The best guide for Crypto beginners! If you don’t have time to read everything, we got you covered; check out all the topics covered in the guide here: https://intercom.help/parachutetoken/parachute-guides

Made in collaboration with the ParachuteToken community.

What is a cryptocurrency?

A cryptocurrency is a digital or virtual currency. It is designed to work as a medium of exchange. It uses cryptography (encryption) to secure and verify transactions on the blockchain. Cryptocurrencies are often called coins or tokens.

The most famous and the first cryptocurrency is Bitcoin, a cryptocurrency created in 2008 by Satoshi Nakomoto. Many other cryptocurrencies followed. These cryptocurrencies are called altcoins (alternative coins), Ethereum being the most famous altcoin. A cryptocurrency basically acts as peer-to-peer electronic cash. Peer-to-peer means that there is no need of a middleman, like a bank, to send or receive any currency. You are your own bank.

What is a Blockchain?

Blockchain is a technology for recording information chronologically and publicly. Currently, blockchains are mostly used for recording cryptocurrency transactions. A simple metaphor for blockchain is picturing it as a book. Each block on the blockchain represents a page in a book. Like a page, a block can record any information. These blocks are chronologically chained to each other to create what we call a blockchain. So essentially, a blockchain is a massive book composed of thousands of pages.

All these blockchains are independently and simultaneously recorded by individuals and their computers. These individuals are known as miners, as they record and therefore confirm transactions. By helping the blockchain validate transactions, by solving incredibly difficult algorithms (needing a lot of computing power; that’s why miners need expensive equipment), these miners are rewarded with the cryptocurrency of the blockchain they help function (Ethereum and Bitcoin being the most popular blockchains).

This is the reason we call the blockchain decentralized. The blockchain is distributed among many individuals and thus every transaction is recorded independently as opposed to, for example, one bank recording your transaction. It offers a lot of freedom and new technologies; that’s why we are all so excited!

What are Public and Private keys?

Public and Private keys are two uniquely related cryptographic keys. You can imagine them as being brother and sister. Cryptographic keys are basically long random numbers. The Public Key is, as the name suggest, public. This means that everyone can view your Public key via public repositories. The Private Key is only accessible to the respective owner of the key. This means that you should keep your Private Key, as the name suggest, private and very secure.

Both keys are mathematically related. To unlock whatever is encrypted with a Public Key you’ll need the corresponding Private Key and vice versa. So, when you send cryptocurrency to your friend, Captain Parachute, you will encrypt your transaction with Captain Parachute’s Public Key. Only Captain Parachute has access to his Private Key and as a result he is the only person able to decrypt the transaction you just sent him.

Example of a Public Key: 6038 0547 80D9 98LA LK8D SW9K EQR5 FM87 824T E929 3A98 FL22 PW36 R117 ……

What is a Cryptocurrency Wallet?

Essentially a cryptocurrency wallet is a piece of software that enables you to interact with the blockchain; it enables you to send and receive cryptocurrencies. A wallet stores your public and private keys, and interfaces with the blockchain so you can see your balance and transactions.

There are five different kind of wallets: online, desktop, mobile, paper and hardware wallets.

Online Wallet: an online wallet is a wallet that runs on the cloud. An example of online wallets are the wallets on exchanges. An online wallet is accessible from any device that has access to the internet. The danger with online wallets is that the private keys are in control of a third party so you don’t essentially control the security of your wallet. (examples: Exchange wallets like Coinbase and Binance)

Desktop Wallet: a desktop wallet is an application that you download from a website. These wallets are only accessible on desktops that have the wallet application installed. A desktop wallet offers a high level of security; the only way someone can access your private keys, is to hack your computer or if a virus gets hold of your computer. So don’t store your private keys on your computer and encrypt your desktop wallet! (examples: Jaxx and Armory)

Mobile Wallet: a mobile wallet is an application that runs on your phone. These applications are useful but are limited in use due to the limited storage in phones. (examples: Trust and Armory)

Hardware Wallet: a hardware wallet is a wallet that stores your private keys on a hardware device (i.e. USB). The hardware wallets are stored offline thus increasing security. They can however make transactions online. To send a transaction you simply connect your hardware wallet to an internet connected computer, enter your password and send your currencies. Hardware wallets are considered one of the safest options for storing your digital currencies. (examples: Ledger Nano and Trezor)

Paper Wallet: a paper wallet is a physical copy of your public and private keys; a print-out of your public and private key. You can transfer currencies to your paper wallet by transferring your currencies from your software wallet to the public address shown on your paper wallet. You can also reverse this process to spend or withdraw your currencies. You can access your paper wallet by scanning the QR code on the paper wallet or entering your private keys on the site or application where you created your paper wallet.

