Considering investing in cryptocurrency? Out of all the things you should know, one important thing is the terms or lingo used in the cryptocurrency space. First thing first, there are many cryptocurrencies out there. You can check CoinDesk to see the list and ranking of the most popular cryptocurrencies currently.
Here are some of the need-to-know Crypto Terms
Altcoin refers to any cryptocurrency that is not Bitcoin. An example of such Altcoins is Ethereum, which is the second most popular coin.
This is a series of sequential data blocks that build upon one another when there is a transaction between users. This creates a permanent and unchangeable ledger or record of transactions.
Blockchain, the framework which cryptocurrencies are built upon, is traditionally decentralized. Its operations require majority approval from all users rather than a central authority. The process of requiring approval from all users is called decentralization. One term you would hear often when it comes to decentralization is what is called DeFi. DeFi stands for Decentralized Finance. This is any financial activity conducted without the involvement of an intermediary (e.g., banks, government, etc).
After a certain number of blocks are mined, the amount of new Bitcoin entering circulation is halved. This happens typically every four years and can have an impact on the price of Bitcoin.
This is the term used to describe a unique string of numbers and letters that identify blocks and transactions.
Sometimes referred to as ‘market cap’, is calculated as the price of the cryptocurrency multiplied by the number of its coins in circulation. It gives a clearer picture of the growth potential of a cryptocurrency.
This is simply the process whereby new cryptocurrency coins are created and made available.
Nonfungible tokens (NFTs)
These are tokens or units of value used to represent ownership of a unique digital asset.
There are two types of keys, public and private. The public key is your wallet’s address, which is like your bank account number. You can share your public key if you want to receive money or send out money (after you authorize it). The private key is an encrypted code that allows direct access to your cryptocurrency. This is like your bank account password which you should never share.
This is a physical or digital place where you store your cryptocurrencies. Cold wallets are physical devices you can store your coins. Hot wallets are digital stores. Cold wallets allow for greater security while hot wallets allow for easier access and transactions.
Now that you know some of the crypto terms, Experts recommend that you invest in the most popular cryptocurrency (Bitcoin) and Altcoins (Ethereum); buy and sell using a secured and well-respected cryptocurrency exchange; invest in cryptos with higher market cap and invest only what you are comfortable with losing.
On a final note, please understand that this content does not serve as a piece of financial advice. It was published solely for educational purposes.