Top 10 Cryptocurrency Terms People Use Every Day
This column was originally published in November 2021.
Despite Bitcoin’s launch in 2009, it’s only recently that you can’t listen to the news or browse the web without coming across a mention of cryptocurrency.
I’ve gotten so many questions from my readers and national radio listeners that I’ve written a crypto e-book to help you out. I demystify digital currency, mining and how to start trading. Tap or click here to get your copy on Amazon.
Unfortunately, I also hear from people who have been fooled by one crypto scam or another. Where there is money, criminals wait. Tap or click for five smart crypto scams doing the rounds right now and steps to stay safe.
Before you begin, be aware that this is not financial advice. The crypto world is volatile and you should never risk money that you are not comfortable losing. Now let’s look at some of the most common jargons:
CRYPTO COLLAPSED? :Why is crypto so down? Uncertainty in traditional markets and Fed concerns, experts say
STOCK MARKET QUESTIONS:Are you worried about the stock market? Ask yourself these 3 questions to protect your finances.
Every cryptocurrency transaction is processed, verified, and recorded on a virtual ledger called blockchain. When someone buys or sells using cryptocurrency, another entry is made on this virtual ledger.
Think of the blockchain as a series of boxcars on a train. When a cryptocurrency transaction is made, another boxcar is added to the train.
Blockchain is decentralized. This means that it is not stored on a machine or even on a network. Instead, blockchain exists on computers around the world that are accessible through the internet.
People and businesses help verify every transaction added to the blockchain using their own computer’s processing power on a decentralized peer-to-peer network. Each transaction is time-stamped, individually encrypted and cannot be reversed or modified. Yes, you read that right – crypto transactions cannot be undone.
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I know what you’re thinking: “I thought a Fiat was a car.” Not in the land of cryptos. Fiat currency is currency issued by the government. If you are in the United States, that means US dollars.
Cryptocurrency, on the other hand, is virtual money.
Cryptocurrencies are not backed by governments or any other standard used with traditional currency. Each “token” represents the amount you own.
The value of each token varies according to the current market value. One day it’s over; the next day down. With cryptocurrency, price swings can happen much faster and are more extreme – both positive and negative. A good resource for checking current prices is CoinMarketCap.
Here’s an easy one to remember. A altcoin is any digital currency that is not bitcoin. There are thousands of cryptocurrencies, and new ones are added all the time.
As of this writing, these are the top five currencies market caps. (This is the total market value of the circulating supply.) Since crypto is moving so quickly, this list may have already changed by the time you read.
• Binance Coin
To buy cryptocurrency, you must start with a exchange. Think of an exchange as a crypto middleman. It is an online service that allows you to exchange your fiat for crypto or change crypto to fiat.
If you are familiar with traditional investing, a crypto exchange works like a brokerage. You can deposit money via wire transfer, wire transfer, debit card, and other standard deposit methods. You can expect to pay fees for most transactions.
You can also buy crypto through apps you may already use, like Venmo, Robinhood, or Cash App.
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In basic terms, a cryptocurrency wallet is an app or physical storage device that allows you to store and retrieve your digital currency. Wallets can hold multiple cryptocurrencies, so you’re not limited to Bitcoin, for example.
Whether you use an app or a physical wallet, it is important to note that the currency itself is not stored there. Instead, wallets store the location of your currency on the blockchain.
Wallets are divided into two main categories: hot and cold. A hot wallet is, by definition, connected to the Internet. The safest way to store your cryptocurrency is with a cold wallet – those who are not connected to the Internet.
Physical wallets come in different types, but are usually specially designed USB drives that directly store your cryptocurrency for later use. Physical wallets give you the best protection against hackers.
Two popular cold wallets are the Ledger Nano X and the Trezor Model One. Of the two, I prefer the Ledger Nano X because it supports 23 different types of cryptocurrencies and has additional features.
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You’ve probably heard this term associated with Bitcoin, which is created by mining. Computers mine coins by solving complex mathematical problems. The more powerful the computer, the faster it can “think”.
Now, if your computer is the fastest to solve the problem, bingo – you win one unit of the cryptocurrency you mine.
Although there are a few cryptocurrencies with an infinite supply, most have a limit. For Bitcoin, this limit is 21 million. The last coin will be mined in 2140 or earlier.
Here is another simple one. DeFi is an abbreviated version of decentralized finance. This term refers to financial transactions that occur without an “intermediary,” such as the government, a bank, or another financial institution.
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You’ve heard of it: non-fungible tokens. It’s a fancy way of saying, “This digital item is one of a kind and irreplaceable.” This applies to anything you can imagine, from online artwork to songs, viral videos, articles, text logos and GIFs.
Some people collect vintage cars, wines, famous works of art, and baseball cards. From now on, any digital object can also be transformed into a collector’s item. They also act as online status symbols. Check out Jimmy Fallon’s Twitter profile picture for an example.
The only way to buy an NFT is with cryptocurrency. You can buy an NFT through an auction platform, a secondary market or by participating in a currency. What is it, you ask?
Mint or Frappe
Hit is how a file, such as a JPEG or GIF, is stored on a blockchain. Once an NFT is minted, it can be sold or traded. If you participate in a Mint, it means that you are the first person to buy this work from its creator. You can keep it, sell it or trade it.
During the minting process, the creator specifies the royalties he receives from future sales. This acts as a command if the work changes hands in the future and is a big draw for artists looking to go digital. If you sell an NFT on a secondary market, it likely gets a share of the sale as well.
Here’s a term you might see on social media. HODL means “hold on for life”. Some say it originated from a typo of the word “hold” on a Bitcoin forum a long time ago, but now it’s everyday slang.
The idea behind it is simple: if you think a project or a currency will gain more value, you just need to “hodl” it even if the market goes down.
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The views and opinions expressed in this column are those of the author and do not necessarily reflect those of USA TODAY.