography, maintaining ledger consistency through consensus mechanisms, and achieving fast and low-cost fund movement globally.

Typical Crypto Assets include: Bitcoin is the first widely adopted encryption coin globally, launched by Satoshi Nakamoto in 2009. Its main positioning is as a store of value and a means of payment, hailed as the “digital gold” due to its scarcity and anti-inflation mechanism; Ethereum is the second largest crypto asset by market value. In addition to serving as a medium of exchange, it has also built a powerful decentralized application platform, supporting core innovations such as smart contracts, NFTs, DAOs, and decentralized finance (DeFi), becoming an important infrastructure for Web3 application development.

With the continuous evolution of blockchain technology, more and more crypto assets have emerged, such as Litecoin, Solana, and other new generation public chain projects. These coins continue to optimize in terms of transaction speed, fee structure, scalability, and privacy protection to meet a wider range of user needs and scenarios, gradually becoming tools with practical financial value and commercial applications, bringing far-reaching impacts to the global financial infrastructure.

Some crypto asset tokens (Image source:https://chinese.aljazeera.net/economy)

How Does Cryptocurrency Work?

The core operation mechanism of Crypto Assets relies on blockchain technology, a decentralized distributed ledger system used to record all transaction activities in the network. Taking Bitcoin as an example, its blockchain records the transaction data of every asset transfer or receipt by users, forming a transaction history that is viewable, verifiable, and tamper-proof by anyone, replacing the traditional financial system’s reliance on intermediary institutions such as banks for ledger verification.

Crypto Assets rely on the ‘public key-private key’ encryption system to confirm account ownership and transaction validity. Each user has a set of keys: the private key is confidential information exclusively held by the individual, used to sign transactions and authorize asset transfers; while the corresponding public key can be freely shared for others to transfer funds to that address. Due to the one-way nature of encryption algorithms, no one can derive the private key from the public key, ensuring the security of the asset transfer process.

The value of crypto assets is determined by the supply and demand relationship: on the supply side, different crypto assets set their total issuance and inflation pace through algorithms, for example, the total amount of Bitcoin is limited to 21 million, and it halves at a fixed cycle; On the demand side, it depends on the user’s recognition of its payment function, speculative value, and technological ecology, so the final price reflects the dynamic game result of the market’s expectations and actual demand for the asset.

Main Types of Crypto Wallets

The encrypted wallet is the core tool for managing digital assets, mainly used to generate private keys, sign transactions, and securely store assets. Depending on the storage method and control permissions, encrypted wallets are usually divided into the following four types, each with different advantages and applicable scenarios:

Hot Wallet

Online wallets connected to the internet, highly convenient, suitable for high-frequency trading and daily use. Common forms include mobile wallet applications (such as Trust Wallet, MetaMask) and web plugin wallets. Users can quickly access assets and interact on-chain, but due to being always online, they face a certain degree of risk of hacker attacks and private key leakage, requiring security measures such as enabling two-factor authentication.

Cold Wallet

Belonging to offline wallets, private keys are generally not exposed to the internet, which can effectively prevent hacker attacks. It is suitable for long-term holding and secure storage of large amounts of funds, typical representatives are hardware wallets (such as Ledger, Trezor) and paper wallets (private keys printed and properly stored).

It is worth noting that although cold wallet operations are relatively cumbersome, they have clear advantages in asset security.

Comparison of Hot Wallet and Cold Wallet Features (Image Source: Hot Wallet vs Cold Wallet）

Centralized wallet (Custodial Wallet)

Centralized wallets are used by users who have accounts on exchanges such as Gate.io, where the exchange or third-party service providers hold the users’ assets and private keys. The advantage of such wallets is that users do not need to remember or save their private keys, and the platform provides fast trading and asset services. However, users also need to bear the risk of ‘trust in third parties,’ as the platform may suffer from technical attacks or compliance issues, leading to potential loss of user assets.

Decentralized Wallet (Non-Custodial Wallet)

Emphasize that users have complete control over their private keys, and asset control is always in the hands of the users. These types of wallets do not rely on third-party institutions and are widely used in the DeFi ecosystem. Typical examples include MetaMask, Rabby, Keplr wallets, which support free interaction with various DApps.

