X cryptocurrency terms you need to know
Cryptocurrency has changed the world of finance and any industry it’s used in as a payment method. There’s a growing market for cryptocurrencies now that it’s more widely accepted and more heavily regulated. Those getting into cryptocurrency trading can find it somewhat confusing at first.
The market is very tech-savvy and dependent on the technology called blockchain. It uses a lot of terms that new traders may not be familiar with. It’s useful for newcomers to the industry to use crypto resources such as CryptoManiaks to learn about the latest developments as well as the basic tenets.
In this article, we’ll go over some of the most important cryptocurrency terms to be aware of.
Cryptography
Cryptography is a technique that uses codes to protect communication and information. It’s used to protect digital assets, such as the codes used to run cryptocurrencies. Cryptography protects the information from altering and theft.
It’s this technique that allows transactions made in crypto to remain anonymous and private. This is the biggest advantage of using cryptocurrency when compared to traditional fiat currencies.
Cryptocurrency
Cryptocurrency is a digital currency protected by cryptography. It’s used for the same purposes traditional fiat currency is used – it stores values and it can purchase goods and services. There’s no centralized bank that issues the currency, instead, it’s based on the value the currency has on the market. Cryptocurrencies use blockchain technology to record transactions.
This means that all the transactions are written into the code itself so that there’s no chance of theft or scams.
Blockchain
Blockchain is a type of database that collects information and stores it on a computer system. A blockchain stores information together in blocks. Each block has a certain information storage capacity and when it is filled it is chained onto the previously filled block. A chain of such information blocks is known as the blockchain.
The recorder can’t alter the information retroactively since it’s not stored on a single computer or a device. This makes the transaction immutable and therefore easy to prove and verify.
Bitcoin
Bitcoin is the first virtual currency and the most widely used one. It was introduced in 2008 and it has been actively used as a currency since 2009. Over the years Bitcoin was widely recognized as the most trustworthy currency and it’s accepted as legal tender in many countries.
However, it’s still volatile and subject to market changes as much as any other cryptocurrency. It has had its ups and downs over time, but it’s proven to be a valuable investment.
Altcoins
For a while, altcoin was a term used to describe any cryptocurrency coin that isn’t Bitcoin since it was considered to be the standard for the industry. The term is no longer in use as often since there are more than a few coins that have made a name for themselves other than Bitcoin – for instance, Ethereum, Tether, and BNB are equally popular and have just as many applications.
The term altcoin is sometimes still used to describe new and up-and-coming cryptocurrencies that are known for their niche purposes.
Stablecoins
Stablecoin is an interesting innovation that was created to solve the issues of cryptocurrency volatility. The value of these coins isn’t as volatile and dependent on the market forces, as it’s tied to the value of a traditional fiat currency – such as the US dollar.
Many have found this to be a way to use all the tech features of cryptocurrency without the downsides that come with its changing value. However, others use cryptocurrency for its decentralized structure and find stablecoins to be a useless feature as the value depends on the central bank once again.
Mining
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Mining is the process of creating cryptocurrencies without investing money in them. It’s the process where a global network of computers runs through the code to ensure that the transactions are legitimate and correctly added to the chain. This is when new currencies are created.
The process requires a lot of processing power and consumes a lot of energy making it expensive and complicated to set up. Investment in mining equipment and facilities is considered a great way to get into the industry without actually trading crypto yourself.
Distributed ledger
Distributed ledger is a digital system for recording transactions of assets used in cryptocurrency. The transactions and their details are recorded in multiple places at once providing a decentralized security system.
The ledger allows the public to witness the transactions and therefore becomes proof of their validity. It’s the opposite of the traditional centralized ledger that most companies and transaction systems use. The technology is similar to that of blockchain. A cryptocurrency called Ethereum uses this system to record its transactions.
Fork
A fork is a change in the blockchain protocol made by the community. When this happens, the chain splits — producing a second blockchain that shares all of its history with the original but is headed off in a new direction.
This means that the blockchain has added a new feature or become different in some other way. There are soft forks which are similar to software updates, when a new feature is added but the basic service remains the same. Hard forks, on the other hand, happen when the new version of the blockchain isn’t backward compatible.
Private key
A private key is an alphanumeric code used in blockchain and cryptocurrency, similar to a traditional password. It’s used to authorize transactions and prove ownership of digital assets such as cryptocurrency coins.
The keys are an essential protection method and losing them can mean that someone else can control or sell your digital assets. It’s best if they are kept in cold storage meaning on a hard drive not connected to the internet.
Digital wallet
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Digital wallets are programs, services, or sometimes actual physical devices used to store, send, and receive cryptocurrency. The only way to get access to the funds or to be able to send them is to have the key we mentioned before. This means that digital wallets don’t rely on any government or corporate structure to keep the funds safe and available.
Most cryptocurrency users that store large amounts of crypto coins do so, using offline wallets that have never been connected to the internet.
Fungible
Fungible is a term often used to describe cryptocurrencies. This simply means that they are interchangeable with one another. Each unit of Bitcoin is exactly the same as any other and that means that you can trade one for another and give and receive the same value.
Education is essential
The cryptocurrency market is here to stay and it will grow and expand its services and abilities as it already has. That’s why it’s so essential for those who want to trade in this market or to simply use cryptocurrencies as a payment option – to learn about them.
There are plenty of resources and crypto guides out there that can help the users with it, not all of them are equally suited to that task, however. An investor or a user should therefore start with the basics and once they understand the terms of this innovative financial service, they can move on to closely following the crypto market and its latest developments.
