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Cryptocurrency has gone from a niche hobby to a mainstream obsession in just over a decade. If you feel left behind in this rapidly evolving space, you‘re not alone. In this ultimate cryptocurrency for dummies guide, we‘ll break down everything you need to know to understand crypto and how to get started with it—no prior knowledge or technical expertise required!

What is Cryptocurrency?

At the most basic level, a cryptocurrency is a digital asset that can be used as a medium of exchange. Unlike traditional fiat currencies issued by governments (like the US dollar), cryptocurrencies are decentralized and not backed by any central authority.

The first and most well-known cryptocurrency, Bitcoin, was launched in 2009 by the pseudonymous Satoshi Nakamoto. Bitcoin introduced a novel technology called blockchain that enables secure peer-to-peer transactions without intermediaries like banks.

Since then, thousands of other cryptocurrencies (also known as altcoins) have been created, all with unique features and use cases. As of April 2023, there are over 25,000 cryptocurrencies in existence with a total market capitalization of $1.17 trillion according to CoinMarketCap.

How Do Cryptocurrencies Work?

Cryptocurrencies rely on a few key technologies:

Blockchain
A blockchain is essentially a tamper-proof digital ledger that records all transactions. This ledger is distributed across a network of computers rather than being controlled by a single entity. Each block contains a set of transactions and is cryptographically linked to the prior block, creating a chain. This decentralized structure and immutable linking makes it nearly impossible for anyone to alter transaction history.

Decentralization
The computers that make up a blockchain network are called nodes. Anyone can operate a node, and each node maintains its own copy of the ledger. For a transaction to be added to the blockchain, the majority of nodes must reach consensus that it is valid. This decentralized system prevents any single party from controlling the currency.

Mining & Staking
New cryptocurrency is created and entered into circulation through two main methods: mining and staking. In mining-based cryptocurrencies like Bitcoin, computers compete to solve complex mathematical problems and earn the right to add new blocks of transactions to the chain. In proof-of-stake systems, users lock up (stake) an amount of cryptocurrency for the chance to be chosen to validate the next block and earn newly minted coins. Both processes help secure the network.

Wallets
Cryptocurrencies are stored in digital wallets. These can be hardware devices, software programs, or even paper printouts. Wallets contain a user‘s public and private keys which allow them to send and receive coins. Public wallet addresses are shareable, but private keys must be kept secret as they enable full access to funds.

Transactions
To send cryptocurrency, you simply specify the recipient‘s public wallet address and the amount. The transaction is digitally signed with your private key and broadcast to the network for validation. Once confirmed, the blockchain is permanently updated to reflect the transfer of funds. This process can take anywhere from a few seconds to over an hour depending on the specific cryptocurrency and network traffic.

Real World Use Cases & Adoption

Despite the "crypto" name, cryptocurrencies are much more than just a form of digital money. Here are some examples of how crypto is being used in the real world today:

Payments
A growing number of businesses now accept cryptocurrency payments, from tech giants like Microsoft and AT&T to hundreds of thousands of small businesses worldwide. Crypto enables cheap, fast, borderless transactions without reliance on banks. Cryptocurrency debit cards even enable spending in venues that don‘t directly accept it.

Decentralized Finance (DeFi)
Decentralized finance protocols built on blockchains allow for peer-to-peer lending, borrowing, trading, and more without centralized gatekeepers. DeFi grew from under $1 billion in 2019 to over $200B by 2022. On DeFi platforms, global users can earn interest, take out loans, and access financial services with just an internet connection.

Store of Value/Investment
Due to their finite supply, many cryptocurrencies are seen as hedges against inflation or appreciating assets to hold long-term. Major companies like MicroStrategy and Tesla now hold billions in Bitcoin on their balance sheets. A 2022 study by the Pew Research Center found that 16% of US adults have invested in or traded crypto.

Cross-Border Remittance
Cryptocurrencies enable fast, low-cost international money transfers between individuals. Traditional money transfer services charge high fees, especially in developing nations. With crypto, a worker abroad can send money home to family almost instantly and at a fraction of the cost compared to traditional remittance services.

Charitable Giving
Cryptocurrencies have created new ways to quickly mobilize funds globally for causes. The Ukrainian government has raised over $100M in crypto donations since the war started in 2022. Crypto giving increased 1,558% on popular donation platform The Giving Block between 2020-2021.

