Once you start learning about cryptocurrency, there are some terms that are indispensable to your studies. You need to know what a wallet is, how mining works, and even define terms such as decentralisation. That’s why we’ve put together this article with the most important terms to know before getting started in cryptocurrency, whether you’re new to the digital world or looking to dive into one of today’s hottest investment opportunities.
- Wallet (Digital Wallet)
A wallet is simply a digital storage for cryptocurrency. Your wallet fills the role of your personal bank account in cryptocurrency. It’s where your balance, profits and transactional data are stored. Current wallets come in two varieties: desktop wallets and mobile wallets. Desktop wallets are downloaded onto computers while mobile wallets are pre-installed on smartphones or tablets, which allows them to be accessed anywhere you have Internet access.
Don’t get confused with airdrops; airdropping refers to the act of distributing new cryptocurrency through an online airdrop or simply distribution of free tokens. Airdrop distributions occur when companies want to introduce new token holders or increase the number of people in their ecosystem. These distributions can be obtained through mining and other rewards systems MTLB Token ICO is used as an example in this guide.
- Altcoins (Alternative coins)
Altcoins is a term used to describe the “alternative” cryptocurrencies to the current or dominant coin. Bitcoin is said to be the dominant coin, or the ‘King of Coins’, these days and many altcoins try to imitate or replicate the success of bitcoin. Even though some altcoins have come close in terms of popularity over the years, none have matched bitcoin’s market capitalization so far.
- Atomic Swap
An atomic swap is a highly anticipated development for cryptocurrencies that allows users to trade different coins directly with each other without using a 3rd party such as an exchange. In essence, an atomic swap allows you to exchange coins directly between buyers and sellers. Atomic swaps are expected to greatly increase the ease of cryptocurrency trading and settlement by removing third party exchange fees and providing a faster, more secure exchange.
- Blockchain (Blockchain Technology)
The blockchain is a decentralised and distributed ledger that records cryptocurrency transactions. It functions on a simple principle: “If you have something that everyone wants, then you can ask for the highest price. The blockchain is a ledger that everyone can use, and it’s structured to incentivize the users to keep the ledger functioning properly.”
With the recent rise in popularity of cryptocurrencies like Bitcoin, many people have started talking about blockchain as if it will solve all our problems. Blockchain technology is currently very limited but there are signs that this could change soon enough with new concepts such smart contracts being able to execute through blockchains networks.
Mining is the process of solving complex cryptographic puzzles in return for cryptocurrency. This process helps to secure the blockchain network and is a highly technical and processor-intensive job. The miners are rewarded for solving these problems, which allows them to set their own rates for bitcoin transaction fees or even decide how long transactions should be kept in storage.
- Cold Wallet/Cold Storage
A cold wallet or cold storage refers to a cryptocurrency wallet stored without internet connectivity to prevent physical theft or hacking. This is in contrast to standard exchanges where your private keys are stored on the server, therefore making them vulnerable to hacking.
- Non-fungible tokens (NFTs)
Non-Fungible Tokens (NFTs) are ERC 20 tokens that can be individually allocated; they are named after the Fungible Token standard. These NFTs are unique and non-divisible, just like your house or your physical assets such as a car. This is in contrast to fungible tokens that can be divided into smaller units such as a dollar or a bitcoin.
Decentralisation refers to the concept of having a decentralised network where there are no governing bodies or centres of decision-making power. It is a loose term that covers a wide variety of issues and ideas. Decentralisation doesn’t have to take place through geographical separation, as people have been decentralising national economies for centuries. It can also be done by making decisions without the help of intermediaries or trusted third parties.
- Know Your Customer (KYC)
KYC refers to the process of an institution identifying and verifying the identity of its clients. It’s one of the core practices that are essential to anti-money laundering regulations. Due to the anonymity provided by cryptocurrency, KYC has become a major consideration for those who want to avoid regulatory scrutiny altogether. Many people have been asking for ways to implement KYC into different cryptocurrency exchanges in order to make them more professional and legitimate. These are currently being developed as blockchain technology evolves.
- Bitcoin Trading
Bitcoin is a digital currency, also known as cryptocurrencies. Bitcoin trading happens when you buy or sell bitcoins for another type of money like USD and EUR from an exchange service that specialises in this kind of trade-like Coinbase, Kraken etc…
The process can be automated with bots so traders don’t always need to rely on human intervention which may take longer than they’d want because there are many factors involved
And a bitcoin trading site is the perfect place to start for those looking into digital currency. You can buy and sell bitcoins, meaning that you’ll never need any other cryptocurrency again!
If you are new to blockchain technology, it can be a bit difficult to understand the different terminology used. However, these 10 popular concepts should help you get up to speed. The future is bright for cryptocurrency and blockchain technology as both grow and advance together, but the road ahead will not be easy. It’s important to stay vigilant and always do your due diligence in order to make sure you have a legal framework in place to protect your digital assets from any malicious activity or unforeseen obstacles which could damage your infrastructure or discourage its growth.
Also Read: The Pros and Cons of Cryptocurrency