Cryptocurrency, often referred to simply as "crypto," is a digital asset built on blockchain technology and secured by cryptography. Prominent examples include Bitcoin (BTC) and Ethereum (ETH). While the terms digital currency, virtual currency, and cryptocurrency are sometimes used interchangeably—even in academic sources like Wikipedia—this article focuses specifically on decentralized blockchain-based assets such as Bitcoin and Web3 technologies, excluding centralized digital points like Microsoft Rewards, Q Coin, or China’s digital yuan.
This guide provides an overview of the cryptocurrency landscape, particularly relevant to users in China. It emphasizes core concepts, technological frameworks, and associated risks. Please note: this is a comprehensive resource—long read ahead—and may contain inaccuracies or become outdated as the fast-evolving crypto space progresses.
The Crypto Ecosystem
Since Bitcoin’s inception, the crypto ecosystem has expanded into a complex network of technologies often grouped under the term Web3. This includes decentralized storage (e.g., IPFS, Filecoin), decentralized exchanges (DEXs) like Uniswap, and non-fungible tokens (NFTs).
You don’t need to master every concept to get started, but understanding the foundational elements will help you navigate the space safely.
Types of Cryptocurrencies
Stablecoins
Due to the extreme volatility of most cryptocurrencies, stablecoins serve as a bridge between traditional fiat currencies and digital assets. These are cryptocurrencies pegged to stable assets like the U.S. dollar, enabling smoother trading and value preservation.
The most widely used stablecoin is USDT (Tether), a centralized stablecoin. Tether claims that each USDT is backed 1:1 by USD reserves, allowing users to redeem their tokens at par. However, this model carries inherent risks—if Tether’s reserves are insufficient or its banking partners fail, USDT could lose its peg.
Another major player is USDC, issued by Circle. It is considered more transparent due to regular audits and regulatory compliance. Other stablecoins like TUSD and BUSD operate similarly.
⚠️ Risk Alert: Algorithmic stablecoins like the now-collapsed USTC (Terra) highlight systemic dangers. When confidence wanes, algorithmic models can spiral out of control—a phenomenon known as a "death spiral."
Stablecoins fall into two main categories:
- Centralized stablecoins (e.g., USDT, USDC): Backed by real-world reserves managed by companies.
- Algorithmic stablecoins (e.g., DAI): Use smart contracts and collateral mechanisms to maintain value without direct fiat backing.
DAI, for example, is over-collateralized with crypto assets on the MakerDAO platform, offering decentralization at the cost of complexity and potential liquidation risk.
👉 Discover how to securely manage stablecoins across chains
Major Cryptocurrencies (Mainstream Coins)
Coins like Bitcoin, Ethereum, Litecoin, and Solana are considered mainstream due to high market capitalization, liquidity, and widespread adoption. Their prices often move in tandem with broader market sentiment—similar to blue-chip stocks—and influence smaller cryptocurrencies.
These coins typically exhibit lower short-term volatility compared to lesser-known tokens and are less prone to manipulation.
Altcoins (Alternative Coins)
"Altcoins" refer to all cryptocurrencies other than Bitcoin. While some—like Dogecoin—have gained long-term traction, many are highly speculative and eventually lose all value. Altcoins often promise innovative features but come with elevated risk due to low liquidity and uncertain development roadmaps.
Application Tokens
Some projects issue native tokens to power their platforms. These application coins derive utility from their ecosystems:
- Filecoin (FIL): Used for decentralized data storage on the IPFS network.
- Basic Attention Token (BAT): Rewards users for viewing ads on Brave Browser and allows tipping content creators.
While functionally useful, these tokens often behave like altcoins in terms of price volatility and market dynamics.
Native Chain Tokens (Public Chain Coins)
Every public blockchain requires a native cryptocurrency—often called a gas token—to pay for transaction fees and incentivize network validators. These tokens are essential for maintaining blockchain operations.
Examples include:
- ETH on Ethereum
- BNB on BNB Smart Chain
- OKB on OKT Chain
- HT on HECO
Many exchange-issued tokens (like BNB and OKB) also serve as governance or utility tokens within their ecosystems.
To control supply and potentially increase value, some projects implement token burning—permanently removing coins from circulation. However, excessive burning can lead to deflationary pressure and reduced network usability.
Understanding Blockchain Technology
Blockchain is the backbone of all cryptocurrencies. It’s a distributed ledger secured by cryptography, ensuring transparency and immutability.
Gas Fees
"Gas" refers to the transaction fee paid to miners or validators for processing transactions on a blockchain. You pay gas every time you transfer tokens or interact with smart contracts.
