Cryptocurrency is a very popular investment, especially for younger people, but for newbies, much of the jargon can be intimidating and off-putting. If you don’t know what gas is, who a whale is, or what the difference between bitcoin and blockchain is, it can be a little scary to start with crypto.
Familiarity with the terms commonly used in this world will make this much easier. Whether you want to buy cryptocurrency now or later, knowing the jargon is a good first step. To make sure you don’t end up out in the rain, here is a beginner’s guide to introduce you to the world of cryptocurrency.
Sometimes this term creates a little confusion. It seems like the coins are made by blowing up mountains. You are not. Mining is the process of creating and circulating new crypto tokens. It takes powerful computers to solve complex math equations. If the users do this successfully, they will earn coins as a result. You can then trade the coins directly or through online exchanges with your peers.
Of course, most investors don’t actually mine or generate new tokens. Instead, you can buy and sell tokens from other people just like you would any other asset in your investment portfolio.
Those accounts that hold a large amount of a coin and have the ability to single-handedly influence the market are known as whale accounts. Most of the well-known and popular cryptocurrencies have a bunch of whales that can really “throw their weight” around.
In fact, there are even popular websites that track whale activity in order to make the cryptocurrency market more transparent.
Many whale accounts are early investors or large funds, and tracking their activity is actually a smart way to find out how the cryptocurrency market is going to perform.
They store all of your cryptocurrency coins in a wallet. It’s secured by cryptography and if you ever forget your password you will lose all access to your wallet. Cryptocurrency is based on the idea of decentralized distribution, so the only option is to hold people accountable for their passwords.
There are two main types of wallets – hot and cold. While a hot wallet is connected to the internet and makes online trading convenient, a cold wallet is like an offline vault where you keep your assets under strict security.
Trading in cryptocurrencies is largely based on a peer-to-peer network. Blockchain is the digital ledger that stores the details of every cryptocurrency transaction. Since there is no central database and anyone can access the blockchain details from anywhere, there is no risk of a hacker gaining access and corrupting the information stored on it.
It is the fee you pay to make a cryptocurrency transaction. The fee covers the cost of paying a “miner” (the one who has successfully solved the equation and earned a coin) to search for and obtain crypto for you. Its size depends on how fast you want the transaction to run.
The specific destination that the cryptocurrency will be sent to. It is similar to a bank account but contains the only cryptocurrency. Each address, which consists of a set of alphanumeric characters, is used only once to store crypto assets for high security. This address also helps a recipient prove their ownership of the cryptocurrency sent to them.
Most of the time, this term is used to compare cryptocurrency to the traditional currency (fiat) that is supported and issued by the government. It gives the central banks better control over the economy. Currencies like the US dollar and Indian rupee are fiat money.
Interested in cryptocurrency? We discuss everything about crypto with WazirX CEO Nischal Shetty and WeekendInvesting founder Alok Jain on Orbital, the Gadgets 360 podcast. Orbital is available on Apple Podcasts, Google Podcasts, Spotify, Amazon Music, and anywhere you get your podcasts.