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Almost every crypto project describes itself as decentralised. The word is doing a lot of work, and often not much of it is honest.

The basic idea

In an ordinary service, one company owns the servers, holds the records and sets the rules. It can change them, freeze an account, or shut down. For most things that is fine, and there is someone accountable when it goes wrong.

A decentralised system spreads that control. No single participant holds the only copy of the records, and no single participant can unilaterally rewrite them or exclude someone. Bitcoin works this way: thousands of computers each keep the same ledger and check each other.

The trade is real. You gain independence from any single authority, and you give up the safety net that authority provided — no password reset, no reversals, no appeals.

Why it is a spectrum

Decentralisation is not one property but several, and a project can score well on one and poorly on another. Worth asking separately:

Who runs the infrastructure? If almost all of it runs on one cloud provider, that is a single point of failure regardless of how many logical participants exist.

Who can change the code? If a small team can deploy an upgrade without meaningful review or delay, they effectively control the rules.

Who holds the tokens? If governance is by token vote and a handful of wallets hold most of them, the vote is decorative.

Is there an off switch? Many projects retain administrative powers to pause the system or move funds. Sometimes for good reasons — but its existence is the answer to whether one party is in control.

Why any of this matters to you

Decentralisation is not automatically good. A well-run centralised service is often faster, cheaper and easier to use, and has someone to complain to.

What matters is knowing which one you are actually using, because it determines who you are trusting and what happens when something breaks. A project that calls itself decentralised while a small team can pause it and move funds is asking for the trust of a bank while offering the protections of neither.

The word on the homepage tells you nothing. The answers to the four questions above tell you a great deal.

Both kinds of wallet do the same job: they hold the keys that prove you own your crypto. The difference is where those keys live and what has to happen for them to be used.

Software wallets

A software wallet is an application on your phone or computer. It is free, immediate, and convenient — which also means the keys sit on a device that browses the web, installs software and receives messages.

That is fine for modest amounts. It is the same reasoning as carrying some cash in a wallet: convenient, and the loss is survivable if it goes wrong.

The main threat is malware on the device, and the main defence is ordinary discipline — install the wallet from the official source, keep the device updated, and be sceptical of anything asking you to connect or approve.

Hardware wallets

A hardware wallet is a small dedicated device that stores the keys and never releases them. When you want to send, the unsigned transaction is passed to the device, the device signs it internally, and only the signature comes back. The key never touches your computer, so malware on that computer cannot take it.

Critically, the device has its own screen, and you confirm the details on that screen. This is what defeats software that alters the address after you paste it — the device shows you what you are actually signing.

They cost money, they add a step to every transaction, and losing the device without having stored the recovery phrase safely means losing access.

How to decide

The honest rule of thumb: if losing the amount would genuinely hurt, it belongs on hardware. If it would be annoying but survivable, a reputable software wallet is proportionate.

Many people use both — a software wallet for small everyday amounts and a hardware wallet for the bulk. That is a sensible arrangement rather than an indulgence.

Whichever you choose, the recovery phrase is the actual key to everything. Written down, offline, never photographed, never typed into a website. Our guide to setting up a hardware wallet walks through it, and if you are earlier than that, what a wallet actually is is the better starting point.

Blockchains cannot see each other. Bitcoin has no idea Ethereum exists, and neither can read the other’s records. So moving value between them requires something in the middle, and that something is called a bridge.

How it works

The usual arrangement: you deposit an asset into the bridge on the first network, where it is locked. The bridge then issues you an equivalent representation on the second network. To go back, you return the representation and the original is released.

The representation is not the original asset. It is a token that is supposed to be redeemable for it, and its value depends entirely on that promise holding.

Why they get attacked

To function, a bridge has to hold the locked assets somewhere — often an enormous quantity in a single contract. That concentration makes it one of the most valuable targets in crypto, and several of the largest thefts on record have been bridge exploits.

They are also technically difficult. A bridge has to correctly verify events on one chain in order to act on another, and the machinery that does this is complex and comparatively new. Complexity is where bugs live.

When a bridge is drained, the representations on the far side may become unbacked — still visible in wallets, no longer redeemable for anything.

What this means in practice

Beginners rarely need a bridge. If you want an asset on a particular network, buying it there directly through an exchange usually avoids the bridge entirely, and the exchange handles the movement internally.

If you do use one, prefer established bridges with a long operating history and public security audits, move small amounts, and do not leave value sitting in a bridged representation longer than you need to.

And be precise about networks. Bridging is one of the situations where sending to an address on the wrong network is easiest to do, and as ever that mistake cannot be undone.

An exchange-traded fund is a pooled investment that trades on a stock exchange like a share. A crypto ETF is one whose value tracks a cryptocurrency.

Buying a share of it goes through the same account you would use for any other investment, with the same broker and the same tax treatment as other holdings there.