Gas fees vary significantly across networks:
- On Ethereum (ERC-20): Can range from $1 to $10+ during peak times.
- On Polygon: Typically between $0.006 and $0.01 for the same USDT transfer.
Complex operations like NFT minting or DeFi swaps require more computational power and thus higher fees.
👉 Compare real-time gas costs across major blockchains
Major Blockchain Networks
Here’s a breakdown of key ecosystems:
- Ethereum (ETH): The largest smart contract platform. Uses ERC-20 for tokens and supports EVM (Ethereum Virtual Machine)—a framework enabling compatible chains like Polygon, BSC, and OKTC.
- Tron (TRON): Known for low-cost transactions via TRC-20 tokens. Widely used for cheap USDT transfers (~$1 per transaction).
- Other Chains: Include Solana, TON (The Open Network), and various proprietary blockchains.
Each network has its own blockchain explorer (e.g., Etherscan for Ethereum, Polygonscan for Polygon) to track transactions.
Cross-Chain Bridges
Assets on one blockchain cannot natively move to another. Cross-chain bridges enable asset transfers between networks by locking tokens on one chain and minting equivalents on another.
Popular bridges include:
- Multichain.org
- Polygon Bridge
However, bridges are high-risk targets for hackers and have suffered major exploits. Always verify bridge legitimacy before use.
🔐 Pro Tip: EVM-compatible chains share wallet addresses and tooling, making cross-chain navigation easier for users.
Crypto Wallets: Your Digital Vault
To participate in crypto, you need a wallet—a tool to store, send, and interact with digital assets.
Cold Wallets
Cold wallets are offline storage solutions, offering the highest security.
- Software cold wallets like MetaMask store private keys locally but remain vulnerable when connected to dApps.
- Hardware wallets (e.g., Ledger) keep keys completely offline but are overkill for casual users.
While secure, cold wallets incur high gas fees for every transaction and lack advanced trading features.
Hot Wallets
Hot wallets are online applications that offer convenience at the cost of reduced security.
Popular options include Trust Wallet and OKX Web3 Wallet. They support direct access to DeFi platforms like Uniswap and AAVE, enabling yield farming, staking, and automated trading.
Although they claim user control, many hot wallets hold partial custody of keys—making them less decentralized than advertised.
Exchanges as Wallets
Centralized exchanges (CEXs) like Binance and OKX function as custodial wallets. They offer full trading suites—spot, futures, leverage—but operate entirely off-chain.
⚠️ Risk Note: If an exchange collapses (e.g., FTX), user funds may be lost forever—even if deposited as crypto.
To mitigate risk, some exchanges publish Proof of Reserves, cryptographically verifying they hold sufficient assets to cover user deposits. Binance and OKX offer this; others do not.
Trading & Regulatory Considerations in China
China bans cryptocurrency transactions and mining. However, peer-to-peer (P2P) trading persists through C2C markets on global exchanges.
Users typically buy USDT via WeChat or Alipay transfers. Sellers release crypto only after payment confirmation. Platforms act as escrow services during disputes.
But beware:
- Personal accounts used for P2P trades may be flagged by payment providers.
- Some exchanges enforce holding periods (e.g., Binance’s T+1 rule).
- No legal protection exists if funds are seized or scammed.
👉 Learn safe P2P trading practices on compliant platforms
Frequently Asked Questions (FAQ)
Q: Are stablecoins truly safe?
A: Not always. Centralized stablecoins depend on issuer solvency; algorithmic ones rely on code and market confidence. Always assess backing and transparency.
Q: What’s the difference between ERC-20 and TRC-20?
A: ERC-20 runs on Ethereum (higher fees), TRC-20 on Tron (lower fees). Both can represent the same token (e.g., USDT), but exist on different blockchains.
Q: Is MetaMask a cold wallet?
A: Only when used offline. Once connected to dApps or browsers, it behaves like a hot wallet with increased exposure.
Q: Can I lose money using DeFi?
A: Yes. Risks include smart contract bugs, rug pulls, impermanent loss, and flash loan attacks. Never invest more than you can afford to lose.
Q: Why do gas fees fluctuate?
A: They depend on network congestion and transaction complexity. High demand = higher fees.
Q: Are all exchange tokens also chain tokens?
A: Many are—BNB powers BSC, OKB powers OKTC—but not all exchanges run their own chains.
This guide equips you with essential knowledge for navigating cryptocurrency trading—technologically, economically, and safely. As innovation accelerates, staying informed is your best defense against risk.