Wallet types (Bitcoin, ERC20 and NEP5)

The three most popular wallets are Bitcoin wallets, ERC20 (Ethereum) wallets and NEP5 (NEO) wallets. A Bitcoin wallet is compatible with Bitcoin and Bitcoin Cash. ERC20 wallets are compatible with ERC20 based tokens; tokens that are using Ethereum’s network for transactions (like Parachute). NEP5 wallets are compatible with NEP5 based tokens, tokens that are using NEO’s network for transactions. So, in order to store a cryptocurrency on your private wallet, you will need to know which network your token is utilizing. In order to know that, we recommend searching ‘[token name] ERC20 or NEP5’? Do not send your tokens to an incompatible wallet, as you might lose your tokens.

Tips

We strongly advise you to store most of your currencies on your privately owned wallet, not on exchanges. When you store your coins on an exchange, you don’t own the wallet where they are stored, much like a bank actually. The exchange owns the private key to this wallet, if something bad happens to the exchange you run the chance of losing your coins. Remember this phrase: not your keys, not your coins. Also make sure to backup your wallets and your private keys and store the backup on cold storage. NEVER share your private keys with anyone. Add security layers to your wallet and ensure you need a password to withdraw your funds.

Great wallets that are compatible with Parachute

MyEtherWallet, Trust and Metamask are great ERC20 compatible wallets that we recommend you to use! You can watch a great tutorial for MyEtherWallet here, and a great tutorial for Metamask here.

What is a Cryptocurrency Exchange?

Cryptocurrency exchanges are online platforms where you can exchange your cryptocurrencies for other cryptocurrencies (or for fiat currencies). A cryptocurrency exchange is essentially very similar to a stock exchange or a currency exchange at a bank or an airport. Cryptocurrency exchanges are profitable by using utilisation fees. Almost every action on an exchange requires paying a fee, so be wary of them! Many crypto exchanges and services offer a referral signup bonus. So check with your friends before you signup! Example of cryptocurrency exchanges are: Binance, Bittrex, Coinbase and of course the site you are browsing on: Parachute (exchange platform available in the near future).

Taxing of Cryptocurrencies

Before investing any large amount make sure to look up the taxing laws in your country. Cryptocurrencies are considered property in most countries so they ARE taxable. A great application and website to track your investment and taxes is Cointracking. You will need to pay for a subscription to fully utilise the application. Another great site to help you track your taxes is Bitcoin.tax, it’s free to use. We do recommend you, especially if you have made considerable gains with crypto, to contact a financial/legal expert that can help you out with your taxes.

How to track your investment

Download portfolio apps on your phone like Blockfolio or Delta to track your investments. You can also track your investments on your computer by using CryptoCompare or Altpocket. Portfolio apps are very easy to set-up, all you need to do is add the coins you want to track and input some specifications of your transaction and you are set!

What is an ICO?

An initial coin offering (ICO) is a way to raise funds for your crypto project. You can see it as crowdfunding, similar to Kickstarter or GoFundMe. Investors send cryptocurrencies (in most cases Ethereum, Bitcoin or NEO) or fiat currency in exchange for the project’s new cryptocurrency. The cryptocurrencies that project receives are used as capital to fund their project. An example of a project that offered an ICO is our very own partner: PurpleThrone! Make sure to check them out.

What is an Airdrop?

An airdrop is when a crypto project distributes free tokens or coins to the crypto community. To receive airdrops from Parachute and our partners all you need to do is register on the Parachute website and engage with our lovely communities! With your help we will be able to organise an increasing amount of airdrops for the crypto community and thus helping early-stage crypto projects.

What is Market Cap?

Market Cap, short for Market Capitalisation, refers to the total dollar market value of all the coins of a cryptocurrency combined. In mathematical terms: market cap = value of 1 coin * total number of coins. So let’s look at a random cryptocurrency, for example VeChain, it has a circulating supply of 478,489,956 VET and 1 coin is worth $3.89 dollars, so the total market cap of VeChain is 478,489,956 * 3.89 = $1.9 billion dollars.

The thing with market cap is, it doesn’t reflect the total amount of money that is invested in a cryptocurrency. Imagine I have 100 coins and people buy those coins for $1 dollar each; that means I have a market cap of $100 dollars. One day, Bob, decides to buy ONE coin for $2 dollars. This immediately doubles my market cap to $200 dollars, because one coin is now worth $2 dollars. So even though only $102 dollars have been invested, the market cap of my coin is now 200$. So be mindful when looking at market caps, the formula used is too simple to really reflect the value of a cryptocurrency.

