A Beginner’s Guide to Popular Cryptocurrency Terms

A Beginner’s Guide to Popular Cryptocurrency Terms

13 minutes to read | 05.06.2022
TL;DR This article includes a list of important cryptocurrency terms for any beginner that is looking to get more familiar with the crypto space. Some terms you will learn are blockchain, cryptocurrency, decentralization, market capitalization, mining, NFTs, smart contracts, and more!
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The cryptocurrency industry can be a complex and confusing space. Not only is understanding the technology behind blockchain pretty difficult, you also have to learn all the terms that come along with it, or else risk being more confused. You don't have to memorize all of these terms, but getting familiar with them will help you navigate the crypto space and become an even better investor. Here are the main cryptocurrency investing terms that you should know.

Address

A long string of characters that identifies a wallet that can be used to send and receive cryptocurrency. Addresses are unique and since they are just a long string of characters, humans can’t read them, but computers can. This means that addresses are somewhat anonymous, since the only way to identify you is by your string of characters.

Altcoin

Any cryptocurrency other than Bitcoin, especially newer, less known, or lower market cap coins. These tend to be a lot more risky to invest in, but can also be really awesome projects with a lot of potential. Remember, always do your own research on certain cryptocurrencies.

Block

A block holds a list of transactions of what cryptocurrency users have sent and received. Since a block can only hold a certain amount of transactions, it must be mined, added to the blockchain, and a new block is formed to record new transactions.

Blockchain

The blockchain is a way to store data in the form of transactions. This is a list of transactions held and updated by everyone's computer on the blockchain’s network. Learn more about the blockchain process.

Bullish

Bullish is when you are hyped up about a coin. You see good news happening all around you and you really believe this crypto is going to be the next best thing. Maybe even the price is going up. You have to tell everyone!

Bearish

Bearish is the total opposite of bullish. Here the price is probably slumped, and you haven’t heard anything about the project in months. You don’t tell anyone about your losses. You can learn about what to do during a bear market.

Burning

Burning is the process of permanently removing crypto from the circulating supply by sending it to a wallet that no one has access to. There are many reasons why a project would want to burn their supply. The main reason would be to reduce the supply to create scarcity and drive up the price, but can also be used to combat inflation of the coin. You can learn more about burning cryptocurrency.

Buy the Dip

When the price of a crypto has been high for a while, but suddenly takes a huge drop it’s called a dip. People will say this to mean buy the crypto at this much lower price since they believe it will rise back up.

Coin

A coin is another word for a blockchain's cryptocurrency.

Coins in Circulation

This is the amount of coins that have been issued so far and currently available on a specific blockchain. If a blockchain has 1 million coins in circulation then that means only 1 million coins can be traded between users. Coins may be added to the circulating supply through mining. This is something to pay attention to when researching a cryptocurrency.

Coinbase

Coinbase is a centralized cryptocurrency exchange where users can buy and sell crypto with fiat, store crypto, or send and receive crypto. Coinbase is a great place to buy cryptocurrency if you are a beginner.

Cold Wallet

Otherwise known as cold storage, or hardware wallet, this is a method to securely store your crypto offline using a USB like device. You would want a cold wallet to protect yourself from hacking or theft, just don’t lose it.

Consensus

This is the process in which users on the network come to an agreement about the blockchain. This is also a part of cryptocurrency mining and there are many different methods of consensus.

Cryptocurrency

Decentralized and digital currency used to buy and sell things, take part in the future of projects, or as a store of value.

Decentralization

In crypto, decentralization means that the blockchain is run by many users rather than a central authority. For example, normally sending money means asking your bank, the central authority, to verify the transaction in order to send money to someone else's bank. With decentralization, everyone on the network makes sure that the transaction is valid. This means trading between users with no middleman. My crypto will go straight to you without first having to be approved by a central authority like a bank. Decentralization is seen as more secure since a central authority is one chokepoint. If it goes down, then transactions can no longer be sent. In order to take down a decentralized network, hackers would have to shut down more than half of the network. With large projects like Bitcoin and Ethereum, this is basically impossible since there are so many users on the network.

Decentralized Applications (dApps)

An open sourced application, developed and launched on the blockchain, that can run by itself, and is kept alive by a network of users by giving out tokens as a reward. A dApp is not owned by any one individual, but instead is owned by token holders. The application’s future is voted on by the users that hold tokens.

