Why are there so many crypto terms?
Cryptocurrency can be a complex topic. It lives at the intersection of cryptography, computer science, math, economics, philosophy, and business. This means we must understand concepts from each of those areas to grasp what cryptocurrency is, leading to more terms to know.
Additionally, many early to crypto are engineers who mainly interact with other engineers and technical individuals. This means that they may not spend enough time explaining to less technical people, making it harder to learn.
The good thing is that we can break down each of these terms in a relatively simple, digestible manner. You can eventually build a great understanding of cryptocurrency by learning what these terms are.
How to learn about crypto
It’s much better to have a deep understanding of a few concepts than only a surface-level understanding of many. Take your time to understand critical concepts, and gradually cover most of the space. Therefore, the best way to understand the terms is to go through the concepts behind the terms, and eventually, the terms will become clear.
There are several resources available that users can leverage to learn. They exist in varying mediums, including books, articles, videos, Tweets, and more. Worldcoin has its own learning center.
People should choose whatever learning medium works best for them, given their individual learning styles and technical prowess. When learning from a source, you should always consider any potential biases from the content producer and compare them with their current understanding of the space.
If you are curious about a new term, you should look it up and relate it to all your other learnings. There’s no better way to prove to yourself that you understand a concept than trying to explain it to others.
Cryptocurrency terms to know
It’s time to add some new words to your crypto-dictionary. Here are some cryptocurrency terms you should know:
- Address: Just like the street names and numbers that guide us when sending physical packages, addresses in the cryptocurrency world are virtual locations where we can send and receive crypto.
- Altcoin: Altcoin is a combination of two words: “alternative” and “currency.” It refers to any cryptocurrency other than Bitcoin (BTC).
- Append-only: Blockchains are append-only, which implies their data may only be added to the network in a time-bound sequence. This means all data added to a blockchain can’t be changed or modified.
- Audit: An audit is a secure technique that facilitates cryptocurrency transactions through the use of advanced code. Audits are like virtual "inspections" where any weaknesses, bugs, or vulnerabilities are found and fixed in the system.
- Block: Blocks are finite data chunks that form blockchains.
- Blockchain: A blockchain is a virtual ledger made up of data blocks. Blockchain technology records all cryptocurrency transactions.
- Coin: Coins are units of virtual currency with native blockchains.
- Cold wallet/cold storage: For those who like to feel their money in their pocket, a cold wallet is a solution that allows them to hold cryptocurrency on a physical, offline device.
- Composability: Composability is the ability to combine different components to produce new systems or results. Composability in crypto refers to a blockchain application's capacity for collaboration and communication.
- Cryptocurrency: A cryptocurrency is a form of digital currency that operates through a decentralized process called cryptography on virtual platforms called blockchains.
- Cryptocurrency exchange: A cryptocurrency exchange is a virtual platform where users can buy and sell cryptocurrency.
- Cryptocurrency wallet: Crypto wallets hold a user's private keys and allow them to send and receive cryptocurrency.
- Cryptography: Cryptography is the study of secure communication methods, such as encryption, which only allow a transaction's sender and receiver to gain access to it.
- DAO: DAO stands for decentralized autonomous organizations. They’re organizations without any single authority. A DAO is collectively owned and operated by its members.
- dApps: dApps are decentralized applications that don't rely on a single system. Instead, they run on a network of computers and aren't subject to oversight by any central authority due to their decentralized nature.
- Decentralization: Decentralization, the antonym of centralization, in financial terms, refers to assets that are not held in a central location (i.e., banks) or governed by a single authority.
- Decentralized finance: DeFi, or decentralized finance, is a financial system that offers digital assets via smart contracts without the involvement of third parties like banks, brokerages, or governments.
- Emission: Emission is the speed at which cryptocurrencies are created and released into global circulation.
- EVM: Called the “heart of Ethereum (ETH),” EVM is an acronym for Ethereum Virtual Machine. It’s a software that operates on top of the Ethereum blockchain network, executes smart contracts, and helps create dApps.
- EVM compatibility: EVM compatibility refers to the creation of code that allows developers to create programs compatible with Ethereum's virtual machine without needing to write code from scratch repeatedly.
- Fiat currency: Fiat currencies are currencies issued by a country’s government. For example, the U.S. fiat currency is the U.S. dollar, while the U.K.’s fiat currency is the pound.
- Fork: Ever heard of a fork in the road? Apply this image to a blockchain to better grasp this crypto term. A fork refers to changes in the rules on how a blockchain functions, creating a split in the virtual road.