How to buy Cryptocurrency

Make sure to read our complete guide first, and inform yourself about the market. If you feel you don’t know enough make sure to read more guides on the internet! We strongly advise you to not invest more than you can afford to lose. We also recommend searching ‘How to buy cryptocurrencies in [insert your country]’ to be certain; this guide might not apply to all countries. Here we go:

Your best bet is to set up an account on Coinbase and follow their instructions; you’ll need to verify your identity using a copy of your ID and link your bank account. On Coinbase you can buy Bitcoin, Ethereum, Litecoin or Bitcoin Cash with fiat (like USD or EUR). Be warned: Bitcoin Cash is definitely not the same currency as Bitcoin!

After you acquired your first cryptocurrency you can, if you wish to invest into other cryptocurrencies, send your Bitcoin, Ethereum, Litecoin or Bitcoin Cash to an exchange like Binance, Bittrex or Kucoin. We recommend you to use Bitcoin or Ethereum for trading, as most trading pairs are made up of BTC and ETH. Litecoin (LTC) is a great alternative to Bitcoin and Ethereum for trading, when their networks are clogged. On these exchanges you can exchange your Bitcoin, Litecoin or Ethereum for other altcoins. Be wary of fees when sending cryptocurrencies from exchange to exchange. Our very own Parachute exchange will be set up soon!

How to send and receive Cryptocurrencies

In most cases sending and receiving cryptocurrencies goes like this:

Sending cryptocurrencies:

Open your wallet and click on the “Send” tab.

Type in the destination address or scan the QR code of the recipient’s wallet. Always double check this information as sent transactions cannot be undone.

Type in the amount you want to send.

Click send.

You can track your transaction on blockchain explorers. (Bitcoin, Ethereum and NEO explorers)

Receiving cryptocurrencies:

Share your public address with the the sender and you are done!

You can track the transaction on blockchain explorers. (Bitcoin, Ethereum and NEO explorers)

When you send a transaction from your private ERC20 wallet, make sure to have a little bit of Ethereum in your wallet to be used as gas, otherwise the transaction will fail. Gas is essentially the fee you pay for sending a transaction.

If you still don’t know how to send and receive your cryptocurrencies, make sure to search for a FAQ or to contact the support desk of your wallet.

Warnings about sending Cryptocurrencies:

Do not send a type of cryptocurrency, ERC20 for example, to another type of wallet, NEP5 for example, this will, in the worst case scenario, result in the loss of your tokens.

Do not send a cryptocurrency, BTC for example, to another currency’s wallet, ETH for example, in an exchange. This will, in the worst case scenario, result in the loss of your tokens.

How to avoid Scamming and Hacking

Use a very strong password (consisting of capital and small letters, symbols, letters, and numbers).

Use 2 factor authentication (2FA) at all times. Download Authy or Google Authenticator and enable 2FA on every account you have.

Use your private wallet, or better yet cold storage to store your cryptocurrencies. Remember this phrase: Not your keys, not your coins.

Always test before making transactions. Send a small amount of cryptocurrency, before sending a large amount. This can prevent you from accidentally sending a large amount of cryptocurrency to the wrong wallet. So make sure to always double check the address you plan to send your tokens to.

Don’t store your private keys and passwords on a device that is connected to the internet, like your computer. Store them on cold storage. Disconnected devices are generally safer from hacking than connected devices.

Don’t download any third party applications for exchanges, like trading bots. These applications can get hacked leading to your credentials getting stolen and eventual loss of your cryptocurrencies.

Bookmark crypto sites that you use often. Google results and links posted by people can link to phishing sites.

Common scams

Shady ICOs and Cryptocurrencies

In the rising crypto scene, there have been a lot of cases of ICOs scamming their investors. A lot of ICOs overestimate the value of their startup and others are simply pump and dump schemes. They sell their tokens by promising unachievable things. The problems surrounding ICOs have even made it to the SEC (U.S. Securities and Exchange Commision). So make sure to do your own research by using reddit and reviews, when considering investing into an ICO. A great tool to use when investing in ICOs is ICObench, they summarise and review upcoming ICOs.

Remember: If it sounds too good to be true, it probably is.

Shady exchanges

Be very wary of shady exchanges. There are cases of exchanges disappearing overnight and taking all the cryptocurrencies with them. The most recent case being Bitgrail. So make sure to do your own research by using reddit or reviews, when considering a new exchange.

Pyramid and Ponzi schemes

In every financial world, scammers are trying to lure investors into Pyramid schemes and Ponzi schemes. A Ponzi scheme is a fraudulent investing scam that promises abnormally high rates of return with minimal risk to the investors. So if anyone promises you that they have a a new investment strategy that will yield amazing returns, it is extremely likely that they are running a Ponzi scheme.

A Pyramid schemes is a hierarchical based investment scam. This scheme is based on the influx of new investors (money). Investors get rewarded for recruiting new investors. New investors get sucked in by the promise of high returns. Those at the top levels of the pyramid make the most money from the new recruits. The only way a pyramid scheme can generate wealth is by promising these high returns to new recruits. The scam exists in the fact that new recruits will never be able to find enough new recruits to make money. Inevitably the whole scheme will lose steam and the pyramid collapses.

