All 23 Terms You Must Know To Begin In Cryptocurrency (2022)

terms-to-understand-to-begin-cryptocurrency

When you first learn about cryptocurrency in general, you will encounter many technical terms and jargon throughout the Internet and even in books and publications. These words, at first glance, can be daunting to the beginner.

This article is written in a chronological way of understanding so that the beginner learner can easily understand it as they read further. This post is also a constant work in progress, and I will add more terms when I find them necessary for the beginner.

The order of the listing below is arranged in a specific learning order that enables your understanding of the crypto terms as you learn along.

All-Time High (ATH)

Every cryptocurrency in the market has its ups and downs. ATH refers to the highest peak of the coin’s life cycle to date. You can quickly check any cryptocurrencies’ historical prices at CoinMarketCap or CoinGecko.

Altcoin

Any other cryptocurrency that is not Bitcoin and does not have the ticker symbol of BTC. This can be any coin or token, such as Ethereum, Litecoin, DASH, Dogecoin, Monero, etc.

Bubble

A perception indicator of the current market situation whereby one expects a significant drop in the crypto’s price, adoption rate, or both.

Bull / Bullish

This means the particular coin or the market as a whole is moving upwards, either in terms of its price, trading volume or adoption rate. So this is a positive perception point of view.

Blockchain

Bitcoin uses blockchain technology. Bitcoin is the product, and the underlying technology that powers it is the blockchain. It is a special type of database design meant to be decentralized and secure in verifying transactions without the need for a trusted third party. Decentralization means having no central authority and no central point of operation.

Cold Storage

To store cryptos securely offline, one can store them in paper wallets or hardware wallets. Both types of wallets are considered “cold storage” because there is no internet connectivity to access your funds, which greatly reduces the security risks of loss of funds.

HODL

A lingo term made famous by mis-spelling the actual word “Hold”. This refers to the act of holding on to your crypto funds for a long time.

Confirmation

Every cryptocurrency transaction requires a certain amount of confirmation by the network before it can be published as an actual transaction. Bitcoin transaction, for example, needs between 3 to 6 confirmations by network miners.

Exchange

A cryptocurrency exchange is an online marketplace platform where buyers and sellers register and begin trading, using the various tools offered by the exchange, such as spot trading, futures market, staking, savings, etc.

Fiat currency

This refers to your local country’s currency. For example, U.S. residents are using the USD. For U.K. residents, they are using euros.

Full node

Miners can choose to run a full node or remote node (relying on full nodes for validation). The advantage of running a full node is validating transactions and blocks fully. The downside requires miners to download the entire blockchain into their computers.

Mempool

For all Bitcoin transactions, they first enter this mempool area where they are being placed into “queues”, waiting to be confirmed by miners. You can think of this as a temporary holding area before transactions get verified by the network miners.

Mining

This is an act of someone or a company taking their computers to run 24/7 every day in a specialised rig setup. They are called miners. These computers run the Bitcoin blockchain and generally require high-end graphics cards computing power (GPU) to process complex mathematical equations to verify Bitcoin transactions. Besides using GPU, some cryptos require CPU computing power, like Monero. When cryptocurrencies need mining, they use the concept of Proof of Work (PoW).

Proof of Work / Stake

Proof of Work (PoW) requires mining activities to maintain and verify the blockchain as the main driving factor. Bitcoin, for example, uses the PoW concept. On the other hand, Proof of Stake (PoS) cryptocurrencies do not require computing power and instead rely on staking. Crypto owners can stake their coins, giving them the right to check for newer blocks of transactions and add them to the blockchain.

Hot / Cold Wallet

Hot refers to wallets that can connect to the Internet. Cold refers to offline wallets. Examples of hot wallets are crypto exchanges wallets and most mobile wallet apps. Examples of cold wallets are hardware crypto wallets and paper wallets.

Paper Wallet

A highly secure way of storing your crypto assets in paper form. It is offline, and as long as you keep it safe in a secure location, there is no way of losing it. The paper wallet contains both your public wallet address and your private key.

Private Key

This is the password to your crypto wallet, and you must not reveal it to anyone. Keep this string of alphanumeric characters written on a physical paper and keep it secure in a safe, preferably at home. Do not store the private key in a digital document on your laptop, phone, or the cloud. This is to prevent cyber attacks and cyber theft.

Public Wallet Address

This refers to your wallet deposit address. You can give this address to anyone who wishes to send you funds. Think of this as your bank account number that you only give to those who need to send you monies.

Know Your Customer (KYC)

To combat money laundering activities, most cryptocurrency exchanges require their customers to verify their identity in various ways, such as taking a selfie holding the identity card, a photo proof of residential address and others. The country where the crypto exchange is registered mandates all crypto exchanges to have “Know Your Customer (KYC)” policies and processes.

Market Cap

This is the total amount (usually displayed in USD) worth of the cryptocurrency in the market right now. This is calculated using the current price of one coin multiplied by the total number of coin supplies. So, for example, if the price of one (1) Bitcoin is USD 50,000/- and there are currently 19 million bitcoins in circulation, the market capitalization will be 50,000 x 19 million = USD 950 billion.

Satoshi

Bitcoin is divisible into either (8) decimal places. The small unit is 0.00000001, and this is called 1 Satoshi.

Smart Contract

Many crypto assets now have smart contracts as one of their features. Smart contracts are codes stored inside the blockchain and are ready to be executed when certain conditions are met. Examples are trading, lending, borrowing, and they can be used in various industries like healthcare and real estate.

Transaction Fees

For every transaction you send, you have to pay transaction fees. Fees are either automatically suggested by your wallet or exchange, or you can manually input your own. The higher the fees, the faster miners will process our transaction first.

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