These words are not from a newly-discovered alien language; instead, they are among the cryptocurrency language’s many new and critical terms.
Cryptocurrency is quickly becoming a more popular investment choice than traditional stocks and bonds. With all the new acronyms, technologies, and trends to keep up with, it can be a daunting task for even experienced investors to learn about cryptocurrency. But it’s well worth taking the time to get acquainted with this unique world if you want to stay ahead of the curve!
Cryptocurrencies are still a new and speculative investment, so it’s essential to understand what you’re getting into before making any decisions. Make sure to research the coins you’re interested in and only invest money you can afford to lose.
You should consider doing several things before buying into crypto, like building your emergency fund, paying off high-interest debts, and securing a traditional retirement plan. And, as we’ve said before, you should only ever put into crypto what you’re willing to lose. Experts advise dedicating no more than 5% of your portfolio to these digital assets.
An essential item to add to your checklist is a beginner’s understanding of cryptocurrency and its differences from other investment strategies. Also, be sure to understand the different factors that can affect a cryptocurrency’s market value.
Crypto investing can be confusing for beginners. This guide will help you understand some of the terms and phrases used in this exciting world.
Altcoin
Altcoins are any digital coins that exist outside of Bitcoin. This can include Ethereum, the second-most popular coin, and any number of lesser-known and less valuable coins. Generally speaking, it is recommended to stick to more established and mainstream cryptocurrencies when investing.
Bitcoin
Bitcoin is the world’s first and most valuable cryptocurrency, created on Jan. 3, 2009. Although its value has climbed steadily over time, it has recently seen wild fluctuations in price. In just the past few months, Bitcoin has fluctuated from a record high of $60,000 to below $30,000.
Bitcoin Cash
Bitcoin Cash was created due to a fork from the Bitcoin blockchain. It is intended to be more optimized for transactions than Bitcoin. It has thus gained wider acceptance as a viable currency.
Block
Blocks are created on a cryptocurrency blockchain when users buy and sell coins. Each block can only hold a certain amount of information, so once it reaches its limit, a new one is formed to continue the chain.
Blockchain
A blockchain is a digital ledger of records that is decentralized and can be used to track anything of value. The underlying technology behind cryptocurrencies is created by sequential blocks linked together to create a permanent and unchangeable record of transactions.
Coin
A digital value that is stored on a blockchain or crypto network. Some have the same name for both the network and the coin, like Bitcoin. Others can have different names, like the Stellar blockchain, which has a native coin called Lumen.
Coinbase
Coinbase is one of the most popular cryptocurrency exchanges. Recently, they became the first exchange to go public on the Nasdaq.
Cold Storage
Cryptocurrency can be stored securely offline by using a cold wallet. A cold wallet is a physical device that looks similar to a USB drive. This type of wallet can help protect your crypto from hacking and theft, but it also comes with its own risks – like losing it, along with your crypto.
Cryptocurrency
A currency that is digital and decentralized is known as cryptocurrency. This type of currency can be used to buy and sell things, or it can be held as a long-term investment.
Decentralization
The decentralized nature of blockchains allows for a more democratic operation, where changes to the blockchain must be approved by majority consensus from all users. This helps prevent anyone user or group from gaining too much power over the network.
Decentralized Finance
Planned financial activities without the use of an intermediary, like a bank, government, or other financial institution.
Decentralized Applications
Actions without intermediaries are often completed using decentralized apps on a blockchain. Ethereum is the primary network supporting activities in decentralized finance.
Digital Gold
Cryptocurrencies are often compared to real gold based on their ability to store and increase in value over time. Bitcoin is often referred to as digital gold.
Ethereum
Ethereum is a crypto network that developers use to create new applications and has an associated currency called ether. Ethereum’s trade volume is the second largest among all cryptocurrencies.
Exchange
A cryptocurrency is a digital currency that uses encryption techniques to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. Cryptocurrency exchanges are websites where you can buy, sell, or trade cryptocurrencies for other digital currencies or traditional currency like U.S. dollars or euros.
Fork
When a blockchain’s users make changes to the rules, this often results in two new paths: one that follows the old rules and a new blockchain that splits off from the previous one. (For example, Bitcoin Cash was forked from Bitcoin.)
Gas
If you want to make changes to the rules of a blockchain, you have to pay a fee in ether. This is called gas, and it’s paid to the Ethereum network.
Genesis Block
The first block to be mined of any given cryptocurrency.
HODL
A term used to describe a passive investment strategy in cryptocurrency. People buy and hold onto different types of cryptocurrency, hoping that its value will increase over time. The term is said to have originated from a user typo on a Bitcoin forum in 2013.
Halving
Bitcoin’s code features a halving every four years that reduces the new Bitcoin entering circulation by half. This event can impact Bitcoin’s price.
Hash
A cryptographic key is a unique string of numbers and letters that identifies blocks and is tied to crypto buyers and sellers.
Hot Wallet
A cryptocurrency wallet that is software-based and connected to the internet has some advantages over an offline one. Still, it is also more susceptible to hacking and cybersecurity attacks. Just as files you store on the cloud may be more easily hacked than those locked in a safe at home, your crypto wallet is also vulnerable online.
Initial Coin Offering (ICO)
Funds are often raised for new cryptocurrency projects through Initial Coin Offerings (ICOs), which are similar to Initial Public Offerings (IPOs) of stocks.
Market Capitalization
The total value of all the coins in circulation is known as the cryptocurrency market capitalization. This can be calculated by multiplying the number of current coins by their respective values.
Mining
The process of creating new cryptocurrencies and recording the transactions between users is maintained.
Node
A computer that is connected to a blockchain network.
Non-fungible Tokens (NFTs)
A new type of blockchain asset known as a non-fungible token. These assets represent unique items, such as digital art or collectibles. They are typically held on the Ethereum blockchain.
Peer-to-peer
Two people interacting without any third party or intermediary.
Public Key
Your public wallet key is a long, confusing string of numbers and letters that acts similarly to your bank account number. You can give this key to people or institutions so they can send you money or take it from your account when you authorize them.
Private Key
The private key is essential for accessing your cryptocurrency and should be kept secret. It works like your bank account password, so never share it with anyone.
Satoshi Nakomoto
The pseudonym of the creator of Bitcoin. His or her true identity remains a mystery to this day.
Smart Contract
An Ethereum program that automatically follows the contract’s code. One of the main advantages of using Ethereum is its ability to execute smart contracts.
Stablecoin or Digital Fiat
A stablecoin is a digital currency that is pegged to another non-digital currency or commodity. This allows for a more stable value and avoids the price volatility associated with most other cryptocurrencies. An example of this would be Tether, which is pegged to the U.S. dollar.
Token
An asset on a blockchain that has some other value proposition besides just a transfer of value.
Vitalik Buterin
The programmer who invented Ethereum in 2015 and believes that the blockchain can change many aspects of our lives.
Wallet
A digital wallet is a place to store your cryptocurrency holdings. Many exchanges offer wallets, which may be hot (online, software-based) or cold (offline, usually on a device).