What it changes

The practical friction largely disappears. No wallet to set up, no seed phrase to protect, no crypto exchange account, no worrying about sending to the wrong network. For someone who wants exposure to the price without learning custody, that is a real simplification.

It also brings the holding inside familiar regulatory and account structures, which matters to some people considerably and to others not at all.

What it does not change

The price still moves the way the underlying asset moves. An ETF does not smooth volatility; if the cryptocurrency falls by half, so does the fund. Everything in our explainer on why crypto moves so much applies unchanged.

You also do not own any crypto. You own a share of a fund that holds it, or that holds contracts tracking it. You cannot withdraw it to a wallet, spend it, or use it on a network. If the appeal of crypto to you is self-custody and independence from institutions, an ETF delivers none of that — it is the opposite arrangement.

The costs

Funds charge an annual management fee, deducted from the value of your holding. It is usually small in percentage terms and compounds over long periods.

Some funds track price via contracts rather than by holding the asset directly, which can cause the fund’s return to drift from the asset’s return over time. Whether a fund holds the asset itself is worth checking rather than assuming.

Which suits whom

If you want simple price exposure inside an account you already understand, an ETF removes a lot of complexity and a lot of ways to make an expensive mistake.

If you want to actually use crypto — to hold it yourself, send it, or interact with applications — an ETF cannot do any of that, and a wallet is the thing you need. Neither is the correct answer in general; they answer different questions.

Most cryptocurrencies are interchangeable. Any one Bitcoin is worth exactly the same as any other, in the way one pound coin is worth the same as another. NFTs are the opposite: each is distinct, and that is the entire point.

The name stands for non-fungible token. Non-fungible simply means not interchangeable.

What you actually own

This is where expectation and reality separate. When you buy an NFT, the blockchain records that your address owns a particular token. That token usually contains a link to something — an image, most commonly — rather than the thing itself.

Owning the token does not automatically give you copyright, exclusive use, or any legal right to the underlying work. Some projects grant rights explicitly in their terms. Many grant nothing at all, and the buyer assumes otherwise. The two situations look identical at the point of purchase.

It is also worth knowing that if the file lives on an ordinary web server rather than distributed storage, and that server goes away, the token remains and points at nothing.

Why people bought them

Some for genuine interest in the art or the community. Many because prices were rising quickly and they expected to sell higher. The second group was much larger than the first, which is why the market fell so sharply when attention moved on.

This is not a comment on whether any particular project was worthwhile. It is a description of what was driving prices.

Where the technology genuinely fits

A verifiable record of who owns a specific unique thing is useful. Event tickets that cannot be counterfeited, credentials, in-game items that persist outside one company’s servers, and records of provenance are all reasonable applications, and some are being used in practice.

Those uses tend to be unglamorous and are not what most people encountered.

If you are considering buying one

Read what rights you are actually getting, in writing, before rather than after. Assume you may not be able to sell it — many NFTs have no buyers at any price, which is a normal outcome rather than a failure. And be aware that this corner of crypto attracts a high volume of fake listings and copied collections, so verifying you are buying from the genuine project matters more than usual.

The language of crypto suggests coins travelling somewhere. Nothing travels. What happens is closer to updating a ledger that thousands of people hold identical copies of.

Step one: you sign an instruction

Your wallet holds a private key. When you send, the wallet uses that key to produce a signature on a message that says, in effect, move this amount from this address to that one. The signature proves the instruction came from whoever controls the address, without revealing the key itself.

This is why the key matters so much. Anyone holding it can produce valid signatures, and there is no separate password protecting the funds.

Step two: it is broadcast

The signed instruction is sent to the network, where it sits in a waiting area with everyone else’s pending transactions. At this point it is public but not yet settled.

Step three: it is included in a block

The computers maintaining the network gather pending transactions into a batch and add that batch to the chain. Yours is included when someone selects it — and because space is limited, the fee you attached influences how quickly that happens.

This is the point where it becomes real. The shared record now says the balance belongs to the recipient.

Step four: confirmations accumulate

Each subsequent block added on top makes it progressively harder to undo. Exchanges often wait for several before crediting a deposit, which is why funds sometimes take a while to appear even though the transaction has clearly gone through.

Some networks work differently and treat a transaction as final almost immediately. Either way, the waiting is about certainty, not about anything being in transit.

Why it cannot be recalled

Once the instruction is in a block that thousands of independent computers have accepted, undoing it would mean persuading all of them to rewrite their copy of history. That is the property the whole system is built to guarantee, which is why a mistaken send cannot be reversed.

The practical consequence is worth repeating: check the address and the network before you sign, because signing is the moment of no return.

A rug pull is exactly what it sounds like: the ground is removed from under the people who put money in. A project launches, attracts buyers, and then the people running it take the funds and vanish.

