Cryptocurrency Keywords and What They Mean
The downward spiral of FTX and its former CEO, the ‘King of Crypto’, has attracted massive media attention and brought cryptocurrency conversations back into the spotlight.
But for many, the language of crypto – bitcoin, blockchain, crypto exchange – remains cryptic.
Do not worry.
If you’re hearing these words for the first time or just need a refresher, here are some key terms and what they mean…
Bitcoin
Bitcoin is a type of digital currency (cryptocurrency). Like traditional currencies, such as the dollar, pound or euro, there are many types of digital currencies. Other popular ones include Ethereum and Dogecoin. However, unlike traditional currencies, Bitcoin is not backed or controlled by centralized financial institutions. Instead, it is decentralized. This makes it popular with people who believe decentralization can bring financial freedom, but it also makes it extremely volatile – rising and falling in value at the whim of Bitcoin buyers and sellers.
Blockchain
Blockchain is the technology underlying all cryptocurrencies, and many other products such as NFTs (Non Fungible Tokens). All of the buying, selling and trading of cryptocurrencies is recorded on this virtual spreadsheet, which is arranged in blocks linked together in a giant chain. Each cryptocurrency transaction is individually recorded on the blockchain by a large network of volunteers who verify its authenticity using computer programs. Since the blockchain is decentralized, it is not stored on one machine or network or owned by one company. The information is available to everyone.
Cryptocurrency
Cryptocurrency is the term used for digital currencies such as Bitcoin that exist on the blockchain.
Crypto exchange
A crypto exchange is the digital platform where investors can buy, sell and trade cryptocurrencies. Like traditional investing, a crypto exchange acts as a brokerage house where people can transfer traditional money, such as pounds or dollars, from their banks to cryptocurrencies such as Bitcoin or Ethereum. Most transactions are accompanied by fees.
Crypto wallet
A crypto wallet is a place where investors keep their cryptocurrency. It stores the virtual assets much like a traditional wallet holds cash. There are two types, a hot wallet and a cold wallet. Hot wallets are connected to the internet, and thus more accessible for fast transfers and easy access. Cold wallets are physical devices such as specially designed USBs that store crypto offline usually for safer and long-term storage.
