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HODL. DApp. Ethereum.
No, these are not words from a newly discovered foreign language. They are among the many new and key terms in the cryptocurrency language.
Cryptocurrency is not just a new investment option and in many ways represents a whole different world from traditional stocks and bonds. Between unfamiliar acronyms, emerging technologies, and tracking memes and tweets, learning the basics takes time, even for seasoned traditional investors.
As with any investment, it’s important to understand exactly what you’re investing in before you start. This is especially true when it comes to a speculative – and always changing – asset like crypto.
There are a few prerequisites that we recommend before buying crypto, such as storing your emergency fund, paying off high interest debts, and securing a traditional retirement plan. And, as we’ve said before, you should never put in crypto more than what you’re willing to lose, and experts recommend spending no more than 5% of your portfolio on these digital assets.
But another item you should add to your checklist is at least a beginner’s understanding of what you’re getting into, including how crypto differs from other investment strategies, and the different factors that can affect the market value of a cryptocurrency.
Here are some of the terms and phrases that will help newbies gain a better understanding of the world of crypto investing.
Cryptographic terms to know
Any coin that is not Bitcoin. Altcoins can be anything from the second most popular coin, Ethereum, to one of the thousands of coins with very minimal market value. Experts say you should largely stick with larger, more common cryptocurrencies as an investment.
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The first and most valuable cryptocurrency, launched on January 3, 2009. While its value has been steadily increasing since then, it has seen wild swings. In the past few months alone, the price of Bitcoin has fluctuated from a record high of $ 60,000 to below $ 30,000.
A peer-to-peer electronic payment system formed from a fork of the original Bitcoin. Where Bitcoin is widely accepted as too volatile to be useful as a currency, Bitcoin Cash is designed to be better optimized for transactions.
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Groups of data within a blockchain. On cryptocurrency blockchains, blocks are made up of transaction records as users buy or sell coins. Each block can only contain a certain amount of information. Once this limit is reached, a new block is formed to continue the chain.
A digital form of record keeping and the underlying technology behind cryptocurrencies. A blockchain is the result of sequential blocks that build on each other, creating a permanent, non-modifiable record of transactions (or other data).
Piece of money
A representative store of digital value that lives on a given blockchain or cryptocurrency network. Some blockchains have the same name for the network and the coin, such as Bitcoin. Others may have different names for each, like the Stellar blockchain, which has a native coin called Lumen.
A popular centralized cryptocurrency exchange. Coinbase recently made history as the first cryptocurrency exchange to go public on the Nasdaq.
Cold wallet / cold storage
A secure method of storing your cryptocurrency completely offline. Many cold wallets (also known as hardware wallets) are physical devices that look like a USB flash drive. This type of wallet can help protect your crypto from hacking and theft, although it also comes with its own risks, like losing it, along with your crypto.
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A type of digital and decentralized currency. Cryptocurrency can be used to buy and sell things, or as a long-term store of value.
The principle of distributing power from a central point. Blockchains are traditionally decentralized because they require the majority approval of all users to operate and make changes, rather than a central authority.
Decentralized finance (DeFi)
Financial activities carried out without the intervention of an intermediary, such as a bank, government or other financial institution.
Decentralized applications (DApps)
Applications designed by developers and deployed on a blockchain to carry out actions without intermediaries. Decentralized financial activities are often carried out using decentralized applications. Ethereum is the main network supporting decentralized finance activities.
Experts sometimes compare specific cryptocurrencies to real gold based on how it can be stored and increase in value. Bitcoin is commonly referred to as digital gold.
The second largest cryptocurrency by volume of trade, Ethereum is a crypto network and software platform that developers can use to create new applications, and has an associated currency called ether.
A digital marketplace where you can buy and sell cryptocurrencies.
When users of a blockchain change its rules. These changes to a blockchain’s protocol often result in two new paths – one that follows the old rules and a new blockchain that separates from the previous one. (Example: a Bitcoin fork gave rise to Bitcoin Cash).
A fee that developers have to pay to the Ethereum network to use the system. Gas is paid for in Ether, Ethereum’s native cryptocurrency.
The first block of a cryptocurrency ever to be mined.
Stands for ‘Hold On for Dear Life’ although the term originated from a typo by a user on a Bitcoin forum in 2013. It refers to a passive investment strategy in which people buy and hold crypto. currency – instead of exchanging it – in the hope that it will increase in value.
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Reduce by half
A feature written in Bitcoin’s code in which after a certain number of blocks are mined (usually every four years), the amount of new Bitcoins entering circulation is halved. Halving can impact the price of Bitcoin.
A unique string of numbers and letters that identify blocks and relate to crypto buyers and sellers.
A software-based cryptocurrency wallet connected to the Internet. While more convenient for quickly accessing your crypto, these wallets are a bit more susceptible to hacking and cybersecurity attacks than offline wallets, just as files you store in the cloud can be more easily hacked than those locked in. a safe in your home.
Initial coin offering (ICO)
One way to fundraise for a new cryptocurrency project. ICOs are similar to initial public offerings (IPOs) of shares.
For cryptocurrency, market cap refers to the total value of all the coins that have been mined. You can calculate the market capitalization of a crypto by multiplying the current number of coins by the current value of the coins.
The process by which new cryptocurrency coins are made available and the log of transactions between users is maintained.
A computer that connects to a blockchain network.
Non-fungible tokens (NFT)
Non-fungible tokens are units of value used to represent ownership of unique digital items like art or collectibles. NFTs are most often held on the Ethereum blockchain.
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Two users interacting directly without third parties or intermediaries.
Your wallet address, which is similar to your bank account number. You can share your public wallet key with people or institutions so that they can send you money or withdraw money from your account when you authorize it.
The encrypted code that allows direct access to your cryptocurrency. Like your bank account password, you should never share your private key.
The pseudonym of the creator of Bitcoin. No one knows Nakomoto’s true identity – or if it’s more than one person.
An algorithmic program that automatically enacts the terms of a contract based on its code. One of the main value propositions of the Ethereum network is its ability to execute smart contracts.
Stablecoin or digital Fiat
A stablecoin pegs its value with another non-digital currency or commodity. A digital fiat represents a fiat or government backed currency on the blockchain. (Example: Tether, which is pegged to the US dollar)
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A unit of value on a blockchain that usually has another value proposition besides a simple transfer of value (like a coin).
Programmer who invented Ethereum in 2015.
A place to store your cryptocurrency holdings. Many exchanges offer digital wallets. Wallets can be hot (online, software-based) or cold (offline, usually on a device).