How it works mechanically

For a new token to be tradeable, someone has to supply a pool of it alongside something valuable — usually a well-known cryptocurrency — so that buyers have something to trade against. The people who create the token normally supply that pool.

They can also remove it. When they do, there is nothing left to sell the token into. The price collapses to effectively nothing, and holders are left with something no one can buy from them.

A slower variant: the creators keep a very large share of the token, promote it heavily, and sell steadily into the buying interest they generate. There is no dramatic moment, just a price that never recovers.

A third variant is written into the token itself — code that prevents anyone but the creators from selling, discovered only when a holder tries.

Signals worth noticing

Anonymous teams with no verifiable history. Not proof of anything on its own, but it removes any consequence for walking away.

Enormous promised returns, particularly guaranteed ones. Nothing in this market can guarantee a return, and a promise of one is a statement about the promiser rather than the investment.

Heavy promotion in comments, replies and direct messages, especially with urgency attached. Manufactured attention is cheap to buy and is the main input to this kind of scheme.

A token where most of the supply sits in a handful of wallets. It means a small number of people can end the price at any time.

No product beyond a website and a roadmap. A convincing site takes an afternoon.

The honest position

Very new, very small tokens are where nearly all of this happens. The most effective protection available to a beginner is simply not to buy them — not because every one is fraudulent, but because distinguishing the few that are not requires skills that take years to develop, and the cost of guessing wrong is everything you put in.

If someone is urging you towards a token you had not heard of an hour ago, that urgency is the product being sold.

People arrive at crypto expecting anonymity and immediately meet a request for a passport photograph. It feels contradictory, and the reason is worth understanding.

What the requirement is

Businesses that convert traditional money into crypto are, in most countries, treated as financial institutions. That brings obligations to verify who their customers are and to report suspicious activity — the same rules banks operate under, applied to a newer industry.

The blockchain itself does not know who you are. The exchange does, because the law requires it to.

What you will usually be asked for

Typically a government identity document, proof of address, and sometimes a photograph taken at the moment of signing up to show the document belongs to you. Larger withdrawal limits often require more.

This is normal. A platform that lets you deposit conventional currency with no checks at all is more likely to be operating outside the rules than to be respecting your privacy — and a platform operating outside the rules is a poor place to keep money.

The real risk

The danger is not being asked. It is being asked by the wrong people. Fake exchanges and cloned websites collect identity documents precisely because they are valuable for identity theft, and you have handed over everything needed to impersonate you.

Before uploading anything: confirm you are on the genuine site by navigating there yourself rather than through a link. Check the platform is registered with the relevant authority in your country. Be wary of any platform that asks for identity documents over chat, email or a messaging app rather than through its own verified process.

What it does not do

Providing identification does not make a platform safe to leave money on indefinitely. It is a legal requirement, not a guarantee of solvency or competence, and exchanges holding fully verified customers have failed before.

Verification also does not make your on-chain activity private. Once an exchange links your identity to addresses you withdraw to, that connection exists. It is worth knowing this rather than assuming otherwise.

If you want to understand what leaving funds on a platform actually risks, our explainer on whether crypto is safe on an exchange covers it directly.

If you send money to the wrong bank account, there is a process. It might be slow and it might not succeed, but a human being can look at it, and in cases of fraud the payment can often be reversed.

Crypto has no equivalent. A confirmed transaction is final.

Why it works this way

The whole point of the design is that no single party can alter the record. That is what makes it possible for strangers to transact without trusting an institution. But an authority that could reverse your mistaken payment is, by definition, an authority that could reverse anyone else’s — including legitimate ones. The property that protects you from interference is the same property that removes your safety net.

It is a deliberate trade, not an oversight. Whether it is a good trade depends on what you value, but it is not going to change.

The three ways people lose money to this

Wrong address. Addresses are long strings of characters. Copy and paste rather than typing, and check the first and last several characters after pasting — some malicious software watches the clipboard and swaps in an attacker’s address.

Wrong network. The same address can exist on several networks. Sending on one to a destination that only accepts another is one of the most common losses among people who have just learned to move funds between platforms. Confirm the network on both ends every time.

Authorised fraud. If someone persuades you to send funds voluntarily, the transaction is valid and irreversible. This is why crypto is the payment method of choice for scams — not because it is inherently criminal, but because it cannot be clawed back.

How to work with it

Send a small test amount first when using a new address or a new platform. Losing the network fee on a test is trivial compared with losing the full amount.

Slow down when you are being hurried. Every scam that relies on this property also relies on you not pausing.

Accept that care is the substitute for a safety net. There is no support line that fixes this after the fact, and any service claiming it can recover sent funds for a fee is itself a scam.

Market capitalisation is the most quoted number in crypto after price. It is also the most misunderstood.

The calculation is simple: the current price of one coin, multiplied by how many coins are currently in circulation. If a coin trades at two pounds and there are a hundred million of them, the market cap is two hundred million pounds.