Decentralized Finance (DeFi)

A financial technology used as an alternative to traditional finance. The main goal of decentralized finance is to remove the middleman, like the bank. This will allow anyone to use financial services no matter where or who they are.

Exchange

An exchange is where you can go to buy, sell or swap cryptocurrency. There are centralized exchanges like Coinbase, where the power is in just their hands, and there are decentralized exchanges like PancakeSwap or Uniswap, where the power is in the hands of the users who hold certain tokens.

Fork

This is when users on a network want to make changes to the blockchain rules, but can’t agree on the change, which results in a split of the blockchain. One chain follows the old rules, and the other blockchain follows the new rules. One example is that Bitcoin Cash is a fork of Bitcoin.

Fiat

Money that is recognized as legal currency and backed by a government. Like dollars, euros, or taka.

Gas

Gas is a fee that’s used to pay to complete a transaction, or a transaction fee. The gas fee ends up going to the miner who validates the transaction. If you want to pay less gas your transaction will be slow, and to speed up the transaction you can pay more.

Genesis Block

The very first block of a cryptocurrency.

HODL

HODL means to "hold on for dear life!" Basically, this means that in a volatile market where the price has dropped significantly to keep holding onto your crypto and not to sell even though your portfolio looks like it's doomed.

Halving

Halving is when the reward for mining Bitcoin is cut in half for every 210,000 blocks that are mined. This will happen every 4 years. For example, in the beginning of May of 2020 if you mined a block you would receive 12.5 BTC. At the end of May you would have received 6.25 BTC because the halving happened in the middle of May.

Hash

This is a complex code made with letters and numbers that is used to identify blocks on the blockchain. This is also what connects blocks together and makes sure they cannot be tampered with. A hash is what proof of work miners are solving for.

Hot Wallet

Also known as a software wallet, this is a wallet that is connected to the internet in some way, like through an app such as Coinbase. Since it’s connected to the internet, these wallets are easier to be hacked or scammed.

Initial Coin Offering (ICO)

This is when a project launches their cryptocurrency to the public in order to try and secure funding. It’s similar to when a company goes public with their stock. They are popular because sometimes the price will rapidly increase, luring people with the possibility of huge gains.

Know Your Customer (KYC)

This is when an exchange gathers information like your identity and background in order to allow you to use their platform. KYC is mainly used by centralized exchanges since this is where most of the fiat is flowing in and out of cryptocurrency. Since they are obligated to do this (by law), it's probably safe to say this is just a way for the government to track your spending so that they can get those sweet, sweet tax dollars from you.

Layers

Blockchain layers are a way to categorize and understand the architecture of a blockchain. There are 4 layers to blockchain - Layer 0, Layer 1, Layer 2, and Layer 3. Each layer has its own uses. For example, the goal of a layer 2 is to help speed up and scale a layer 1 blockchain. You can learn more details about blockchain layers in simple terms.

Max Supply

The total amount of coins of a cryptocurrency that will be issued in the blockchain's lifetime. Usually, the higher the max supply, the lower the price of the coin. Max supply is something to pay attention to because it can help see how much inflation will hit the crypto in the future. For example, Bitcoin will only ever have 21 million coins issued in its lifetime. Another thing to pay close attention to when researching cryptocurrency.

Market Capitalization

Market capitalization is the amount of money that's in a certain cryptocurrency. You can find a crypto's market cap by multiplying the number of coins in circulation by the amount per coin. You can learn more about using a crypto's market cap to find its price.

Mining

A process where the blockchain is maintained and updated. Here, transactions are validated, a new block of transactions is added to the blockchain, and cryptocurrency is added to circulation. Computers compete with each other to be the first to mine a block. Learn more about cryptocurrency mining.

Node

A node is a computer, or miner, on the network responsible for validating blocks and making sure the blockchain is secure and running.

Non-fungible Tokens (NFTs)

NFTs are a unique token on a blockchain that cannot be replicated, which can be bought and sold just like anything else. An NFT can be tied to anything from real or digital art, to real or digital real estate, to digital clothing to basically any asset whether real or digital. The main goal with NFTs is to prevent fraud by giving everything a unique code that establishes proof of ownership, while also making it easy to buy and sell assets. Because NFTs are unique, it's easy to verify their ownership and authenticity. NFTs get made fun of since people are spending thousands or millions on digital art, but they can have some real world uses like unique characters in video games to tickets for concerts or sporting events.

