Many people are still confused about what Cryptocurrency is all about and its capabilities despite its popularity. It isn’t just a novel investment option, and in various ways, depicts a diverse world altogether compared to conventional stocks and bonds. Learning the basics takes time, even for experienced traditional investors, between unfamiliar acronyms, developing technologies, and following up with memes and tweets. As with any investment, it’s essential to recognize what you’re investing in before you begin. That’s especially valid when it comes to an uncertain and still growing asset like crypto.
As Cryptocurrency requires an urge for risk and a whole unique vocabulary, below are the fundamentals of crypto terminology that one should know:
A blockchain address is a compilation of unique numbers and letters that leads to a particular address where Cryptocurrency can be sent and received inside a blockchain network.
Any blockchain-based coin or token is regarded as an alternative to Bitcoin. Popular Altcoin includes Ether, Litecoin, and Dogecoin.
A record book, also called an attestation ledger, is utilized to show a transaction receipt to confirm the authenticity of a cryptocurrency transaction and prove that a transaction has been completed.
Considered as the first and most valuable Cryptocurrency launched on Jan. 3, 2009. While its value has risen steadily since then, it has seen raging changes.
These are groups of data within a blockchain. On cryptocurrency blockchains, blocks are formed up of transaction records as users buy or sell coins. Every block can contain only a particular amount of data. Once it approaches that limit, a new block is formed to continue the chain.
It is a digital form of record-keeping and the underlying technology behind cryptocurrencies. It results from sequential blocks that develop upon one another, building a permanent and unchangeable ledger of transactions (or other information).
It is an emerging technology for decentralized data storage. It’s appealing because it’s transparent, provable, traceable, and tamper-proof.
The coin represents the value of a digital asset that is native to the blockchain network. Examples of coins include Bitcoin and Altcoins like Ether, Litecoin, and Dogecoin.
This is a method of storing Cryptocurrency that is not connected to the Internet. Cold wallets are appended protection against malicious activities to steal or disrupt the probity of digital coins/tokens.
A digitized kind of currency that is bound with cryptography and decentralized networks utilizing blockchain technologies.
It is the science of generating secure communications using codes. These codes are preserved so only the sender and receiver of the data can obtain the contents of the communications.
It is the system of allocating power away from a central point. Blockchains are traditionally decentralized because they need majority approval from all users to run and make adjustments rather than a principal authority.
Decentralized Finance (DeFi)
Financial activities are conducted without an intermediary’s involvement, like a bank, government, or other financial institution.
Decentralized Applications (DApps)
These are applications designed by developers and deployed on a blockchain to send out actions without intermediaries. Decentralized finance activities are often made by employing decentralized apps. Ethereum is the primary network supporting activities in decentralized finance.
The second-largest Cryptocurrency by trade volume, Ethereum is a crypto network and software platform that developers can utilize to create new applications and has a corresponding currency called ether.
A digital marketplace where users can buy and sell Cryptocurrency.
It is a currency distributed by a government that is not backed by any commodity. Instead, the currency is backed or guaranteed by the issuing government. Fiat currency is diverse from traditional commodity money backed initially by tangible assets such as gold, salt, and tea.
A fork is a split, change, or alternative variant of a blockchain. For blockchain technology to work, all nodes inside a blockchain network must operate the same underlying center software. A fork occurs if sufficient nodes wish to change or alter the core software, splitting the nodes into two separate networks.
It is the capability to replicate data so that each repeated unit can replace any other. From a cryptocurrency viewpoint, each coin or token is fungible as each one has the equivalent value. Therefore, each coin/token is deemed identical and interchangeable.
When a blockchain’s users change its rules, these changes to a blockchain protocol often appear in two new paths, one that attends the old rules and a new blockchain that splits off from the preceding one.
FUD (“fear, uncertainty, doubt”)
In crypto language, FUD regards negative information that pulls on an asset’s value.
A charge that developers have to pay to the Ethereum network to use the system. Gas is paid in ether, which is the native Cryptocurrency of Ethereum.
It means “Hold On for Dear Life,” though the term started from a user typo on a Bitcoin forum in 2013. It connects to a passive investment strategy in which people buy and hold onto Cryptocurrency instead of trading it in the hopes that it grows in value.
This is a unique string of numbers and letters that distinguish blocks and are tied to crypto buyers and sellers.
Initial Coin Offering (ICO)
A system where funds are accumulated for a new cryptocurrency project. ICOs are comparable to Initial Public Offerings (IPOs) of stocks.
An account or record that is used to trace transactions. From a blockchain view, ledgers are distributed across several nodes within a blockchain network.
The facility at which a cryptocurrency can be converted into some other form of crypto or fiat currency.
For Cryptocurrency, the market cap applies to the total value of all the coins that have been mined. Users can calculate a crypto’s market cap by multiplying the current number of coins by the present value of the coins.
It is the process whereby new cryptocurrency coins are offered available, and the log of transactions between users is kept.
Node is a computer that attaches to a blockchain network.
Non-fungible Tokens (NFTs)
Non-fungible tokens are units of value utilized to represent the ownership of unique digital items like art or collectibles. These are most often held on the Ethereum blockchain.
Two users interact directly without a third party or intermediary.
This is a key, code, or string of characters that unlocks or decrypts data that has been encrypted. Private keys must be held safe from others and cannot be retrieved.
It is a string of unique characters generated from the private key that is used to encrypt data. The only alternative to theoretically decrypt the data is if the user/device has the private key.
The pseudonymous creator of Bitcoin. No one identifies the true identity of Nakomoto or if it’s more than one person.
An algorithmic system that establishes the terms of a contract automatically based on its code. One of the central value propositions of the Ethereum network is its capacity to perform smart contracts.
Stablecoin or Digital Fiat
It pegs its value to other non-digital currencies or commodities. A digital fiat depicts a fiat or government-backed currency on the blockchain.
A token is the unit of value on a blockchain that usually has another value proposition.
This is a digital storage file holding coins or tokens held by a user or entity. Each wallet in a blockchain network has a different address to identify it to transmit/receive coins or tokens.