Let’s begin with a simple definition of Cryptocurrency; A cryptocurrency is a digital currency that is secured by cryptography and leverages distributed ledger technology called blockchain. Now, let’s break down that technical jargon one-by-one.
What is a Digital Currency?
A digital currency is a non-tangible form of currency that you can’t hold in your hand or touch, unlike paper currency or coins. Basically, any form of currency that you can transfer between two distinct persons digitally can be called a digital currency. However, cryptocurrency showcase one fundamentally difference from traditional digital currency i.e., unlike a digital form of fiat currencies such as Dollar, Euro or Rupee, cryptocurrencies are not governed or controlled by any central authority such as a bank or government.
What is Blockchain?
Blockchain is described as a vast information file known to list all transactions made in a stipulated amount of time. This is also the crux, the epicenter, the center of the bitcoin network, and serves as a ledger type.
In simpler terms, blockchain is a ledger that contains all the transactions and is shared among all the participating parties.
Now, delving further, let’s get into the definitions of all the must-know cryptocurrency terms.
All of the cryptocurrencies except Bitcoin are called altcoins as in alternative coins.
Crypto is simply used as a short word for all cryptocurrencies.
DApp stands for decentralized applications. These are applications that are built on top of blockchain technology, and they do not have a central operating authority. Keep a mental note of this word, you’ll likely to hear a lot about it in the coming years.
Also called decentralized finance, this is a new monetary system made exclusively on public blockchains without a centralized institution’s involvement.
Digital wallets are installed on the local computer or your PC, remote server, and mobile app, facilitating the storage of digital currencies. The most secured digital wallets are cold storage paper wallets or hardware wallets, such as Ledger and Trezor.
It stands for ‘fear of missing out,’ which is a term that is known to describe one’s fear of not entering a winning position in terms of trade.
This is a person who wholly believes in Bitcoin. Most times, the maximalist considers the other altcoins as useless.
A person who is said to have a large sum of crypto; somewhat like the billionaire in the crypto world.
Dead Cat Bounce
This is termed a momentary recovery in the falling price rate of a cryptocurrency, followed by a further decline.
Known as peer-to-peer transactions, they are made between persons without involvement of any central authority.
ICO – Initial Coin Offering
This is known as the initial coin offering, and it’s a kind of presale of a new cryptocurrency.
A single collection of transaction data on a blockchain.
Genesis block is a term given to the first block of a blockchain.
This is simply the compensation that miners receive for successfully endorsing new transactions and recording them right on the ledger— blockchain. Block reward usually is the combination of newly minted cryptocurrency along with the transaction fee that miners earn in exchange for updating the ledger.
Do you know this was a mistake? It started as a user on Bitcoin forums accidentally misspelled the word hold and the word hodl just got picked up. Nowadays, hodler is a term used for people who hold a cryptocurrency for an unknown period of time regardless of its price, sometimes forever!
HODL was first used during the crypto bubble pop of December 2013.
This is known as calculating hashes of blocks and takes a lot of computing power, and it is rewarded with the transaction fees paid and newly minted coins. Mining can also be defined as reward for facilitating transactions on a blockchain network.
Also known as Proof-of-Work. PoW is part of the consensus algorithm that was originally used by the Bitcoin blockchain network. Using the PoW protocol, all nodes on a distributed network can achieve a consensus to confirm transactions and add new blocks to the chain. By showcasing the proof of work, nodes on a network can claim for rewards in exchange for their work.
Public & Private Key
In essence, public and private enables you to prove that you have a secret without revealing the secret. In the context of cryptocurrencies, public key acts as your wallet address, similar to that of a bank account. Therefore, anyone can send you cryptocurrency to your public key whereas you’d need a private key to prove that you’re the owner of that given wallet address.
Satoshi is simply the cent unit of bitcoin. So one Satoshi is 0.00000001 of bitcoin. It’s named after the anonymous creator of Bitcoin i.e., Satoshi Nakamoto.
The unit of Satoshi is eight decimal spaces because the creator had a dream or a plan for the bitcoin to be used as an everyday currency. Therefore, the value of one Sat or Satoshi will be feasible to transact even when bitcoin reaches the price of over one million dollars.
Capitalization or market cap represents the current price of a single cryptocurrency, multiplied by the total number of coins in the market, which is the circulation supply. Currently Bitcoin has the highest market cap among all cryptocurrencies.