When entering investment ventures for the first time, it’s essential to have adept knowledge about the topic. This is most applicable for niche markets like cryptocurrency which is riddled with many technical jargons and terms that the ordinary investor won’t grasp at first encounter.
Though full of potential, venturing into cryptocurrency without enough knowledge of the basic cryptocurrency terms and concepts will pose a risk to your funds. From mining cryptocurrencies to knowing market terminologies, all of these will contribute to a better investment experience.
Learn about crypto 101 here at Casino Days and eventually become an expert in the industry! Keep reading the section below to see the top cryptocurrency terms you should know before trading:
When it comes to cryptocurrency, the first concept you should grasp is decentralization. This is a process wherein a system is neither held nor controlled by a governing body. In relation to cryptocurrency, there are no banks or programs that control user transactions.
Cryptography is a means of transferring data from one block to another where the language or algorithms used is initially unreadable. Cryptography translates this content and allows for the intended receiver to decode the data.
If banks and other organizations have record books, cryptocurrency has its own as well. You can think of the blockchain as the official database or public ledger where all transactions made with cryptocurrency are recorded in blocks of information.
Remember that the blockchain can be viewed by anyone, however once the data is stored in the block and added to the chain of information that builds the ‘blockchain’, it can no longer be altered or tampered with.
The process of adding cryptocurrencies into the circulation is also essential. Crypto mining involves miners who use high-powered computers and devices to mine cryptocurrencies. They help manage the decentralized network by verifying transactions on the blockchain through solving advanced mathematical problems. Once the mining process is complete and the transactions are successfully verified, the miner is then given cryptocurrencies as an incentive.
Hashes are another important part of the blockchain and mining process. It is a string of hexadecimal characters generated from the mining process that acts as the ‘fingerprint’ of each block that connects it to the previous.
Also known as dApps, decentralized applications are digital programs built on the blockchain of certain cryptocurrencies like Ethereum that offer various crypto services to users.
Also called Defi, decentralized finance refers to certain products and services offered in the financial technology industry. These are designed to make the trading experience easier and uses financial products like brokerage and online banking to eliminate the middleman.
There’s no denying that there are thousands of cryptocurrencies out there. The first and most popular one, Bitcoin, is no longer the only digital asset in the industry. Cryptocurrencies that are not Bitcoin are called altcoins which mean ‘alternative coin’. This applies to all other cryptocurrencies like Ethereum, Ripple, Litecoin, and many more.
Fiat currencies refers to currency backed up by the government in a specific country or territory.
One of the most important things you should know when it comes to cryptocurrencies is market capitalization. This refers to how much a certain cryptocurrency is worth based on a set of data and volatile information about its values and prices.
Every time you execute trade orders for your cryptocurrencies, you should always check the market capitalization. This includes current and previous data about the prices along with other statistics that can help you make a decision.
The blockchain in the world of cryptocurrency is a complex platform. There will be times when the upgrades or developments are made on the original blockchain, creating a new version that is called a fork.
There are two types of forks in cryptocurrency. The hard fork means protocols and nodes are no longer accepted into the new blockchain while a soft fork is still compatible with the old blockchain, allowing old nodes to participate in transactions.
Public and private keys
All traders are given their own public and private keys to use to complete transactions. Public keys, as the name suggests, are a public set of numbers and letters that everyone can view. Other people can use your public key to transact with you, however you cannot authorize or receive it without the private key.
Private keys are not visible to other traders online and are used to unlock and access transactions. It’s important that only you have access to your private keys.
If you have a regular wallet for fiat currency, you should also have a storage where you can safely keep your cryptocurrencies. Crypto wallets are completely digital and you can use them to store and access your digital assets whenever you want.
There are different types of crypto wallets which include hardware, software and paper wallets, each with their own features suited to different trader needs and preferences.
To trade cryptocurrencies with ease, users can create accounts in cryptocurrency exchanges where they can access various trading features that can instantly improve their experience. Some of the popular exchanges include Binance, Coinbase and Kraken.
An acronym that means ‘Hold On for Dear Life’, HODLing cryptocurrencies means that a trader will hold onto their investments for a long period of time until its price appreciates. While some traders execute trades within a few weeks to profit over market trends or daily price fluctuations, HODLers do so over the course of a few months or even years.
Now that you have an idea of the basic cryptocurrency terms, you’re ready to start trading! Use this knowledge to your advantage and get an edge in the market to make the most out of your investments.