The State of Cryptocurrency in Numbers

To put the size, scope and growth of the cryptocurrency industry in perspective, here are some key statistics:

  • Total crypto market cap: $1.17T (April 2023)
  • Market share: Bitcoin 47%, Ethereum 18.7%, Other 34.3%
  • Bitcoin price: $27,476 (April 2023) up from $0.0008 in 2010
  • Daily crypto exchange trading volume: $71.4B (March 2023)
  • Number of unique crypto wallet addresses: 425M (Dec 2022)
  • Number of crypto owners worldwide: 420M (July 2022)
  • Total value locked in DeFi: $81.4B (April 2023)
  • NFT market sales volume: $1.6B (Q1 2023)
Top 10 Cryptocurrencies by Market Cap (April 2023)
1. Bitcoin $562B
2. Ethereum $221B
3. Tether $79.5B
4. BNB $51.8B
5. USD Coin $32.7B
6. XRP $25.8B
7. Cardano $13.7B
8. Dogecoin $12.8B
9. Polygon $11.6B
10. Solana $8.3B

How to Buy, Store and Use Cryptocurrency Safely

Ready to dip your toes into the world of crypto investing and usage? Here‘s a crash course on how to get started:

Get a Wallet
The first step to using crypto is setting up a digital wallet where your coins can be stored. For beginners, the easiest option is a software wallet that can be downloaded as a smartphone app or desktop program. Popular picks include Coinbase Wallet, Exodus, and Mycelium. Always carefully record your recovery phrase, which acts as a backup password for your wallet.

Sign Up for an Exchange
Crypto exchanges are the marketplaces where you can buy, sell and trade coins. Coinbase, Binance, Gemini and Kraken are some of the most popular and user-friendly options. You‘ll need to complete identity verification and connect your bank account or debit card as a payment method.

Make Your First Purchase
On the exchange, navigate to the page for the coin you want—let‘s say Bitcoin. Enter the amount you want to purchase and click buy. Your BTC will appear in your exchange wallet for you to hold or send elsewhere. Note the exchange will charge a small transaction fee.

Transfer Coins to Your Wallet
For the best security, it‘s wise to transfer your coins to your personal wallet rather than leave large sums for long-term storage on the exchange. Get your wallet address for the coin you want to send. On the exchange, go to Bitcoin, click "Withdraw" and paste in your wallet address. Always double check the first and last characters of the address match before sending coins!

Storing Crypto Safely
Within your wallet, your coins are only as safe as your private keys. Never share your private key or seed phrase with anyone else—that would enable them to access your coins. For large amounts, consider a hardware wallet that keeps your keys in "cold storage" on an offline device. Always keep a backup of your keys in case of damage or loss.

Sending & Receiving Coins
To send coins, you‘ll need the recipient‘s public wallet address. Input that into the "send" field in your wallet along with the amount. Remember transaction can‘t be reversed so always carefully verify the address! To receive coins, just share your public wallet address. Your wallet should notify you when funds are received.

Beware of Common Scams and Fraud
As with any financial investment or monetary transaction, scammers have entered the crypto space. Never give out your private key or send coins to someone claiming to need access to your wallet. Never trust "giveaways" promising free crypto—if it sounds too good to be true, it probably is! Also be on alert for fake/spoofed websites and apps, sticking only to official links.

Benefits, Risks & Challenges of Crypto

As with any emerging technology, cryptocurrency comes with both significant potential benefits and risks.

Benefits

  • Decentralization & Disintermediation: By eliminating the need for central third-party authorities like banks, crypto can reduce costs and single points of failure.
  • Broader Financial Access: Anyone with an internet connection can access crypto services, democratizing finance especially in developing nations.
  • Transparency & Anonymity: Public blockchains give a full transaction record while enabling pseudonymous identity.
  • Security: Cryptography and distributed consensus make blockchain highly tamper-resistant.
  • Faster & Cheaper Transfers: Crypto enables cross-border transfers in minutes rather than days and at a fraction of the cost.
  • Programmability: The programmable nature of many blockchains opens the door to more complex transactions beyond currency.

Risks & Challenges

  • Volatility: Most cryptocurrencies experience drastic price fluctuations, posing short-term risk to investors.
  • Regulation: The regulatory landscape for crypto is still uncertain and rapidly evolving globally.
  • Technical Barriers: The underlying tech and jargon of crypto remain confusing for many mainstream users.
  • Irreversible Mistakes: With no recourse for lost keys or misdirected transactions, user error can mean permanent fund loss.
  • Criminal Usage: The anonymity of crypto has attracted use for money laundering, ransomware and more.
  • Energy Consumption: Consensus mechanisms like Bitcoin‘s proof-of-work require high energy expenditure.
  • Limited Scalability: Most blockchains still face challenges to process high transaction volumes.

