10 Common Cryptocurrency Terms You Need To Know

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Despite the launch of Bitcoin in 2009, it’s only recently that you can’t turn on the news or browse the web without hitting a cryptocurrency mention.

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Before you begin, know that this is not about financial advice. The world of crypto is volatile and you should never risk money that you are not comfortable losing. Now let’s take a look at some of the more common jargon.

1. Block chain

Each cryptocurrency transaction is processed, verified, and recorded on a virtual ledger called a blockchain. When someone buys or sells using cryptocurrency, another entry is made on this virtual ledger.

Think of the blockchain as a series of boxcars on a train. When a cryptocurrency transaction is made, another boxcar is added to the train.

The blockchain is decentralized. This means that it is not stored on a single machine or even on a single network. Instead, the blockchain exists on computers all over the world that are accessible through the internet.

People and businesses help verify every transaction added to the blockchain using the processing power of their own computer on a decentralized peer-to-peer network. Each transaction is time-stamped, individually encrypted, and cannot be rolled back or changed. Yes, you read that right – crypto transactions cannot be reversed.

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2. Fiat

I know what you are thinking: “I thought a Fiat was a car.” Not in the crypto-land. Fiduciary currency is a currency issued by the government. If you are in the United States, it means the US dollar.

Cryptocurrency, on the other hand, is virtual money.

Cryptocurrencies are not backed by governments or any other standard used with traditional currency. Each “token” represents the amount you own.

The value of each token varies based on the current market value. One day it’s over; the next day down. With cryptocurrency, price fluctuations can happen much faster and are more extreme, both positive and negative. CoinMarketCap is a good resource for checking current prices.

FILE – In this file photo from February 9, 2021, the Bitcoin logo appears on the display screen of a cryptocurrency ATM at the Smoker’s Choice store in Salem, NH (AP Photo / Charles Krupa, File)

3. Altcoins

Here is an easy one to remember. An altcoin is a digital currency that is not Bitcoin. There are thousands of cryptocurrencies with new ones being added all the time.

At the time of this writing, these are the five currencies with the highest market caps. (This is the total market value of the circulating supply.) Since crypto moves so fast, this list may have already changed by the time you read this.

BitcoinEthereumBinance CoinTetherSolana4. To exchange

To buy cryptocurrency, you need to start with an exchange. Think of an exchange as a crypto middleman. It is an online service that allows you to exchange your fiat for crypto or change crypto to fiat.

If you are familiar with traditional investing, a crypto exchange works like a brokerage house. You can deposit money by wire transfer, wire transfer, debit card, and other standard deposit methods. You can expect to pay a fee for most transactions.

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You can also buy crypto through apps you may already be using, like Venmo, Robinhood, or Cash App.

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5. Wallet

Simply put, a cryptocurrency wallet is an application or physical storage device that allows you to store and retrieve your digital currency. Wallets can contain multiple cryptocurrencies, so you’re not limited to Bitcoin, for example.

Whether you are using an app or a physical wallet, it is important to note that the currency itself is not stored there. Instead, wallets store the location of your currency on the blockchain.

Wallets are divided into two main categories: hot and cold. A hot wallet is, by definition, connected to the internet. The safest way to store your cryptocurrency is to use a cold wallet, which is not connected to the internet.

Physical wallets come in different types, but are usually specially designed USB drives that directly store your cryptocurrency for later use. Physical wallets give you the best protection against hackers.

FILE – This April 3, 2013 file photo shows bitcoin tokens in Sandy, Utah. (AP Photo / Rick Bowmer, file)

Two popular cold wallets are the Ledger Nano X and the Trezor Model One. Of the two, I prefer the Ledger Nano X because it supports 23 different cryptocurrency types and has additional features.

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6. Mining

You’ve probably heard this term associated with Bitcoin, which is created by mining. Computers mine coins by solving complex math problems. The more powerful the computer, the faster it can “think”.

Now, if your computer is the fastest at solving the problem, bingo – you earn one unit of the cryptocurrency you mine.

THE PRICE OF BITCOIN REMAINS STABLE AT AROUND $ 60,000

While there are a few cryptocurrencies with an endless supply, most have a limit. For Bitcoin, this limit is 21 million. The last coin will be mined in 2140 or earlier.

7. Challenge

Here is another simple. DeFi is a shortened version of decentralized finance. This term refers to financial transactions that occur without an “intermediary”, such as the government, a bank or other financial institution.

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8. DTV

You’ve heard of it: non-fungible tokens. It’s a fancy way of saying, “This digital item is one of a kind and irreplaceable.” It applies to anything you can imagine, from online illustrations to songs, viral videos, articles, text logos and GIFs.

Some people collect vintage cars, wines, famous artwork, and baseball cards. Now any digital item can also be turned into a collector’s item. They also act as online status symbols. Check out Jimmy Fallon’s Twitter profile picture for an example.

The only way to buy an NFT is to use cryptocurrency. You can buy an NFT through an auction platform, secondary market, or by participating in a currency. What is it, you ask?

9. Mint

Coinage is how a file, such as a JPEG or GIF, is saved to a blockchain. Once an NFT is issued, it can be sold or traded. If you participate in a mint, it means that you are the first person to buy that artwork from its creator. You can keep it, sell it or trade it.

During the minting process, the creator specifies the royalties he receives from future sales. This acts as a commission if the work changes hands in the future and is a big draw for artists who want to go digital. If you sell an NFT in a secondary market, it also gets a share of the sale.

Izmir, Turkey – January 12, 2018 Close up ethereum coin with other crypto coins shot on black background in studio (iStock)

10. HODL

Here’s a term you might see on social media. HODL stands for ‘hang on for life’. Some say this stems from a typo of the word “hold” on a Bitcoin forum, but now it’s everyday slang.

The idea behind it is simple: if you think a project or currency will gain more value, just “hod” even when the market goes down.

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