[Blockchain A to Z] Entering the World of Cryptocurrency ②

◆ Lesson 3: All Cryptocurrencies Look Similar, but Their Functions Are Very Different

When people hear the word “cryptocurrency,” most immediately think of Bitcoin. In reality, however, there are thousands of different cryptocurrencies, each with distinct functions, roles, and technical foundations.

They are all digital assets, but some are designed primarily as a means of payment, others serve as infrastructure for smart contracts and decentralized applications, and still others are used only within a specific ecosystem or platform. To understand these differences, we first need to recognize that cryptocurrencies operate within different layers of blockchain architecture.

- The Concept of “Layers” in Blockchain


One of the most important concepts in understanding cryptocurrencies is the idea of “layers.” This term is used to distinguish the different technical levels within blockchain architectures, commonly referred to as Layer 1 and Layer 2.

Layer 1 refers to the base, independent blockchain networks themselves — such as Bitcoin or Ethereum — that directly record and validate transactions on their own chain.

Layer 2, on the other hand, is built on top of Layer 1. Its role is to complement and extend the base layer by improving transaction speed, reducing fees, and enabling scalability solutions. Instead of replacing Layer 1, it works with it.

Looking at cryptocurrencies through the lens of layers makes it easier to see what role each asset plays in a broader ecosystem.

◇ Understanding Blockchain Layers Through a Pizza


Blockchain is not a single, uniform technology. It is more like a complete dish made from multiple ingredients working together. A useful analogy is a pizza.

Think of Layer 1 as the pizza dough. The dough forms the base and gives the pizza its structure and shape. In blockchain terms, this corresponds to core networks like Bitcoin or Ethereum, which handle block creation and transaction validation. These networks offer strong security and decentralization, but they also face limitations in speed and scalability.

Layer 2 is like the sauce, cheese, and toppings added on top of the dough. These additional layers make the pizza tastier and more versatile. In blockchain, Layer 2 solutions process transactions in a more efficient way, reduce fees, and enable new functionality such as NFTs and high-performance decentralized applications.

Just as a good pizza depends on the harmony between dough and toppings, a healthy blockchain ecosystem relies on the interplay between a robust Layer 1 and powerful Layer 2 solutions.

- Layer 1 vs. Layer 2

Layer 1 chains are responsible for the fundamental tasks of a blockchain: validating transactions, maintaining consensus, and securing the network. Their strengths are security, decentralization, and reliability. However, when too many people try to use the network at once, congestion, slow transaction times, and high fees can become serious problems.

Layer 2 solutions were created to address exactly these issues. They operate on top of Layer 1, handling many transactions off-chain or in aggregated form, then ultimately settling back to the base layer. This approach increases throughput and reduces costs.

The trade-off is that Layer 2 systems depend on Layer 1 for their final security and settlement. While they are excellent for scaling and adding new features, their stability is ultimately tied to the underlying base chain.

Rather than competing, Layer 1 and Layer 2 form a complementary structure. Together they support the growth and evolution of the broader blockchain ecosystem.

- Conclusion of Lesson 3

The development of cryptocurrencies is closely linked to the pursuit of better scalability. Layer 1 and Layer 2 emerged as two sides of that effort — one focusing on core security and decentralization, the other on speed and usability.

Blockchain technology is still evolving. New protocols and scalability solutions continue to appear. Understanding the difference between Layer 1 and Layer 2, and how they work together, is essential to grasping how modern crypto ecosystems are being built.

◆ Lesson 4: The Basics of Charts – First Steps in Reading Price Action

In the cryptocurrency market, where assets exist only in digital form, charts often become the primary window into market behavior. There are no traditional financial statements or physical products to examine. As a result, the ability to read charts often translates into the ability to sense market psychology.

In this lesson, we look at the basic structure of candlesticks and the emotions reflected in their patterns.

- The Meaning of Bullish and Bearish Candles

The most basic building block of a chart is the candlestick. A bullish candle indicates that price has risen over a given period, while a bearish candle indicates that price has fallen.

More precisely, when the closing price is higher than the opening price, the candle is bullish; when the closing price is lower than the opening price, the candle is bearish. Each candle contains four key pieces of information: the opening price, closing price, highest price, and lowest price. The candlestick’s body and wicks turn this data into an intuitive visual form.

- Time Compressed into a Single Candle

A candle is not just a simple line — it is a compressed record of a specific time period. A one-minute candle contains everything that happened to the price in that one minute; a one-hour candle compresses an hour of movement into a single bar; a daily candle reflects a full day of trading.

This means that the same bullish candle may carry totally different implications depending on the timeframe. A bullish one-minute candle is very different from a bullish daily candle.

To read charts properly, you need to understand not just the color of the candle, but also the time context and the broader market structure in which it appears.

- The Psychology Behind Buying and Selling


A chart is not just a visual representation of numbers; it is a record of collective human psychology.

A series of bullish candles usually reflects strong buying pressure, while a series of bearish candles indicates that sellers are in control. When trading volume spikes or a dramatic reversal occurs, it often suggests that large players — sometimes called “whales” — may be moving the market.

Smaller retail investors, often referred to as “the crowd,” tend to react to these moves rather than anticipate them. They may chase rising prices in fear of missing out or sell in panic during sharp declines.

In this sense, reading charts is very similar to reading human emotions and crowd behavior.

- Candles as Compressed Emotion

A single candlestick contains much more than open, high, low, and close. It captures fear and greed, impulse and hesitation, conviction and doubt.

Learning to read charts means learning to interpret these emotional traces. It is not enough to say “the price went up” or “the price went down.” You must ask: who was buying, who was selling, and what were they thinking at that time?

◇ If Everyone Sees the Same Chart, Why Is Profit So Difficult?

- Trader Psychology and the Paradox of the Crowd

The cryptocurrency market is open to everyone, but only a small fraction of participants consistently make profits. Even though everyone is looking at the same charts, outcomes differ dramatically.

On the surface, charts look like simple combinations of lines and numbers. In reality, they are dense with conflicting emotions: fear, greed, impatience, hope, and despair — all mixed together.

- “Avoid the Falling Knife” – Easier Said Than Done

A classic piece of advice warns, “Don’t try to catch a falling knife.” Yet in practice, when the price drops sharply, many individuals convince themselves that “this must be the bottom” and jump in, only to face deeper declines.

- “Buy at the Knee, Sell at the Shoulder”

Another famous saying is, “Buy at the knee and sell at the shoulder.” The problem is that these levels are only obvious in hindsight. What looked like the knee often turns out to be the thigh, and what seemed like the shoulder is revealed to be the top of the head.

Charts record results, not certainties. The key in the market is timing, and timing is shaped by each trader’s psychology and conviction. That is why two traders can look at the same candle and arrive at completely different decisions.


- Going Against the Crowd Is Not Automatically Right

There is a popular belief that you should always go against the crowd. But blindly opposing the majority can be just as dangerous as blindly following it.

If you mistime your contrarian move, you may end up being the only one losing money while everyone else is profiting. Conversely, if you simply follow the trend without discipline, you may end up buying at the peak of a mania.

- Conclusion of Lesson 4

Charts are open to everyone, but they do not guarantee equal results. Without understanding the subtle psychological structures and timing behind price movements, charts can easily mislead.

That is why true chart reading goes beyond technical patterns. It is about interpreting human behavior and collective emotion.