Cryptocurrency from Scratch: What It Is, How to Buy, Store, and Use

Cryptocurrencies (or simply crypto) attract attention from both experienced investors and newcomers, promising new opportunities for earning and financial independence. Many have heard stories about how one can get rich through cryptocurrency, but beginners often do not know how to profit from this market from scratch and where to start. However, before diving into this high-tech market, it is essential to understand what cryptocurrency is, how it works, what it is needed for, and to explore the primary ways to buy, store, and use it. This article serves as a structured guide for beginners that will help clarify the fundamentals of cryptocurrency from scratch and assess the risks and prospects of this digital asset.

What is Cryptocurrency?

Illustration: Physical Bitcoin coins are often used as a symbol of cryptocurrency. However, cryptocurrency does not have a physical form: its units exist only as entries in the blockchain. The first digital coin, Bitcoin, was created in 2009, marking the beginning of the cryptocurrency market's development.

Cryptocurrency is a special type of digital currency created and operated based on blockchain technology (a distributed ledger system). Unlike conventional money issued by central banks, cryptocurrencies are decentralized: their issuance and transaction tracking are not controlled by a single entity. Instead, the network's maintenance is supported by users worldwide (such as miners and validators), applying cryptographic methods to secure data and verify transactions.

Simply put, each unit of cryptocurrency (coin or token) exists not as a physical coin or banknote but as a record in a global digital ledger. This ledger—the blockchain—represents a chain of blocks, each containing information about transactions. When a new transaction occurs (for example, transferring a coin from one user to another), it is verified by participants in the network and combined with others into a new block added to the chain. Thus, the blockchain ensures transparency and immutability of data: it is nearly impossible to retroactively alter a record in an already added block without reconstructing the entire chain, which requires tremendous resource expenditure.

The first cryptocurrency was Bitcoin (BTC), launched in 2009 by a person or group under the pseudonym Satoshi Nakamoto. Bitcoin demonstrated that a digital asset could be created to serve as money without the involvement of governments and banks. Over more than a decade of its existence, the price of Bitcoin has experienced dramatic rises and falls, but the underlying principle of decentralized currency has gained widespread acceptance. Today, there are numerous other cryptocurrencies (often referred to as altcoins—alternative coins). Some are focused on increased transaction speed and scalability, others on anonymity, while others represent platforms for creating decentralized applications. A prime example of the latter is Ethereum (ETH), the second-largest cryptocurrency by market capitalization. Ethereum is not just a cryptocurrency; it is an entire blockchain network platform with smart contracts that allow the creation of new tokens and services leveraging its infrastructure. This has led to the emergence of projects based on Ethereum and similar platforms—decentralized finance (DeFi), non-fungible tokens (NFTs), etc.—which significantly expand the application possibilities of cryptocurrencies.

It is essential to understand that the term "cryptocurrency" encompasses a multitude of digital assets with different properties. They can vary in transaction confirmation mechanisms (for instance, Proof-of-Work mining, as with Bitcoin, or Proof-of-Stake staking, as with the new Ethereum), issuance volume (some cryptocurrencies have a fixed supply, like Bitcoin, while others do not), and purpose (payment coins, utility tokens for accessing services, stablecoins pegged to the dollar, etc.). Nevertheless, they all share the use of blockchain and cryptography and independence from national borders: sending a transfer in cryptocurrency can be done directly from one person to another anywhere without intermediaries. This makes cryptocurrencies a unique phenomenon at the intersection of technology and finance.

Why Do We Need Cryptocurrency?

Initially, cryptocurrency was conceived as digital money for transactions on the internet. Bitcoin was positioned as a peer-to-peer electronic payment system, allowing value to be sent directly from user to user without the involvement of banks. In practice, cryptocurrencies today serve several functions:

