In the digital era, cryptocurrency is a revolutionary and lucrative investment option. People are going crazy about it as it is a different world altogether. It employs far more advanced technology than traditional investment avenues like stocks and real estate.
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Therefore, it is natural for anyone, even an experienced investor, to get lost between technical terms and strange acronyms. It seems that the crypto vocabulary is alien and a language in itself. Hence, getting started in the cryptocurrency markets might feel overwhelming.
Thankfully, this guide is here to help. In this article, you will learn the vital cryptocurrency concepts that will help you lay the foundation in the crypto market. Let’s get started!
15 Important Digital Currency Terminologies
The world of crypto investing is hugely unpredictable. You may make poor decisions if you have little to no understanding of the crypto world. Hence, you must get familiar with the following essential crypto vocabulary.
It is a digital and decentralized currency. You may use it to buy and sell items. You can also keep it as a long-term investment.
Altcoin means all the existing cryptocurrencies except for Bitcoin. In simple terms, Altcoin means any digital coin alternative to Bitcoin.
Bitcoin was the first cryptocurrency to be introduced on January 3, 2009. The cryptocurrency value of this digital coin has drastically fluctuated from a high of over $65,000 in 2021 to a low of under $40,000 in 2022.
Blockchain is the technology that governs digital currencies. It’s an electronic ledger that keeps track of all cryptocurrency transactions. It’s developed by stacking successive blocks on top of each other. Each block encompasses transaction information, and when it reaches the threshold, a new block forms, continuing the chain. Blockchain is a non-reversible and permanent ledger.
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A cryptocurrency wallet is identical to a physical wallet. The only difference is that you keep your digital currency here. There are two types of special wallets for cryptocurrency.
A hot wallet is for storing crypto coins online. There is easy access to crypto here, but it is also easily vulnerable to hackers. Another type is cold, also known as a hardware wallet, which resembles a USB drive. The cold wallet is for storing cryptocurrencies offline, minimizing the risk of online theft. However, it also risks being misplaced, which means you will lose all of your cryptocurrencies.
DeFi is an abbreviation for decentralized finance. It is a decentralized currency trading monetary system. More than that, it is a decentralized structure in and of itself. The best example is the DeFi exchange protocols, which automatically handle crypto trading without the need for third parties like brokers, banks, and governments.
dApps is yet another moniker. Its full form is decentralized applications. dApps are any apps that use blockchain technology to conduct financial transactions decentralized. This indicates that there is no need for intermediaries. dApps may range from mobile games to social networking services.
These are internet sites where you may trade one digital asset for another. You may also purchase and sell digital currency on these portals. However, trading and transactions are subject to the market value of cryptocurrencies.
It refers to any currency authorized by the government. Fiat currencies, such as the Japanese yen, US dollar, Indian rupees, etc., are referred to as fiat.
When a set amount of Bitcoin blocks are mined, generally every four years is called halving. The number of new Bitcoins entering the market is cut in half. Its purpose is to keep Bitcoin circulation from overgrowing. It may have an impact on Bitcoin’s prices.
It is the process of acquiring cryptocurrencies using sophisticated computers and specialized software.
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It is a metric for computational and processing power applied in cryptocurrency mining—the greater the hash rate, the more influential the network.
HODL is a slang term and a typo, not a misspelling. A cryptocurrency enthusiast’s finger slipped, and he ended up urging a fellow trader to hold on for dear life rather than sell.
It is a passive investing technique in which it is assumed that a crypto currency’s price will grow in the future, even if the price is currently low. So, the aim here is not to trade in the hopes of making more money in the future.
Pump and Dump
Pump and dump is a crypto scam in which the price of a cryptocurrency is manipulated based on a false assumption.
Whales are people who hold significant amounts of cryptocurrency and have the capacity to influence crypto prices with a single transaction. It’s no surprise that cryptocurrency day traders fear and respect them.
The cryptocurrency markets keep evolving, and new terminologies are being introduced regularly. To become more aware and make wise investment decisions in digital currency, you must stay up to speed on new crypto technologies and concepts.