Remember: If it sounds too good to be true, it probably is.

Pump and Dump scheme

A Pump and Dump is a scheme used by Pump and Dump groups to quickly raise (pump) the value of an unknown coin and then selling (dumping) it to unsuspecting investors for a much higher price. This massive selling causes the value to tank, leaving the unsuspecting investors with a worthless coin. Because crypto isn’t regulated (yet), these schemes are considered legal in the crypto space. If you consider joining such a group, be warned that the probability that you will end up with profit is very low. These pump and dumps happen so fast, you will be left empty handed. The only ones who profit, are the ones who organise Pump and Dumps; they are the ones who pull the triggers.

Remember: If it sounds too good to be true, it probably is.

Fake sites and social media accounts

Always double check the site you are visiting, scammers are prone to creating a fake site of your favorite exchange to steal your credentials. The best way for you to not end up on a fake website, is to bookmark the real sites.

Another scam that is surging in the crypto scene is the ‘send tokens to receive more tokens’ scam. Scammers are impersonating crypto celebrities and organising ‘giveaways’. These giveaways promise you, for example, 1 Ethereum if you send them 0.1 Ethereum. These type of giveaways are ALWAYS scams, don’t fall for it.

Remember: If it sounds too good to be true, it probably is.

How to use Telegram

Telegram has proven to be one of the most important medium of interacting with Crypto projects and communities. Make sure to install the app and join our Telegram: https://t.me/parachutetokengroup

If you need help installing and starting up your Telegram, you can find a great guide to using Telegram on LaptopMag.

Useful Crypto Websites

Coinmarketcap: is a website to track the value of various cryptocurrencies. It is also the place where you can check the market cap of all cryptocurrencies combined.

Etherscan: is an Ethereum transaction tracker, simply enter your wallet address or the transaction hash to track your transaction.

Blockchain.info: is a bitcoin wallet and a Bitcoin transaction tracker, simply enter your wallet address or the transaction hash to track your transaction.

Coindesk: the largest crypto news media platform. This is the place to be for crypto related news!

Cointelegraph: another great crypto news media platform.

Tradingview: is the place to be for technical analysis. You can use the available tools to learn technical analysis and eventually create professional graphs. You can also follow successful technical traders and receive their latest trades directly to you inbox.

Reddit: subscribe to r/CryptoCurrency, r/Altcoin, r/Bitcoin, r/Cryptomarkets and r/ParachuteToken to be part of the latest crypto related discussions and receive the latest news.

Crypto terms you’ll come across

Bearish: An expectation that the price is going to decrease.

Bullish: An expectation that the price is going to increase.

Cold storage: The storage of cryptocurrencies and private keys onto an offline device like a USB or Ledger.

DYOR: Do Your Own Research

ELI5: Explain Like I’m 5 (years old)

ERC20: A token based on the Ethereum blockchain.

Fiat: Government issued currency, like the USD

FOMO: Fear Of Missing Out, a term used to describe the overwhelming feeling of missing out on something that other are enjoying; commonly used when a coin is rising rapidly in value and you feel that you are missing out on massive profit.

Fork: A situation where a blockchain is split up into two different blockchains. An example of a fork is the Bitcoin Cash fork of Bitcoin.

FUD: Fear, Uncertainty and Doubt. Negativity spread by individuals who want to see the price of something drop. These individuals are called FUDsters.

HODL: A famous typo of HOLD

ICO: Initial Coin Offering

KYC: Know Your Customer, is the process used by businesses to identify and verify the identity of their customer.

Masternode: A masternode is a node in a currency’s network that fulfills a specific function beyond simply relaying transactions. By running a masternode you get rewarded by the cryptocurrency for aiding the network function.

Mining: The process by which transactions are verified and added to the blockchain, this verification of transactions rewards the people who verify them. It is called mining, because coins are awarded to the solver of the computationally difficult puzzle that enables the miner to place the next block on the blockchain. The coins are thus literally mined.

Mooning: A term used to describe a sudden and massive increase in value of a token.

NEP5: A token based on the NEO blockchain.

Node: A computer that possesses a copy of a blockchain and works to maintain it.

POS: Proof of Stake

POW: Proof of Work

ROI: Return On Investment

Total Market Cap: The total value of all cryptocurrencies combined.

Whale: Someone that owns an enormous amount of cryptocurrency.

Written by Crypto French

If this guide was helpful to you, or if you need more information be sure to sign up on the ParachuteToken Platform. Parachute is a platform dedicated to helping out early-stage crypto projects and crypto enthusiasts by connecting them to each other. Read more about Parachute and their goals here.

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