Medium of exchange and payment. Thousands of vendors worldwide already accept Bitcoin, Ethereum, and other coins as payment. Cryptocurrencies can be used to pay for goods and services, especially in international transactions, bypassing expensive bank transfers. Although price volatility hinders widespread adoption as everyday money, it remains a convenient tool in certain niches.
Means of savings and investment. Many view cryptocurrencies as a new asset class to diversify their portfolios. For example, Bitcoin is sometimes called "digital gold" due to its limited supply and increasing long-term value. Investments in cryptocurrencies attract potentially high returns: within a short timeframe, the price of some coins has skyrocketed. The cryptocurrency market is open 24/7, providing opportunities to profit from price fluctuations at any time, albeit at increased risks.
Technological platform. Decentralized applications are being developed based on blockchain networks (with Ethereum as a frontrunner), ranging from financial services (lending, exchanges, derivatives) to gaming. Cryptocurrencies are required for the operation of these platforms—for instance, Ether (ETH) is used to pay transaction fees on the Ethereum network. Thus, cryptocurrencies facilitate the functioning of entire ecosystems of projects based on blockchain technology.
Transfers and financial independence. In countries with unstable banking systems or strict currency controls, cryptocurrencies offer a way to store savings outside banks and send them overseas. This enhances the financial independence of users. Even in everyday cases, transferring money to relatives in another country via the crypto network is often faster and cheaper than a bank transfer across borders. From the perspective of the global financial network, cryptocurrencies create a unified transaction space where the sender and recipient's location does not matter.

Moreover, crypto assets stimulate the development of new economic models. For example, through initial coin offerings (ICOs) or token sales, startups can create their projects and raise funding from the community, bypassing traditional venture capital. Token holders of such projects assume the role of early investors. Another example is meme coins like Dogecoin or Shiba Inu that were initially created as jokes but gained popularity thanks to their community: their value largely depends on hype, which has become a part of crypto culture. Thus, each cryptocurrency may have its purpose, ranging from purely utilitarian to speculative or even socio-cultural.

However, it is crucial to note that despite all the advantages and applications, cryptocurrency remains a tool that requires a responsible approach. The appeal of quick profits should not overshadow the original intention for entering this market. Before acquiring a particular coin, it’s important to know exactly why you need it—for payments, long-term investments, participation in a specific project, or just for speculative profit. This will determine your strategy for working with cryptocurrencies.

How to Buy Cryptocurrency?

To start using cryptocurrency, you first need to acquire it with regular money (fiat currency such as rubles, dollars, euros). There are several main ways to buy cryptocurrency from scratch, each with its own features:

Through cryptocurrency exchanges (CEX). This is the most popular route. Centralized exchanges are online platforms for trading digital coins. Users register, go through the Know Your Customer (KYC) process as required by regulations, deposit fiat money (e.g., via banking card or transfer), and exchange it for the desired cryptocurrency. Major exchanges like Binance, Coinbase, Kraken, etc., support numerous cryptocurrencies (Bitcoin, Ethereum, Litecoin, many ERC-20 coins, etc.) and offer various trading tools. It is crucial to choose an exchange with a good reputation and reliable security, as working through a centralized service means entrusting them with your funds.
Through exchangers and brokerage services. There are online exchangers where buying occurs more straightforwardly than on an exchange: you transfer money to the seller (or to the service itself) and receive the agreed amount of cryptocurrency to your wallet. Exchange rates may be less favorable, but the process is quicker and avoids complex registration. Some financial applications and banks are also beginning to offer cryptocurrency purchase services (though such operations are officially restricted in several countries, including Russia).
P2P transactions (peer-to-peer). Many exchanges have built-in platforms for P2P trading, where you buy cryptocurrency directly from other users for fiat. Over-the-counter transactions also exist: for example, one person transfers rubles through a bank to another and receives a cryptocurrency transfer to their address in return. The P2P method eliminates the need for intermediaries and extra fees but requires trust between participants and attention to transaction security.
Alternative methods. Rarely, cryptocurrency ATMs (similar to regular ATMs) can be found—terminals through which you can buy Bitcoins for cash. There are also ways to earn cryptocurrency without buying it: for example, by receiving it as payment for work or participating in an airdrop (distribution of tokens to new users for promotional purposes). However, for newcomers, such paths are typically exceptions rather than rules.

Before buying your first cryptocurrency, explore the available options. Beginners are often advised to start with a reliable large exchange—as this is a relatively straightforward and understandable path. Pay attention to the platform’s fees and limits: sometimes, it is more advantageous to buy a larger amount at once than to make several small transactions, each incurring fees. Also, think about which specific cryptocurrency you want to acquire in advance. The classic choice for beginners is Bitcoin or Ethereum, as they are the most known and liquid assets. However, it all depends on your goals: participating in certain projects might require purchasing specific tokens through decentralized exchanges (DEX), such as Uniswap, which operate directly on blockchain networks like Ethereum. For initial steps, it's sufficient to master the basic scenario: create an account on an exchange, deposit money, and exchange it for your chosen coin.

