Beginner’s Crypto Dictionary
Getting caught up with everything happening in the crypto-world can feel like a part-time job, especially if you’re a newcomer. For that very reason, we’ve compiled our own crypto dictionary to help bring you up to speed and bump up your crypto IQ. Take a peek:
Crypto Dictionary
Cryptocurrency — Any decentralized digital currency. They’re called currencies because they hold value but they also have functionality like the apps on your phone. There are thousands of cryptocurrencies that are trying to solve real world problems like keeping your credit score information safe (Equifax anyone?) or securely managing all your passwords. Here’s a simple explanation of 100 different cryptocurrencies and what they do.
Blockchain — The Economist said, “Simply put, the blockchain is a machine for creating trust.” In a few words, it’s a new type of technology that backs cryptocurrencies and makes them secure. The blockchain uses a type of math called cryptography to make and send secure transactions. These transactions are then shared with every single computer on that network — the more computers connected, the more authentic and secure the data is. It’s almost like a google doc that’s visible to everyone but hack-able by no one, hence the added sense of trust. Check out this video for a two-minute rundown.
Bitcoin — The first form of digital currency released in January 2009 by an individual or group under the pseudonym Satoshi Nakamoto. Satoshi’s identity is still unknown and is one of the most intriguing mysteries in the crypto-space. Bitcoin allows you to send digital currency anywhere in the world for a lower fee than traditional online payment platforms. The price of Bitcoin changes depending on how many people are buying and selling it. Here’s the current price and market cap.
Ethereum — The second largest (market cap) cryptocurrency behind Bitcoin. Ethereum’s blockchain-based platform features smart contract functionality. This means you can secure confidential contract data (like information about the parties or assets involved in a contract) and automate execution of contract terms in a safe and secure way. On another note, Ethereum co-founder, Vitalik Buterin, has a fashion sense that’s on another level. See for yourself.
Decentralized — Decentralized is a term that’s thrown around all the time in crypto circles. It means taking power away from a central figure or authority. For example, all decentralized blockchain applications (like Bitcoin or Ethereum) work without the influence of any sort of third party like a bank or government. Decentralized systems are less prone to failures and are much harder to attack because their infrastructure is spread out across thousands of servers.
Altcoin — Short for “alternative coin”, altcoins are cryptocurrencies that have popped up after the success of Bitcoin. Typically, they’re built on the same framework as Bitcoin or Ethereum, but claim to have more functionality and use cases. Even though most of them have much smaller market-caps, there are thousands of altcoins. Read about a few here.
ICO — ICO stands for “initial coin offering” and is the crypto-version of the business term IPO or “initial public offering” (where privately traded companies start selling their stock to the public). With an ICO, crypto startups are selling their own coins (similar to stocks) to public investors. Investors hope the company will be successful and the coins they purchased will jump up in price, thus making them money. ICO’s are revolutionary because some have raised literally hundreds of millions of dollars in seconds — think massive kickstarter campaign but for cryptocurrencies.
Exchange — An exchange is where buyers and sellers of cryptocurrencies do business. You can buy cryptocurrencies with dollars (or other fiat currencies like the pound, euro or yen) or with other cryptocurrencies like Ether or Bitcoin. There are dozens of exchanges but most aren’t very user friendly and require upfront fees. Here’s an easy way to get started investing if you’ve never used an exchange before.
Crypto Wallets — Similar to the wallet sitting in your pocket, crypto wallets store all your cryptocurrencies in one place. There are dozens of digital wallets and each one can house different types of cryptocurrencies. Each wallet has a unique address that allows you to send or receive funds to/from another wallet or exchange. They come with long passwords (called private keys) and other authentication requirements. There are also offline, “cold wallets” (arguably the most secure type of wallet) that have similar functionality to a USB flash drive. You plug them into your computer’s USB port and can store all your crypto on the device. Check out a review of the top wallets here.
Cryptography — Cryptography is a type of math that uses sophisticated algorithms and secret keys to encrypt and decrypt data. It’s the backbone of cryptocurrencies and blockchain technology and is what makes the transactions that appear on the blockchain network so secure. We could go more in depth, but you get the idea.
Hard Fork — A hard fork happens when an existing currency is duplicated and then changed, resulting in an original and new version of the currency. For example, image that we duplicated Bitcoin to create a Bitcoin 2.0 (not an actual coin) and then altered Bitcoin 2.0 to speed up transaction times or something else that made it more efficient. These forks are popular in the crypto community because when a new currency is released, everyone that holds the original currency gets the same amount in the new currency. So if you own 5 Bitcoin when Bitcoin 2.0 is released, you’d also own 5 Bitcoin 2.0. Here’s more on a fork that actually happened with Bitcoin, creating a new currency called Bitcoin Cash.
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