It’s unlikely that, at this point, you haven’t heard about cryptocurrency. Whether it’s because a friend has invested, or you’ve explored it a bit yourself, there’s no doubt that it’s been a subject of discussion. But have you been able to fully participate in the conversation?
Crypto terms can often sound like a different language, or at least like you need Google Translate. It doesn’t have to be that hard, though. Understanding some of the basic terms can be the perfect entrance into the world of cryptocurrency, allowing you to not only participate in the conversation but also invest and use cryptocurrencies at some of your favorite stores!
What is Cryptocurrency?
Have you been lost from the start of the conversation because you’re not quite sure what cryptocurrency even is? Maybe you have a vague understanding that it’s some kind of digital currency. The good news is that digital currency is the short answer.
Cryptocurrency or crypto is a digital currency that allows users to buy, spend, transfer, and save digital tokens or funds. However, unlike traditional currencies, cryptocurrencies are not tied to or backed by a central bank or government like national currencies including the dollar, the pound, the euro, and more.
In terms of a functional understanding, that’s the most important information, that crypto is a decentralized currency that can be used in the same way as traditional currencies. More and more businesses are accepting crypto making both acceptance and use more widespread.
Understanding Crypto Terms
At this point, you might be thinking that seems pretty simple, but that doesn’t really help me understand what early crypto adopters or those within the industry are talking about. There’s got to be more to it. And, of course, there is. Crypto, and the industry surrounding it, comes with a lot of terminology.
As with any new technology, there is language to describe the technology itself (like the term “smartphone”), the method through which you use the technology (apps), and more. To those unfamiliar with crypto terms, it can be overwhelming and a bit confusing. We’re here, again, to say it doesn’t have to be.
In fact, if you want to get involved in the crypto world or are simply considering it, understanding some basic crypto vocabulary will go a long way in helping you get started (or at least following the conversations).
Cryptocurrency Glossary for Beginners
As the heading implies, this is a brief glossary as a way to introduce people new to cryptocurrency to the crypto lingo and terminology. It is, by no means, exhaustive, but instead is intended to be an overview of some of the key vocabulary that will make understanding crypto technology a bit easier.
Altcoin- Altcoin is short for alternative coins and refers to any cryptocurrency token other than the original: Bitcoin. Whether it’s fairly well-known tokens like Ethereum and Tether to lesser-known coins that are either new to the market or don’t enjoy widespread adoption (yet), all fall under the category of altcoin.
Bitcoin- Bitcoin is the OG of crypto. For that reason, it is sometimes used interchangeably with cryptocurrency when what someone really means is a crypto coin, in general. In reality, it’s a specific cryptocurrency, the one that launched the entire industry.
Block- A block is a part of the blockchain that stores cryptocurrency ledgers. Each block stores a specific amount of information related to a crypto transaction. Those blocks are then “chained” together, connected digitally, to create the blockchain.
Blockchain- The database of cryptocurrency transactions made up of individual blocks that store information regarding each transaction. The blockchain is time-stamped and cannot be altered. In this manner, all crypto transactions can be traced.
Burning coins– To help keep some cryptocurrencies stable, to balance the minting of new crypto coins, some are removed from circulation. For stablecoins, this process is extremely important as it helps stabilize the market and limit inflation.
Coin- A coin is any cryptocurrency that lives on its own native blockchain.
Coinbase- Coinbase is a cryptocurrency exchange, the largest in the U.S., that enables the trading (buying and selling) and lending of cryptocurrencies.
Cold wallet/Cold storage- Cold storage options for crypto allow storage of cryptocurrencies in secure locations that are not connected to the internet. Individuals may utilize cold storage methods by storing crypto on a portable USB drive, but risk losing all their funds if the USB itself is lost.
Commodity Futures Trading Commission (CFTC)- The CFTC regulates commodities in the U.S.Having determined that cryptocurrencies are commodities, they also provide oversight for crypto-derivatives (the underlying asset in cryptocurrency also referred to as a token). Should there be fraud or manipulation of those derivatives, the CFTC is empowered to take action.
Cryptocurrency– Digital currencies created by private businesses or citizens. Originally, the concept was developed by Satoshi Nakamoto who created Bitcoin as a way to circumvent traditional banking structures in the wake of the financial crisis.
Crypto Exchange- A forum or online space devoted to trading and lending cryptocurrencies. Many exchanges also offer additional cryptocurrency services such as storage and wallets.
Crypto Mining- The process by which currencies are verified and added to the blockchain utilizing the proof-of-work method. This is a competitive process but the winner is typically awarded fees or currency itself.
Decentralization- The principle upon which cryptocurrencies function. Oversight and control over the crypto market are distributed among its users rather than localized to a single entity such as a government or central bank.
Decentralized Finance (DeFi)- The term used to describe the organizations that support crypto services, like exchanges, that really enable and facilitate a decentralized financial network.