It is worth mentioning mining separately—the process of generating new coins using computational technology. Strictly speaking, mining is not a method of "buying" cryptocurrency, but rather an alternative way of obtaining it. In the case of Bitcoin and some other currencies, you can set up equipment (such as powerful graphics cards or ASIC miners) to perform complex calculations for the network and receive cryptocurrency rewards. However, as of 2025, mining has become quite challenging and costly: high competition, expensive electricity, and equipment. Therefore, most beginners now prefer to purchase on an exchange rather than attempting to mine coins from scratch. Moreover, some popular cryptocurrencies (for example, the updated Ethereum) no longer support mining and have transitioned to other consensus mechanisms.

Where to Store Cryptocurrency?

After purchasing cryptocurrency, the question of safe storage arises. Unlike money in a bank account, the responsibility for securely holding digital assets largely lies with the owner. Cryptocurrency is stored in special wallets, which come in several types:

Hot wallets (online/"soft" wallets). These are programs or services that are always connected to the internet. They include mobile applications (e.g., Trust Wallet), desktop programs (Exodus, Electrum), web wallets in browsers, and accounts on exchanges. Hot wallets are convenient for frequent use: quick transfers, exchanges, trading on exchanges. However, they are potentially vulnerable to hacks, phishing, or scams, as access to them is online. If you store funds on an exchange or another online service, you are entrusting the security of your coins to a third party.
Cold wallets (offline storage). These solutions are not permanently connected to the network, which greatly enhances security. They include hardware wallets (specialized devices like Ledger or Trezor, where keys are stored on the device itself) and paper wallets (where you print or write down the address and private key on paper and store it offline). A cold wallet is optimal for long-term storage of significant amounts you do not plan to move frequently. Even if the owner's computer is infected with a virus, the funds in the isolated cold wallet will remain inaccessible to malicious actors.

Each crypto wallet has two main components: a public address and a private key. The address is like an account number, and you can freely give it to others to receive a transfer. The private key is a secret "password" that allows you to manage the funds in the address (sign transactions). Knowing the private key allows anyone to access your assets, so it should not be shared with anyone. The modern form of the private key is often represented as a seed phrase—a set of 12–24 English words that should be recorded and kept in a secure place.

For beginners, there is a relatively simple option—leaving the purchased cryptocurrency in the exchange's account without transferring it to an external wallet. This minimizes technical complexities (no need to navigate setting up your wallet application), but there are drawbacks: the exchange effectively controls your funds. The crypto community even uses the expression: "Not your keys — not your coins," emphasizing that only by personally holding the private key do you truly control your cryptocurrency. Therefore, as your asset amounts increase, it’s advisable to learn how to use a personal wallet. For example, you might start by setting up a mobile wallet and transferring a small amount from the exchange to practice conducting transactions. This will provide you with necessary experience and confidence.

When choosing a storage method, it’s important to assess the balance between convenience and security. For active trading and small amounts, a hot wallet or exchange account is suitable. For significant long-term investments, cold wallets are preferable. Some investors diversify their holdings: keeping part on an exchange or in a mobile wallet for immediate operations while holding the majority on a hardware wallet offline. Always adhere to basic security rules: store your seed phrase in a secret place (and make a backup), use strong passwords and two-factor authentication, and be wary of suspicious links and applications. Remember: if you lose your private key or allow it to be compromised, you unfortunately will not be able to regain access to your funds—this embodies both the advantage and the risk of decentralized finance.

