Cryptocurrency Terms to Know: A Beginner’s Guide
A cryptocurrency is a type of currency which uses digital files as money. Usually, the files are created using the same ways as cryptography (the science of hiding information). Digital signatures can be used to keep the transactions safe, and let other people check that the transactions are real. In other terms, every transaction is register in an online ledger and everybody have access to this ledger.
Cryptocurrencies make advantage of a system known as ‘decentralized control.’ As a result, the government has no authority over cryptocurrencies. In contrast to ‘centralized’ electronic money and central banks, this is a decentralized system. Each cryptocurrency is controlled by a public financial transaction database called a blockchain, which is a distributed ledger (a record of transactions shared by everyone).
In 2009, Bitcoin was released as open-source software for the first time. It is frequently referred to as the “first decentralized cryptocurrency.” Since then, more than 4,000 cryptocurrencies (also known as altcoins or alternative coins) have been produced.
Now that we covered the basic of cryptocurrency. Here are some of the terms and phrases that will help beginners better understand the world of crypto.
Crypto Terms You Should Know
Unique addresses are used to identify cryptocurrency coins on the blockchain. Consider the blockchain to be a GPS system, and your cryptocurrency address to be a targeted mailing address. No coin can be held without an address, and the blockchain cannot authenticate or verify its existence. So you can’t own a coin until you have a valid wallet address.
Any cryptocurrency that isn’t Bitcoin. Altcoins range from the second-most popular coin, Ethereum, to thousands of coins with extremely low market value.
The very first cryptocurrency created by an unknown individual named Satoshi Nakamoto. Since it started in 2009 it has gain in popularity and currently the most famous and valued cryptocurrency.
Within a blockchain, data groups. Blocks on cryptocurrency blockchains are made up of transaction records, which are created as users buy and sell currencies. Each block can only carry a limited amount of data. A new block is produced to continue the chain once it reaches that limit.
The fundamental technology underpinning bitcoins, ethereum and a digital type of record keeping. A blockchain is made up of sequential blocks that build on top of each other to form an immutable and permanent ledger of transactions (or other data).
The abbreviation BTFD stands for “Buy The F**king Dip.” When a trader instructs others to purchase a digital currency that has lost value, this term is employed.
A representative store of digital value that lives on a given blockchain or cryptocurrency network. Some blockchains have the same name for both the network and the coin, like Bitcoin. Others can have different names for each, like the Solana blockchain, which has a native coin called Sol.
Cold Wallet/Cold Storage
A safe and secure way to keep your cryptocurrency offline. Many cold wallets (also known as hardware wallets) are physical devices that resemble USB drives in appearance. This type of wallet can help safeguard your cryptocurrency from hacking and theft, but it also has its own risks, such as losing it and your cryptocurrency.
A digital and decentralized form of currency. Cryptocurrency can be used to buy and sell items, as well as to store value over time.
Power is distributed away from a central location under this approach. In contrast to a central authority, blockchains are usually decentralized since they require majority approval from all users to operate and make modifications.
Decentralized Finance (DeFi)
Financial transactions are carried out without the use of a middleman, such as a bank, government, or other financial organization.
Decentralized Applications (DApps)
Developer-created applications that are put on a blockchain to carry out tasks without the use of a middleman. Decentralized apps are frequently used to fulfill decentralized finance tasks. Ethereum is the most important network for decentralized finance.
Experts frequently compare cryptocurrencies to real gold in terms of their ability to hold and increase in value. Bitcoin is referred regarded as “digital gold” by many people.
Ethereum is a crypto network and software platform that developers may use to construct new applications, and it has an associated currency called ether. Ethereum is the second largest cryptocurrency by trade volume.
A cryptocurrency exchange that allows you to purchase and sell cryptocurrencies. It’s a lot like an online stock exchange.
The term “fiat” refers to government-issued currencies such as the US dollar and the Japanese yen. Fiat refers to any currency controlled by a central authority in a broad sense. Bitcoin serves as a counterbalance to traditional fiat currencies due to its decentralized form.
When the rules of a blockchain are changed by its users. Changes to a blockchain’s protocol frequently result in two new paths: one that follows the existing regulations, and another that breaks away from the prior one. (For instance, a Bitcoin fork resulted in Bitcoin Cash.)
To use the Ethereum network, developers must pay a fee to the Ethereum network. Gas is paid in ether, Ethereum’s native money.
The very first cryptocurrency block ever mined.
Though the name originated from a user error on a Bitcoin forum in 2013, it stands for “Hold On for Dear Life.” It’s a passive investing approach in which consumers buy and hold cryptocurrencies rather than trading it in the hopes of seeing its value rise.
A feature built into Bitcoin’s code that reduces the quantity of new Bitcoin entering circulation once a specific number of blocks are mined (usually every four years). Bitcoin’s price may be affected by the halving.
