12 Crypto Terms Decrypted
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Have you been thinking of Investing in cryptocurrencies? Or perhaps you’ve simply been trying to develop a better understanding of them? Cryptocurrencies have only been around since 2009, yet an entire Crypto culture has been established with its language. Understanding some of the terminology is essential to getting involved with cryptocurrencies. This post aims to define several of the popular crypto terms.
What is a cryptocurrency?
Before we delve into 12 crypto terms, it’s essential to understand exactly what a cryptocurrency is. Cryptocurrencies are essentially digital currencies that can only be traded online. They are decentralized, meaning any government or organization does not own them. This allows them to be traded by people worldwide without the need for currency exchange fees. Cryptocurrency payments don’t require giving any personal information. However, every transaction is recorded on a digital ledger called a blockchain. In recent years, cryptocurrencies have become popular as an investment asset due to their rising value.
12 Crypto terms decrypted
Below are some standard terms you may encounter when trading crypto, along with an explanation of what they mean…
Altcoin
An altcoin is any cryptocurrency that isn’t Bitcoin (BTC). Well-known examples include Ether (ETH) and Ripple (XRP). Altcoin cryptocurrencies are not as regularly traded as Bitcoin but are popular among investors. As of 2024, there are over 20,000 different altcoins in circulation.
Blockchain
Cryptocurrency transactions are typically recorded on a blockchain. This database visually tracks every transaction as a block in a chain while also keeping track of the total amount of a cryptocurrency in circulation. Blockchain data is stored across multiple computers worldwide, so it cannot be tampered with. This provides an accurate record of every transaction that can help reduce fraud and theft. Blockchain explorers like this Arbitrum block explorer can allow anyone to monitor this data.
Bitcoin
Bitcoin was the first cryptocurrency and is still the most popular and valuable cryptocurrency. It was launched in 2009 by Satoshi Yakamoto via the Bitcoin Blockchain (the first blockchain). In October 2010, the value of 1 Bitcoin was $0.10. As of October 30, 2024, 1 Bitcoin is worth over $72,000
DeFi
DeFi stands for ‘Decentralised Finance’. It refers to finance that is not controlled or interfered with by governments, banks, credit card companies, or card processor companies. This results in reduced fees, user anonymity, and greater transaction transparency. Cryptocurrencies and blockchains are a form of DeFi.
Ethereum
Ethereum is a famous blockchain used for trading crypto. Its native cryptocurrency is Ether (ETH) (which some call ‘Ethereum,’ despite Ethereum being the blockchain name). Ether is the second most popular cryptocurrency after Bitcoin and, therefore, the most popular altcoin.
Exchange
Cryptocurrency is traded via exchanges. You must create an account at one of these exchanges and deposit funds to purchase cryptocurrency for the first time. There are many different exchanges you can choose from with other perks. Some offer access to more cryptocurrencies, some have better Security, and some provide insurance. The most popular exchanges are Binance, Coinbase, and Kraken.
Gas
All transactions on the Ethereum blockchain come with a fee known as a ‘gas fee.’ While this does make Ethereum transactions more expensive, these fees go towards paying Ether miners. This encourages people to keep mining Ether, which has helped the cryptocurrency grow and become valuable.
Mining
Because cryptocurrencies are digital and decentralized, they cannot be printed by a government like regular Money. Instead, they are created by everyday people using a process known as ‘mining.’ This involves using specialist computers to solve complex equations. Each equation solved creates 1 unit of cryptocurrency.
NFT
NFT stands for ‘Non-Fungible Token’. NFTs are digital certificates granting you ownership over one-of-a-kind digital assets like images or songs. They are pretty much digital collectibles. Cryptocurrencies must be used to trade NFTs.
Private key
A private key is an alphanumeric code that locks a crypto wallet. The owner must use this code to access their wallet, and it is also used to authorize transactions that come out of the wallet. It is essential to keep your private key safe.
Ripple
Ripple is a blockchain-based digital payment company that founded XRP, the third most popular cryptocurrency. Many people refer to XRP as ‘Ripple.’
Wallet
Cryptocurrencies are typically stored in a safe location known as a wallet. Hot wallets are connected to the internet and are used when making transactions. Cold wallets are not connected to the internet and help store cryptocurrencies you’re saving up and not immediately using for transactions – keeping your crypto safe from hackers. Wallets are accessed using a private key.
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