Cryptocurrency is not a new investment option, and there are a lot of terms associated with it. Ever since Bitcoin, the first and most valuable crypto was launched in 2009, many other cryptos have emerged. Understanding the terms and phrases associated with these cryptos will help you better understand the crypto world before investing.
7 Crypto Terms You Should Know Before Investing
There are several terms associated with crypto. If you want to tap into the opportunity of the cryptocurrency world, it is good that you know the meaning of some terms. Below are 7 terms you should know before investing.
The word cryptocurrency is used to refer to virtual or digital money. It only exists in electronic form. Just like fiat currency, cryptocurrency can be exchanged for goods and services.
The encryption of cryptocurrency ensures the security of each transaction. Examples of cryptocurrency include Bitcoin, Polkadot, Ethereum, and Dogecoin.
Bitcoin is a decentralized digital payment system. Unlike other banking systems, Bitcoin, a digital currency, can be securely exchanged between two individuals located anywhere in the world. Every transaction with Bitcoin is logged on a blockchain.
For security, each transaction is made transparent by being distributed across the whole crypto user’s network. It does not involve any third party and is controlled only by participants and the Bitcoin network. By purchasing a fraction of a Bitcoin, you can be part of the network.
When you hear of bitcoin, it does not mean it is the only cryptocurrency we have, we have more than 50,000 cryptocurrencies. Any coin other than bitcoin is called altcoin meaning alternative coin.
All other coins that are not Bitcoin are referred to as altcoins. Altcoins were launched after Bitcoin’s success, and they are alternative cryptos. However, the market values of altcoins are minimal compare to Bitcoin.
Some altcoins after they were launched disrupted the market and helped shaped the trends in the crypto industry. Some coins are not safe, so you should choose to invest in the mainstream, bigger, and larger crypto.
You can read about interesting blockchain use cases here.
Blockchain is a system that records the transaction information of cryptos. It is simply a digital ledger of transactions. Cheating, hacking, or changing the system is difficult if not impossible.
Blockchain is duplicated and spread across its entire network of computer systems. Contained in each block of the chain are several transactions. Whenever a new transaction takes place on the blockchain, it is recorded and added to the ledger of each participant.
A crypto wallet is a place where you store your digital holdings. Your private keys are kept by your crypto wallets. Private keys refer to passwords that allow you access and permit you to receive and send cryptos.
Crypto wallets are in several forms. There are hardware wallets, mobile apps wallets, etc. Mobile apps make the use of crypto easy.
An address in the crypto world refers to a specific network destination where crypto is sent. It is intended to provide a highly secure and unique place for holding crypto assets.
Consisting in each address is a special set of alphanumerical characters. This precise set of characters is used by a recipient to prove that they own and can receive a cryptocurrency once it is transferred from one party to another.
“Whale” is used to refer to the addresses of the most valuable cryptocurrency holders. A whale can be an investor or a group with enough power to influence a coin’s value. If a group of whales decides to sell their coin, the mass sell-off will cause a fall in the coin’s value.
In most cases, whales are an investment and large hedge fund. However, anyone can be a whale if they have enough assets.
If you are new to the crypto market, it is important for you to familiarize yourself with basic crypto terms. The terms mentioned in this guide are some basic terms you should know before you get into crypto investing.