The world of cryptocurrency is a fast-growing one full of new terms and complex language. If you’re new to the world of cryptocurrency, there are certain terms that might be hard to understand or seem redundant – or both.
While you can always reference an online dictionary for basic meanings and common usages, this article is meant to help you learn some new crypto vocab through a more fun and practical lens.
Common crypto terms you should know as a new investor
Every cryptocurrency transaction is first processed, then verified, and finally recorded on a virtual ledger known as a blockchain. Whenever someone sells or buys something using cryptocurrency, the transaction is immediately recorded in this virtual ledger. Blockchain is a digital ledger of transactions that is decentralized and distributed across multiple nodes.
Blockchain is immutable; once information has been entered into the blockchain, it cannot be changed or deleted. This makes it easier for people to trust this technology because there will be no possible way for someone to accidentally or intentionally alter its contents.
Blockchain is also decentralized because it does not rely on any centralized authority for its operation or maintenance. All stakeholders contribute to its security by maintaining copies of all transactions ever made on its network!
Bitcoin is the first and largest cryptocurrency. The digital currency was created in 2009 and uses peer-to-peer technology to operate. Bitcoin is considered disentailed, and that means it is not owned or controlled by any authority or government. Issuing bitcoins and managing transactions are the sole responsibility of everyone on the network. Bitcoin has a lot of interesting and unique properties, including being decentralized, secure, and transparent. All these make Bitcoin more than just a payment system anyone has seen before.
This is used as a collective term for all other cryptocurrencies apart from Bitcoin. Bitcoin is the original cryptocurrency, and therefore all other cryptocurrencies are referred to as “altcoins.” There are now over 1,600 different altcoins on the market, and more are being launched every day.
Some people invest in them to diversify their cryptocurrency portfolio; others buy them just because they like their underlying technology. For example, Ethereum is an altcoin that uses smart contracts (self-executing contracts built into the blockchain) and has become popular for hosting ICOs (initial coin offerings).
The word fiat is a Latin term that translates to “let it be done.” It’s used to describe the monetary systems we use today, which are backed by governments. You’re probably familiar with fiat currencies such as the US dollar, Euro, and Yen.
The term bearish is used to describe a market that is currently falling in value. A bear market is a period of time when the value of an asset will fall, and then there’s a recovery within that same period. A bearish market happens when there’s downward momentum in the price of an asset, and it continues until it goes up again.
6. Gas fee
When you’re sending Ether to another address on the Ethereum blockchain, your transaction will have to be reviewed by miners. Miners are computers that run the Ethereum protocol and verify transactions by solving complex mathematical puzzles. Gas is a unit of measurement for the amount of work that an Ethereum transaction requires. The more complex a transaction is (think: lots of calculations), the more gas it needs to complete.
All transactions need some amount of gas, but if a user doesn’t include enough in their transaction, it could be rejected by miners and never recorded on the blockchain.
As opposed to traditional cryptocurrencies, non-fungible tokens (NFTs) are unique tokens that have no value beyond what the community assigns to them. In other words, there’s only one Mona Lisa painting in existence – you can’t just create another one and expect people to be willing to pay for it. You can also think of NFTs as digital works of art or collectibles.
They’re not backed by any central entity like a bank or government, so their value depends on how many people want them and what they’re willing to pay for them. This makes them a risky investment, but if you play your cards right (and invest early), you could end up making some serious money!
Mining is the process by which a cryptocurrency is created. After a currency has been released, it can be mined by anyone who has the right equipment and technical knowledge. Mining is done by solving complex mathematical puzzles, and miners are rewarded with new coins for each puzzle they solve.
A bullish market is a market that is on an uptrend, with prices rising from one period to the next. The term “bull” is used because bulls charge forward with their horns up when they’re excited about something.
10. Smart contract
Smart contracts are computer programs that can be used to execute the terms of a contract. Smart contracts are executed by a decentralized network of computers, which makes them immutable. This means they can never be changed or altered, and they are stored on the blockchain in an unalterable form.
Smart contracts have been around since the early days of Bitcoin but have become increasingly popular – thanks to Ethereum and other blockchains that support smart contract development. The most common use case for smart contracts is transferring value between parties by enforcing contractual obligations in code (i.e., if you send me $10, then I’ll send you $20).
11. Crypto Wallet
Crypto wallets are digital wallets that store your cryptocurrency. They can be accessed with a personal key, which is a string of numbers and letters that give you access to your crypto wallet. There are two kinds of crypto wallets: software wallets (also known as hot wallets) and hardware wallets (cold storage wallets). While software wallets are connected to the internet, hardware wallets are offline – and so, they’re typically more secure.
12. Crypto Exchanges
Crypto exchanges are online marketplaces where you can buy and sell cryptocurrencies. They’re similar to stock exchanges, but they trade digital assets instead of traditional stocks. You can use these exchanges to buy and sell bitcoin, Ether, litecoin, and many other digital assets.
HODL is a misspelling of hold. The term was coined in 2013 by a bitcoin investor named GameKyuubi and means to hold your coins and not sell them. It has become popular in the crypto community as an optimistic reminder that holding onto your coins can be better for you than selling them at a loss, especially during bear markets.
14. Initial Coin Offering (ICO)
An Initial Coin Offering (ICO) is a way to raise funds for a new cryptocurrency project. It’s similar to an IPO, but instead of shares, the investor receives tokens of the project. ICOs can be used to raise funds for any type of cryptocurrency project, including blockchain platforms and decentralized applications (dApps).
15. Private Key
A private key is a secret number on your crypto wallet that allows you to spend the cryptocurrency. It’s like a password, but it’s not meant to be shared with anyone else. Private keys are used in signing transactions on the blockchain and are only accessible by their owners. This makes them very important tools in ensuring security for cryptocurrency users. If it gets into the wrong hands, they can steal all your cryptocurrencies, and you won’t be able to do anything about it.
16. Public Key
A public key is a string of numbers and letters that, when combined with a private key, enables you to access your cryptocurrency. The public key is visible to everyone, while the private key is kept secret by its owner. The public key is the address that you share with others so they can send you cryptocurrency.
17. Proof of work
Proof of work is a system that requires some kind of work to be done in order to validate a block. This ensures that each transaction on the network has been verified by multiple nodes, which prevents double spending and enables trustless collaboration between strangers who may not know or trust each other.
The most common consensus algorithm used by blockchain networks is Proof of Work (PoW). Bitcoin and Ethereum both use this algorithm as their primary means of securing transactions and validating blocks on their networks.
18. Bull/Bear Trap
Bull Trap is a scenario where the price of an asset tricks you into buying it and then goes down. And Bear Trap is where the price of the asset tricks you into selling it and the proceeds up. This is an example of fakeouts in technical analysis terms.
We hope you’ve learned some new terms and have a better understanding of what they mean. Now that you know all about these crypto terms, you can start using them and really get into the language of this exciting world!
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