Representational image New Delhi: Of late many new retail investors have joined the crypto bandwagon looking at the meteoric rise of Bitcoin, the bellwether cryptocurrency and some altcoins.However, it has been observed that most new investors do not fully understand the basic terminologies used in the trading of digital currency.
Here are 9 crypto jargons you need to understand before investing:
1) Cryptocurrency : Cryptocurrency is a digital currency in which transactions are verified and records are maintained by a decentralised system using the cryptography technique, a system of securing information and communications through use of codes.This is contrary to legal tender that stores records through a centralised authority.
2) Bitcoin: It is the world’s first and most famous cryptocurrency by far.It is also the world’s largest cryptocurrency by market capitalisation, which is pegged at over $900 billion.Bitcoin price is hovering around $42,000 as of 2 pm on September 22.However, earlier this year, the digital currency had touched an all-time high of $64,778 apiece.
In the last one year, the currency has rallied 302%.Bitcoin can be sent from one user to another on the peer-to-peer bitcoin network without the need for intermediaries.In case of Bitcoin, a public ledger records all its transactions and copies are held on servers around the world.
3) Altcoin: The term ‘Altcoin’ means alternative cryptocurrency.The term is used when you refer to any digital currency other than Bitcoin.So the term altcoin imply a category of cryptocurrency, which is an alternative to Bitcoin, such as Ethereum, Cardano, Solana, Avalanche and Dogecoin.
4) Stablecoin : Stablecoins are cryptocurrencies that attempt to peg their market value to some external reference.The external reference can be in the form of a cryptocurrency, fiat money, or to exchange-traded commodities.
It is a solution for those worried about the volatility of Bitcoin and Altcoins.
5) Blockchain: It is a technology that drives Bitcoin, blockchain collects information together in groups, also known as blocks, that hold sets of information.In simpler terms, it is a system of recording the information in a way that makes it difficult or impossible to change, hack, or cheat the system.A blockchain is essentially a sort of digital ledger for transactions that is duplicated and distributed across the entire network of computer systems on the blockchain.
6) Cryptocurrency Exchanges : They are also called as digital currency exchanges (DCE).Crypto exchanges allow customers to trade cryptocurrencies or digital currencies for other assets – like conventional fiat money or other digital currencies.
These exchanges can accept a gamut of payments – credit card payments, wire transfers or other forms of payments in lieu of digital currencies.Just like a stock exchange, a cryptocurrency exchange can be a market-maker that usually takes the bid–ask spreads as a transaction commission for the service it is providing or, it simply charges the fees.
7) Crypto Wallet: Crypto wallets store your private keys and passwords of digital assets, keeping your crypto safe and accessible.They can also allow you to send, receive, and spend cryptocurrencies.They come in multiple forms – from hardware wallets like Ledger to mobile apps.
A crypto wallet aims to make the use of crypto as easy as shopping with a credit card online.
8) Mining : It is the process of creating new cryptocurrency by solving a computational puzzle.
Cryptocurrencies do not exist in any physical form; there are no minted coins/currency notes, etc.Cryptocurrencies are mined through an arithmetic process codes through mining with a virtual ‘mining rig’ that uses a combination of hardware and software designed by professional coders.Interestingly, most Bitcoin mining happens in China.
9) Fork: When a blockchain user makes changes to the rules it is known as a ‘Fork’.
These changes to the protocol of a blockchain may result in two new paths.The last famous fork that happened was to Ethereum–the London Hard Fork– that took place in early August 2021..