As Nobel laureate Paul Krugman writes, "There‘s been an enormous amount of hype around crypto…But there are still major questions about its viability and usefulness."

The Legal & Regulatory Landscape of Crypto

The regulatory treatment of cryptocurrencies varies significantly around the world, with attitudes ranging from outright hostility to cautious acceptance—sometimes within the same government.

In the United States, cryptocurrencies are considered property for tax purposes meaning capital gains taxes apply to profits on sales. Crypto exchanges must register as money transmitters with the Financial CrimesEnforcement Network. Still, US regulation is scattered across agencieswith no overarching framework to date.

China outright banned cryptocurrency trading and mining in 2021, though the government is piloting a state-backed central bank digital currency. Other nations like Algeria, Bolivia, and Egypt prohibit crypto entirely.

At the other end of the spectrum, Japan and Germany have embraced crypto, recognizing it as legal tender and codified it into national law. El Salvador became the first country to adopt Bitcoin as an official currency in 2021.

The European Union reached a landmark deal to regulate cryptocurrency transfers in July 2022, cracking down on anonymity while stopping short of broader trading and issuance rules.

The Bank of England has warned cryptocurrencies "have no intrinsic value" but the UK is pursuing becoming a global crypto hub via a ‘regulatory sandbox‘. Other jurisdictions like Singapore, Hong Kong and Switzerland are following similar sandbox-based approaches.

Meanwhile bodies like the Financial Stability Board are coordinating international regulatory harmonization efforts. The IMF has called for global crypto standards.

For now, cryptocurrency regulation remains uneven and fast-evolving. Owners and users bare the burden to track the rules in their respective jurisdictions.

Resources to Learn More About Crypto

Want to dive deeper into the world of cryptocurrency and blockchain technology after this crash course? Here are some of the best resources to build your knowledge:

  • Books: Mastering Bitcoin by Andreas Antonopoulos, The Basics of Bitcoins and Blockchains by Antony Lewis, Crypto Assets by Chris Burniske
  • Online Learning: Coursera Cryptocurrency and Blockchain Specialization, edX Blockchain Fundamentals, Udemy Bitcoin & Cryptocurrency Mastery
  • Podcasts: Unchained, Bankless, The Pomp Podcast
  • Newsletters: CoinDesk, Messari, Blockworks
  • Communities: Reddit r/CryptoCurrency, Bitcoin Forum, Ethereum Community Forum, Twitter Crypto
  • Courses and TikTok accounts

Remember everyone starts as a beginner—don‘t be afraid to ask questions and learn at your own pace in this fast-moving space!

Looking Ahead: What‘s Next for Crypto?

While it‘s impossible to predict the future, based on current trends here are some key developments to watch in the coming years:

  • Continued Mainstream Adoption: More traditional financial institutions getting involved via crypto custody, payments and trading.
  • Central Bank Digital Currencies (CBDCs): Dozens of countries actively exploring digital versions of national fiat.
  • DeFi & NFTs: The rise of blockchain-enabled borrowing/lending, asset tokenization, and complex financial products.
  • Web3: The decentralized web built on blockchain principles of owning data/identity.
  • Regulatory Clarity: More definite laws and licensing procedures.
  • Improved UX: Wallets, exchanges and dapps reducing technical friction for consumers.
  • Sustainability Progress: A shift to more energy-efficient consensus mechanisms like proof-of-stake.
  • Hyperbitcoinization: A world where crypto dethrones the USD.

As investor Raoul Pal writes, "The open, decentralized digital future is being built right now on cryptocurrency networks."

Key Takeaways
While cryptocurrency remains a complex, rapidly-evolving space, this ultimate beginner‘s guide should give you a solid foundation to start building on. Remember:

  • Cryptocurrencies are digital assets secured by blockchain tech that enable peer-to-peer value transfer.
  • Popular crypto use cases include payments, investing, international remittance, and accessing DeFi services.
  • To get started with crypto, you‘ll need a digital wallet to store it and an exchange account to buy it.
  • Always prioritize the security of your coins and beware of common scams and fraud.
  • Understand both the potential benefits and risks of crypto before investing.
  • Track the evolving regulatory treatment of crypto in your jurisdiction.
  • Explore the wealth of learning resources to stay up to date on this fast-moving industry.

The journey into cryptocurrency is not for the faint of heart but can be highly rewarding for those willing take the ride. Welcome aboard!