What it does not mean

It is not the amount of money invested. It is not the amount of money that could be withdrawn. It is a snapshot arithmetic result, and it assumes every single coin is worth exactly what the last one traded for — which is not true, because selling in size pushes the price down as you go.

This is why a project can lose most of its market cap in hours without anywhere near that much money leaving. If the last trade sets the price and the price falls, the calculated total falls with it, regardless of how much was ever put in.

The cheap-coin illusion

Beginners often reason that a coin priced at a fraction of a penny has more room to grow than one priced in thousands. This confuses price with size.

Price alone tells you nothing, because the number of coins differs wildly between projects. A coin at 0.0001 with a trillion coins in circulation is a larger project than a coin at 50 with a million. For a sub-penny coin to reach a pound, its total value would often have to exceed that of the largest companies on earth. The low price is not an opportunity; it is a consequence of how many were created.

Circulating versus total supply

Market cap normally uses circulating supply — coins actually available. Many projects hold back a large portion for the team, investors or future release. If those enter circulation later, they add selling pressure without adding value.

The figure using every coin that will ever exist is called fully diluted valuation. Where it is far higher than the market cap, a lot of supply is still to come, and it is worth knowing that before rather than after.

How to use it sensibly

Market cap is useful for rough comparison — it tells you whether you are looking at something enormous and heavily traded or something small and thin. It tells you nothing about whether a project is good, safe, or fairly priced. Use it to understand scale, and nothing more.

An airdrop is a distribution of free tokens. A project sends them to people who used an early version of a service, or who hold a particular coin, or sometimes to a broad set of addresses to generate interest.

Legitimate airdrops do happen. They are a marketing tactic: attention is expensive, and giving away tokens is one way to buy it.

Why they are dangerous

The problem is not receiving a token. It is the claiming process, and the fact that anyone can create a token and send it to any address, with no permission needed.

A common pattern: an unfamiliar token appears in your wallet. Looking it up leads to a site offering to let you claim or swap it. That site asks you to connect your wallet and approve a transaction. The approval is not what it appears to be — instead of claiming anything, it grants permission to move your existing holdings. The tokens leave, and the transaction cannot be reversed.

A second pattern skips the token entirely: an announcement of an airdrop for a well-known project, on a convincing-looking site, asking you to enter your seed phrase to “verify eligibility”. Anyone who has your seed phrase controls everything in that wallet, permanently.

The rules that keep you safe

Never enter your seed phrase anywhere to claim anything. No legitimate airdrop has ever required it, and nothing else will either. If a site asks, it is a theft attempt with no exceptions.

Treat unexpected tokens as inert. You do not have to interact with them, and simply holding an unwanted token in your wallet does you no harm. It is engaging with it that causes losses.

Be sceptical of urgency. Airdrop scams lean heavily on limited windows and countdown timers, because pressure stops people checking. A real distribution does not collapse because you took an hour to verify it.

Check the source independently. Navigate to the project yourself rather than following a link from a message, a comment or a search advert. If you cannot find the airdrop announced anywhere official, it is not real.

If you want to explore this area at all, use a separate wallet holding almost nothing. Then a mistake costs you almost nothing, which is exactly the position you want to be in while learning.

Every transaction on a blockchain has to be processed by the computers running that network, and they do not do it for free. The fee is usually called gas.

Why the price moves

Each block of transactions has limited room. When more people want their transaction included than there is space for, they effectively bid against each other, and the fee rises. When the network is quiet, it falls. It is an auction for space, running continuously.

This means the fee has nothing to do with how much you are sending. Moving five pounds and moving five thousand can cost the same, because the network charges for the work of processing, not for the value being moved.

The trap for small amounts

If you are moving a small amount at a busy moment, the fee can be a large fraction of it — occasionally more than the amount itself. People discover this after the fact, when the balance that arrives is noticeably smaller than the one they sent.

Why different networks cost different amounts

Fees vary enormously between networks. Ethereum is generally the most expensive of the major ones, because demand for its limited space is high. Networks built specifically to be cheap, and the scaling layers built on top of Ethereum, charge a fraction of that.

This is a genuine trade-off rather than one option simply being better. Cheaper networks usually achieve low fees by making different choices about how many independent computers need to store and verify everything.

How to avoid paying more than you need to

Check the current fee before you send anything — our gas estimator shows what Ethereum transactions cost right now. If the fee is high and the transaction is not urgent, waiting often helps; networks are usually quieter outside peak hours.

Wallets will normally suggest a fee for you. Setting it lower makes the transaction cheaper but slower, and if you set it too low it can sit unconfirmed for a long time. Setting it higher gets it processed sooner.

Above all, check which network you are sending on. Sending funds on one network to an address expecting another is one of the most common ways people lose money permanently, and no fee setting will rescue that.