Blocks are identified by a unique string of numbers and letters that are linked to crypto buyers and sellers.
Hash rate is the measure of computational and processing power used in crypto mining, the process of earning a cryptocurrency through powerful computers and specifically built software. A network with a greater hash rate is more stable.
A cryptocurrency wallet that is software-based and connected to the Internet. While digital wallets are more convenient for accessing your crypto rapidly, they are more vulnerable to hacking and cybersecurity threats than offline wallets, just as files stored on the cloud are more easily hacked than those secured in a safe at home.
Initial Coin Offering (ICO)
A method of raising funding for a new cryptocurrency project. Initial Public Offerings (IPOs) of stocks are comparable to ICOs.
Know Your Customer (KYC)
KYC stands for Know Your Customer. If you buy crypto in a more mainstream way, it’ll almost certainly come up. KYC is required as part of the onboarding procedure for major platforms like Binance and Coinbase. To prevent money laundering and terrorist financing, regulators mandate identification background checks for new banking clients. Cryptocurrency’s financial regulation is here to stay, so expect to see that acronym crop up more frequently as governments try to link blockchain transactions to residents.
The entire value of all the coins that have been mined is referred to as the market cap of cryptocurrencies. The market cap of a cryptocurrency is calculated by multiplying the current number of coins by their current value.
The method by which new cryptocurrency coins are made available and a log of user transactions is kept.
A computer that connects to a distributed ledger(blockchain) network.
Non-fungible Tokens (NFTs)
Non-fungible tokens are value units used to represent ownership of one-of-a-kind digital objects such as artwork or collectibles. The Ethereum blockchain is where most NFTs are stored.
Without the need of a third party or intermediary, two users interact directly.
Proof of Authority (PoA)
A few chosen nodes are given the permission (or authority) to approve a miner’s ability to construct a block in a blockchain that uses Proof of Authority (PoA). This is a faster, but more centralized, alternative to the proof-of-work model.
Proof of Work (PoW)
Proof of Work is a more conventional technique of compensating miners. It requires miners to demonstrate their work by connecting a variable to the hashing process. A hashed block verifies that work was performed and gives the miner a reward. This consumes a significant amount of energy.
Proof of Stake (PoS)
Proof of Stake allows a person to validate or mine cryptocurrencies based on how many coins they own. The concept behind this strategy is that if a miner has a stake in the game, they will be less likely to attack a network.
The code that permits you to get immediate access to your cryptocurrency. Your private key, like your bank account password, should never be shared.
The address on your wallet, which is identical to your bank account number. When you authorize it, you can share your public wallet key with people or institutions so they can send you money or take money from your account.
Each blockchain has its own ledger to keep track of transactions. The public ledger of Bitcoin may be found here. Given that a blockchain is public, this is where you can see every transaction ever made on it. Some coins set themselves apart by working on a private or anonymous ledger.
Pump and Dump
Pump and dump is a type of price manipulation in which the price of a cryptocurrency is inflated by fraudulent recommendations (pump) before being sold at a higher price (dump) (dump).
“Wrecked” is a crypto slang term. When a trader loses a significant amount of money, this is utilized.
Bitcoin’s pseudonymous founder. No one knows who Nakomoto really is, or if he is more than one person.
Your wallet’s digital existence is built on the seed. A recovery seed is a string of twelve to sixteen words that can be used to regain access to your wallet if something goes wrong and you lose it.
Segregated Witness (SEGWIT)
SEGWIT is a technical term for the process of separating digital signature data from transaction data. This allows for more transactions to fit in a single block, increasing transaction speed. Simply put, it’s a good blockchain value-add.
An algorithmic program that automatically enacts the provisions of a contract based on its code. The capacity to execute smart contracts is one of the Ethereum network’s core value propositions.
Stablecoin or Digital Fiat
A stablecoin is a cryptocurrency that is pegged to a non-digital money or commodity. On the blockchain, a digital fiat represents a fiat, or government-backed money. (Take, for example, Tether, which is backed by the US dollar.)
To the Moon
When someone says “To the Moon” or uses a rocket emoji, they are implying that they believe the price of a cryptocurrency will skyrocket.
On a blockchain, a unit of value that usually has some other value proposition other just transferring currency (like a coin).
The creator of Ethereum in 2015.
A wallet where you can keep your cryptocurrency. Digital wallets are available on several exchanges. Wallets can be either hot (internet, software-based) or cold (hardware-based) (offline, usually on a device).
Individual investors and sophisticated trading firms with enormous quantities of Bitcoin and other cryptocurrencies are known as whales. Whales are both feared and appreciated among crypto day traders because of their capacity to affect markets with single trades. Whales are those that got Bitcoin early on and have never sold it.