Peer-to-peer

This is a network that is distributed among many computers who can share information with each other rather than relying on a central server or authority. Peer-to-peer is one of the main selling points of blockchain and is vital in decentralization.

Private Key

A private key is part of a pair of keys (the other is a public key) that is made up of a random string of characters. The private key should never be shared (hence the word, private) and is needed to use the public key for anything other than receiving crypto, like sending or accessing the crypto. You can think of this like a password for using the public key. When you send crypto from your public key, computers validate whether or not the transaction is good by checking if the correct private key was used.

Proof of Authority (PoA)

A consensus method where blocks can be validated based on identity. This is more geared toward businesses who might want to build something on a blockchain that doesn’t require any outside users.

Proof of Burn (PoB)

A consensus method where a user must prove that they have burned a certain amount of crypto in order to be selected to validate a block. The security comes in making users risk losing crypto unless they stay to help maintain the blockchain. There could also be a few benefits to burning cryptocurrency.

Proof of Stake (PoS)

A consensus method where nodes are "randomly" selected to validate blocks. Nodes can be selected as long as they have locked (staked) a certain amount of blockchain's crypto on the network.

Proof of Work (PoW)

A consensus method where miners race to solve a complex math problem in order to validate transactions, mine blocks, and introduce new crypto into the circulating supply. Hundreds or thousands of computers are trying to solve this code at one time, but only one computer will solve it before the others. Once the code is solved, the block is mined, and the blockchain process will start all over again.

Public Key

A public key is part of a pair of keys (the other being the private key), which is made up of a random string of characters. This key is meant to be seen by anyone who wants to send you crypto. You can share it anywhere you want without fear that anyone can use it to do anything other than send crypto to it. You need the private key to actually access the crypto that has been sent to the public key. In order to use the crypto sent to the public key, you need the private key associated with it.

Public Ledger

A list of transactions that everyone can see. For example, Bitcoin is a public ledger. Anyone in the network can see any transaction that has ever been made with Bitcoin. This means anyone can see the amount and which wallet sent and received Bitcoin, including the total amount currently held by any wallet. However, this is still somewhat anonymous since wallet addresses are just random letters and numbers, so unless you specifically know whose wallet it is, you will not actually know the real identity of the sender or receiver. Not every cryptocurrency has a public ledger, but many of them do.

Seed

A seed is a phrase, usually made up of a string of random words, that's used to get back into a wallet in case you ever get logged out or lose access. It's also known as a seed phrase. You never want to lose your seed phrase, since if you lose it you will have absolutely no other way to access your crypto. There are some best practices when it comes to security like writing it down on a piece of paper rather than typing it in a weird document since that is easier to hack. Come to think of it, where did I put that thing? Learn more about how to keep your crypto seed phrase safe.

Smart Contract

A piece of code that will automatically execute by itself when certain conditions are met. Users can enter into a smart contract without having to trust each other since the contract cannot be tampered with or changed. Many different blockchains are using smart contracts in their apps such as Ethereum, Cardano, or Algorand. Learn about smart contracts in detail.

Stablecoin

Stablecoin are cryptocurrencies that hold the value of something else like real money, or another cryptocurrency. They can basically be considered a digital fiat in most cases. For example, Tether, the most popular stablecoin, is pegged to the United States dollar. For every $1 you put into Tether, you will receive 1 USDT and vice-versa.

Token

A token is another word for a blockchain's cryptocurrency. Mostly this is used to describe cryptocurrencies that are built on another blockchain. For example, Polygon is an Ethereum token. It has its own crypto called MATIC, but uses Ethereum's blockchain.

Volume

The total dollar amount of a crypto traded in 24 hours. A higher volume is good because that means a crypto is traded more often.

Wallet

A wallet is where you store your crypto! It’s just a unique string of characters called an address. This is public and everyone can see any transactions done with the wallet, but only the owner of the wallet can do anything since only they have access to its private key.

Whale

Someone who holds a large amount of crypto. These people can usually affect the price when buying or selling crypto because they usually spend massive amounts of money. Something all of us crypto holders strive to be someday. Summary Getting familiar with these terms will help you when trying to understand cryptocurrency and will help you when you are investing in crypto. Once you have learned these crypto terms, you can learn about your first cryptocurrency, Bitcoin!
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