Although decentralized wallets offer high freedom, once the private key is lost, it cannot be recovered, and the operation threshold is slightly higher than that of centralized wallets.

How to Trade Cryptocurrency

For users who are new to Crypto Assets, understanding the complete trading process is the first step to participate in cryptocurrency. Below is the standard operating process from registration to account security, deposit, trading, and asset management in mainstream exchanges represented by Gate.io:

1. Choose the trading platform

First, users need to choose a reliable, secure, and feature-rich trading platform, such as Gate.io, one of the world’s leading crypto assets exchanges, founded in 2013, supporting trading of over 1,700 crypto assets, with high security and liquidity.

Specifically, you need to go to Gate.io Official WebsiteClick the ‘Register’ button, fill in your email address, set a login password, complete the account verification, then proceed with the KYC (real-name authentication) process, submit identification documents and facial recognition to ensure compliant account usage.

2. Deposit Funds

After completing the account creation, users need to deposit funds into the account. Gate.io provides the following multiple recharge methods:

- Fiat currency deposit: Use Visa/Mastercard, Apple Pay, or bank transfer to purchase mainstream coins such as USDT, BTC, ETH, etc.

- On-chain Transfer: If users hold crypto assets in other wallets or platforms, they can recharge the coins to the Gate.io wallet address through on-chain transfer, remembering to choose the correct chain (such as ERC20, TRC20, etc.).

After the recharge is credited, users can view the balance in the ‘Funds Account’ and transfer between accounts such as ‘Spot Account’ or ‘Contract Account’.

Some of the recharge methods provided by Gate.io (Image source: gate.io/zh)

3. Buy Crypto Assets

Gate.io provides a professional trading interface, supporting spot trading and contract trading for a variety of coins. Taking the purchase of BTC as an example, the process is as follows:

First, enter the “Spot Trading” page, search for the BTC/USDT trading pair; after entering the trading page, input the purchase amount or quantity in the order area, and choose “Limit Order” or “Market Order”; click “Buy BTC”, the system will automatically match and complete the order after submission.

The use of Crypto Assets

Charitable donations: Crypto Assets provide a more efficient and transparent donation channel for charitable causes. Several international non-profit organizations, such as UNICEF and the Red Cross, have supported donations in Bitcoin and Ether, allowing donors to bypass cumbersome banking procedures and improve fund efficiency.

Digital Gifts: As public awareness increases, crypto assets are increasingly seen as an innovative form of gift. For tech-savvy users, giving small amounts of crypto assets is an effective way to introduce them to the blockchain ecosystem.

Content creators reward: Some content creators, artists, musicians, etc., often receive rewards by displaying encryption wallet addresses or QR codes, especially in the podcast and blog ecosystem. This trend is becoming increasingly popular, providing creators with a cross-border, instant, and non-platform revenue source without the need for third-party platform cuts.

Global Travel Payments: Cryptocurrencies provide frequent outbound travelers with an alternative means to avoid currency exchange fees and financial controls, as they do not rely on any legal tender or national borders, thus supporting the ‘digital nomad’ community to consume and settle globally through digital wallets.

Virtual world trading: In virtual reality platforms like Decentraland, cryptocurrencies are used not only to purchase land, clothing, and digital collectibles, but also support diverse economic activities such as virtual event tickets, brand interactions, and asset rights confirmation in the form of NFTs.

Participate in the DeFi ecosystem: The DeFi field builds a decentralized financial system through smart contracts, including functions such as lending, yield aggregation, insurance, and derivatives. Users can access these protocols globally at any time, enabling the possibility of self-directed investment and cross-border financial services.

Conclusion

As a new asset class in the digital age, crypto assets are gradually permeating various dimensions of global finance, technology, and life. Whether as a means of value storage, an innovative payment tool, or the infrastructure leading to a decentralized future, crypto assets are constantly expanding their boundaries. For users new to this field, mastering the trading process and wallet management methods is the first step to secure investment and rational participation. In the future, as regulatory frameworks become clearer, crypto assets will also unleash their potential in a wider range of scenarios, becoming an important force driving the global value internet.