- Gas: Gas refers to the fee needed to complete an Ethereum transaction.
- Genesis block: A genesis block, also known as Block 0, is any given cryptocurrency's first block. New blocks are added to the genesis block to create a blockchain.
- Governance token: Government tokens provide a community of users with certain rights to make decisions on a blockchain through voting.
- Halving: Bitcoin production is capped, and one of the functions that keep that limit in check is “halving,” a process by which the amount of a new Bitcoin produced is cut in two at 4-year intervals.
- Hash: A hash is an alphanumeric code that identifies blocks in a chain.
- HODL: HODL stands for “Hold On for Dear Life.” It's a term used in the crypto community to describe a tactic for "holding" onto one's cryptocurrency despite market volatility and price fluctuations.
- Hot wallet: As cold wallets are physical, hot wallets are virtual. These internet-based wallets provide a digital home to cryptocurrency.
- Immutable: Immutable refers to any data on a blockchain. Blockchain network data can’t be changed or modified, making it immutable.
- Liquidity provider: Liquidity providers (LPs) are individuals that "stake" cryptocurrency on decentralized crypto exchanges (DEXs) in exchange for fees.
- Market capitalization: Market capitalization, or market cap, refers to the value of the total amount of coins created and released.
- Mining: Mining is the process by which new coins are “dug up” from the virtual earth. It requires vast amounts of computational power and advanced technical expertise. Simply stated, mining is the creation of a new cryptocurrency.
- MultiSig: A crypto wallet with multiple signatures is a MultiSig wallet. MultiSig wallets need several private keys to approve a transaction. Sometimes, different keys are used to create one MultiSig.
- Node: Blockchains comprise nodes, which are computers that power a blockchain's process for authenticating and verifying cryptocurrency transactions. Each node holds a copy of the blockchain's main algorithm and its entire transaction history.
- NFT: NFTs, or non-fungible tokens, are digital representations of art, music, videos, games, and more. Each NFT contains metadata that makes it unique.
- Open-source: Blockchains are developed using an open-source code, which is a code that’s publicly accessible and available for use, modification, and distribution.
- Permissionless: Decentralized blockchains are permissionless, which means users don’t require permission to participate. Everyone can gain access to and participate in a cryptocurrency’s blockchain.
- Private key: A private key is a security code that helps validate currency ownership and transactions.
- Public key: A public key is an address where a crypto wallet can receive transactions.
- Satoshi Nakamoto: Nakamoto is the pseudonymous creator of Bitcoin. It’s unknown whether they are an individual, a small group, or a large-scale corporation.
- Self-custody: Self-custody is when a user has complete ownership over their digital currency and virtual assets.
- Signature: In crypto, digital signatures connect an individual's identity to key data like a private key.
- Smart contract: Smart contracts are digital contracts that automatically execute when a predetermined set of conditions are met between two parties.
- Solidity: Solidity is a programming language developed for building and implementing smart contracts on various blockchain networks.
- The Merge: The Merge refers to an event on September 15, 2022, when Ethereum moved from a proof-of-work (PoW) consensus mechanism to a proof-of-stake (PoS) one, resulting in Ethereum 2.0.
- Token: A crypto token is a cryptocurrency that doesn’t have a native blockchain.
- Tokenomics: Tokenonomics is the study of a token’s economics, such as value, supply and demand, volatility, and so on.
- Transaction: A transaction in crypto refers to the exchange of cryptocurrency between two parties. It’s a transfer between buyer and seller.
- Transaction fee: Transaction fees are fees that users pay to complete cryptocurrency transactions.
- Utility token: Utility tokens are crypto tokens that offer a purpose beyond holding monetary value. Utility tokens enable users to conduct operations on a blockchain network.
- Value capture: Value capture is the process through which an organization, protocol, or cryptocurrency keeps a portion of its revenue.
- Vault: A vault is a location where users can securely store their cryptocurrency.
- Verification: Verifications occur when a blockchain authenticates and adds a transaction to its network.
- Whale: A crypto whale is an individual or entity that holds large amounts of cryptocurrency assets.
- Yield farming: Yield farming is the practice of lending or staking cryptocurrencies in return for rewards like interest.
How to get started with cryptocurrency
Now that we understand various crypto terms, we can apply our new knowledge to work by becoming an investor in a few simple steps.
- Choose a crypto exchange.
- Secure a method (like a wallet) for storing virtual currency.
- Purchase your first units of cryptocurrency.
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