Distributed Ledger- Similar to blockchain (though individual blocks are not required), distributed ledgers are a way of tracking and verifying transactions across a decentralized financial network, such as the one used by cryptocurrencies.
Dogecoin- The now infamous and highly volatile cryptocurrency based on the popular doge meme.
Ether- Next to Bitcoin, ether is the 2nd most largely traded cryptocurrency.
Ethereum- The blockchain technology associated with Ether which also offers other crypto services like an exchange and wallet
Exchange- Short for crypto or cryptocurrency exchange.
Fiat- Traditional currency backed by a centralized bank or government. Examples of fiat include dollars, pounds, and euros.
Hot Wallet/Hot Storage- Hot storage options for crypto store the currencies in a digital location that stays connected to the internet. While there is some risk associated with this, it ensures that cryptocurrencies are always available for trade or retail purchases.
Initial Coin Offering (ICO)- ICOs offer an opportunity for companies to raise funds by creating crypto coins. Unlike IPOs (Initial Public Offerings) from businesses, ICOs are not guaranteed or covered in any way. As a result, some companies were sued by the SEC over the practice.
Memecoin- Cryptocurrencies created and based on popular online memes, like Dogecoin.
Mining– Short for crypto mining.
Non-fungible token (NFT)- The latest way to leverage blockchain technology, NFTs cannot be traded and so the blockchain serves as a way to establish provenance and ownership over digital assets. Lately, NFTs have become popular as artists create digital media to be sold as an NFT which establishes a single owner. However, NFTs don’t protect intellectual property or establish copyright, so the technology and its utilization are currently evolving rapidly.
PayBolt- The most advanced cryptocurrency company to hit the market, specializing in enabling payments and transactions between retailers and consumers. Creators of the $Pay crypto coin.
Peer-to-Peer- Cryptocurrency exchanges began as a way to facilitate peer-to-peer or person-to-person exchanges of funds. Peer-to-peer exchanges happen directly between two people, without a “middleman” or intermediary.
Private Key- The password used to access one’s cryptocurrencies. Private keys must be stored carefully as losing the key means a person will lose all access to their crypto.
Public Key- Public keys enable users and institutions to access your account for the transmission (sending or receiving) of funds; they function much like a bank account number. Access must be authorized by the owner of the key.
Proof-of-Stake- Proof-of-stake, like Proof-of-work, is a method for mining cryptocurrencies, especially Ethereum. Proof-of-stake requires users to put up their own crypto as collateral to become a verifier. If the user verifies a fraudulent block, they lose their collateral. There is some concern about this mining method as some argue that it favors those with more crypto to put up as collateral. However, this system doesn’t rely on computing power, which is where some folks, with access to larger data centers, gain an advantage.
Proof-of-work- Proof-of-work is also a mining technique, but it requires users to establish that they have solved the cryptographic puzzle required to validate the transaction. Because heavy computation is required, this method uses quite a bit of energy and is often criticized for its heavy power consumption.
Security Token- Similar to other securities (stocks and bonds) where there’s a promise of future payments or a portion of the profits. The primary difference is that the transaction is recorded in the blockchain, though they are similarly regulated.
Securities and Exchange Commission (SEC)- The primary regulatory commission in the U.S. that oversees securities and their trading. While the SEC Chair has requested that the SEC be given full jurisdiction over cryptocurrencies, that has yet to happen. Currently, the SEC has some oversight, but it is limited.
Stable Coins- Stablecoins are cryptocurrencies that are connected to backed/guaranteed assets. Because of their connection to traditional assets, they are considered more stable as they can be converted more quickly and maintain a set price. In order to ensure the stability of the coins, companies will burn coins to help manage and control the value.
Tokens- Tokens are different from coins, though are often mistakenly interchanged. Tokens have an additional value, unlike coins, though they are similarly built on the blockchain. Typically, tokens are offered as a reward for continuing to build on a specific blockchain.
Wallet/Crypto Wallet- Crypto wallets are where owners can digitally store their cryptocurrencies to enable buying, selling, trading, and spending.
Wrapped Token- A token that can connect two different blockchains. More specifically, different tokens cannot typically be traded or exchanged, but a wrapped token enables different tokens to exist on competing or different blockchains.
Yield Farming- Yield farming is very similar to day trading. The market changes rapidly and yield farming enables users to leverage those opportunities though, like day trading, it requires a significant investment of time and attention paid to DeFi markets.
With these essential crypto vocabulary terms under you belt, you’ll better be able to follow the conversations and the markets! In fact, if you’re ready to start looking into how cryptocurrencies can work for you, it might be worth exploring how you can use crypto at your favorite retailers and more.
If you’re just looking to explore the options available, check out the PayBolt wallet which provides rewards and great options for people like you who are looking to get in on the cryptocurrency world in a way that’s useful, practical, and convenient.