Reading about cryptocurrencies can be confusing to beginners, what with so many new terms, slang and acronyms. While these may be common vernacular to people who know the crypto sphere well, the newcomer may not be so lucky. Following are the most common cryptocurrency terms you should have at your fingertips.
All digital currency transactions are processed, recorded, and verified on the blockchain, a virtual ledger. Whenever a transaction is made in crypto, the entry is registered on this virtual ledger.
Every cryptocurrency transaction is processed, verified, and recorded on a virtual ledger known as a blockchain. Another entry is made on this virtual ledger when someone buys or sells using cryptocurrency.
The blockchain is decentralized, meaning the data stored isn’t found on one server or even across a single network. Instead, the blockchain exists on all the computers in the network worldwide. The transactions are time-stamped, individually encrypted, and cannot be reversed or changed. Yes, you read that right – crypto transactions cannot be reversed.
2. Fiat Currency
Fiat refers to government-issued and controlled money, whereas cryptocurrency is virtual or digital money. Tokens represent the amount you own, and the value of each token may vary based on many factors.
Bitcoin is the original cryptocurrency. Altcoin refers to any other cryptocurrency that’s not Bitcoin, and there are thousands of them, with new ones joining the list every additional time. Some examples include Ethereum, Bitcoin Cash, Solana, Tether, Binance Coin, Shiba Inu, etc.
A Stablecoin is any cryptocurrency or blockchain-based token whose value is pegged to another source of value – in most cases, a fiat currency. For instance, one dollar-pegged Stablecoin is equivalent to $1. Stablecoins are commonly used to facilitate cryptocurrency trading and cross-border finance.
5. Cryptocurrency Exchange
A cryptocurrency exchange is the equivalent of a brokerage in traditional investing. The online service enables users to exchange fiat currency for cryptocurrency and vice versa. You can deposit money to an exchange trade via credit/debit card, wire, or several other acceptable transfer methods.
6. Cryptocurrency Mining
You may already have heard that Bitcoin gets created through mining. This is a process through which computers mine crypto coins by solving complex math problems; the computers need to be more “powerful” so they can “think” faster to mine Bitcoin. When your computer becomes the fastest one to solve the problem, you win a portion of whatever cryptocurrency you’re mining. It is estimated the last Bitcoin will be mined around the year 2140.
DeFi or Decentralized Finance refers to financial transactions that happen without an intermediary such as a bank, government, or any other financial institution.
NFT is the short form for Non-Fungible Token, which means a digital item that’s one-of-a-kind and is irreplaceable. It applies to many things, including artworks, videos, songs, texts, GIFs, etc. Like people collect famous art, wines, or vintage cars, it’s now possible to convert anything into an NFT. NFTs are sold through online auction platforms and paid for using cryptocurrencies.
HODL is the short form for “hold on for dear life.” Originating from the word “hold,” HODL means that when you believe in a particular cryptocurrency, you stick with it even when the value falls because you trust it will soon gain in value.
Tom is a long-serving freelance writer who specializes in the blockchain and cryptocurrency niche. You may even call him a crypto-enthusiast with over 10-years’ experience in content creation, blog writing, and SEO. He is a philosophical figurehead who believes that to make our world a better place, we must invest in incorruptible products and procedures, of which Bitcoin and other cryptocurrencies are leading examples.