Risks and Prospects of Cryptocurrencies

The cryptocurrency market opens up new opportunities, but it is also associated with significant risks. Beginners should be aware of potential dangers:

High volatility. Cryptocurrency prices are subject to sharp fluctuations. Price charts for Bitcoin and altcoins show periods where values drop by tens of percent in just a few days. Such volatility means you can quickly profit from cryptocurrency during price increases, but you can also lose a significant portion of your investments just as fast during a decline. Managing volatility is impossible, so it is recommended to invest an amount you are prepared to part with and always have a strategy (such as not succumbing to panic during dips or, conversely, not buying at peak highs).
Regulatory risks. Different countries have various stances on cryptocurrencies, and regulations are constantly changing. For instance, in Russia, paying with cryptocurrency for goods and services domestically is officially prohibited, but owning it as property is permitted. As of 2024, mining has been legalized in Russia, but the use of cryptocurrencies in commercial activities remains strictly limited. Other jurisdictions may have their own restrictions: from banning banks from serving cryptocurrency exchanges to requiring tax reporting on income from transactions. These factors can influence cryptocurrency prices (for example, news about bans often causes price crashes) and your ability to use them. Always stay informed about the current laws in your country to avoid inadvertently violating regulations.
Security and fraud. The world of cryptocurrencies attracts malicious actors. Phishing schemes are prevalent (where a wallet or exchange site is spoofed to trick you into entering your secret phrase), financial pyramids disguised as investment funds, and cases of exchange or wallet hacks resulting from neglecting key management. Additionally, if you make a mistake during a transfer (like entering the wrong address or sending coins to the wrong blockchain network), recovering funds is nearly impossible. Always exercise heightened caution: check website addresses, do not disclose private information, and double-check wallet addresses during transfers.
Lack of guarantees. Cryptocurrencies are not backed by any government (like regular money) and do not have deposit insurance. If an exchange goes bankrupt or your wallet is compromised, there is often no recourse for compensation. There is also no guarantee that the cryptocurrency project you choose will not fail: hundreds of coins that were popular a couple of years ago have depreciated over time. Investments in obscure tokens without fundamental value (such as meme coins, which often lose value sharply after a hype surge) are particularly risky.

Despite these risks, the prospects for cryptocurrencies and blockchain technology as a whole look promising. An increasing number of large companies and financial organizations are showing interest in this sector each year. The total market capitalization of cryptocurrencies already measures in hundreds of billions of dollars, and in peak periods, it has exceeded a trillion, underscoring the scale and significance of this phenomenon. New infrastructural projects are being created to make the use of crypto assets more convenient and secure for the average user. The development of areas that emerged based on Ethereum and other networks continues: decentralized finance already offers functionalities comparable to banks, while NFT technology finds applications in digital art, gaming, and identification.

The subject of government policy also deserves special attention. In numerous countries, the issuance of central bank digital currencies (CBDCs) is being seriously discussed as a response to the challenges posed by cryptocurrencies. This step effectively recognizes the value of the very idea of digital money. Even if these governmental coins differ significantly from decentralized cryptocurrencies, their emergence will confirm: the world is moving towards the digitization of finance. Meanwhile, the market for traditional cryptocurrencies will continue to develop in parallel, attracting users with capabilities that conventional money lacks.

For investors, prospects are also tied to the developmental cycles of the market itself. For instance, Bitcoin's dominance (BTC's share in the total cryptocurrency market cap) historically remains high, but over time, one might expect an increased role for major altcoins and the emergence of new projects. Another technological cycle (let's say, a mass application launch or a significant update of networks like Ethereum) could spark the next wave of cryptocurrency adoption. At the same time, the market has become more mature compared to the situation five years ago: professional participants are entering, investments and trading strategies are becoming more sophisticated, and the available information for analysis (including on-chain metrics and project activity indicators) has significantly increased.

Conclusion: Cryptocurrency opens up a new financial world where everyone can manage their assets without intermediaries. For newcomers, it is essential to avoid rushing and start with a basic understanding of technology and market principles. Study how blockchain functions, how one coin differs from another, and why the prices of particular assets fluctuate. Try conducting small transactions: set up a wallet, buy a little cryptocurrency, send a transfer to a friend. Such practical experience, supported by theory, will help you feel confident in the world of cryptocurrencies. Remember that the path in this field is a marathon, not a sprint: set long-term goals, manage risks, and do not invest more than you are ready to lose. With a well-considered approach, digital currencies can become not only a convenient payment tool but also a part of your investment portfolio and a gateway to innovative projects. The crypto market continues to create new opportunities, and by mastering its fundamentals, you will be able to take advantage of them.