A lot of new terms and terminologies can be confusing when you are only starting exploring the world of cryptocurrency. There is nothing to be concerned about, in this guide, I will explain some of the most commonly used terms in the cryptocurrencies in the simple terms.
1 . Wallet 👛 :
A crypto wallet is a computer application that enables one to store, transfer, and get cryptocurrencies in a secure manner. The wallets are mostly divided into two categories; hot wallets and cold wallets. Hot wallets are linked to the internet like mobile apps, web wallets, or exchange wallets and are used on small transactions but are more susceptible to hacking. Hardware wallets and paper wallets are cold wallets that are safer and much less susceptible to the long term. Crypto wallets allow people to handle their coins, send money or even engage in actions such as staking. To be safe, it is also necessary to always keep the private keys confidential, turn on two-factor authentication (2FA), and only trust reliable wallet providers. When you lose your personal key or fall victim to a hack, there is a risk of irreversibly losing access to your money forever, making the safety of your wallet the most significant step in becoming a crypto user.
2. Mining ⤲:
Mining refers to the act of producing new currency and verifying transactions in the blockchain. It entails the solution of complicated mathematical problems with the aid of powerful computers. Miners are rewarded with new coins as a form of reward to their work. By way of example, Bitcoin is mined on the basis of the powerful computer systems that ensure the safety of the network and introduce new bitcoins into circulation.
3. Staking :
Staking refers to committing your coins in a wallet to fund the work of a blockchain network. Staking is not a complicated process as it does not need any powerful computers such as mining and, instead, you need to hold your coins and receive incentives like gaining interest. It is primarily applied in Proof-of-Stake blockchains like Ethereum 2.0 and Cardano. Staking is, in a very basic way, like a savings account, your crypto will make you money as you hold it.
4. Crypto Exchanges :
The cryptocurrency exchange, often referred to as a crypto exchange, is an online exchange service or mobile application where people are able to purchase, sell, and trade cryptocurrencies. Similarly to a stock exchange where you can buy and sell shares in companies, a crypto exchange provides an opportunity to buy and sell computerized coins. Examples of this that are popular among beginners and those that experience traders use include Binance, Coinbase, Kucoin and MEXC.
5. Private Key & Public Key :
The cryptocurrency has two keys that ensure transactions are secured. A public key is similar to the number given on your bank account, you can share it with other people to get some crypto. Your ATM PIN is your private key that should not be shared since it will provide any access to your money. Once you lose your key, you will not be able to use your crypto anymore, and there is no means of recovery.
6. Token vs Coin :
Coin and token are terms of cryptocurrency that are commonly used interchangeably, although they are not synonymous. A coin is a digital currency, which has its own discrete blockchain. Examples include Bitcoin, which is based on the Bitcoin system, and Ethereum which is based on the Ethereum blockchain. Coins are mostly used in the form of money, store of value or payment of transaction fees in their transactions networks.
Instead, a token lacks its blockchain. It is developed and operated on top of an existent blockchain instead. Indicatively, a stablecoin can be USDT (Tether) which runs on the Ethereum blockchain. The purpose of tokens is frequently quite varied, including assets representation, smart contracts, and access to decentralized applications.
7. Smart Contract :
A smart contract refers to a self-executing digital contract that is stored in the blockchain. A smart contract aids the performance of a set of actions as opposed to the traditional contract, which requires the involvement of a middleman to fulfill. That is, it does not have delays, manual approvals, and no possibility of cheating, as the rules are directly coded into the blockchain. To illustrate, a lot of Ethereum-based applications and games involve dealing with instances of transactions, rewards, and in-game actions through the use of smart contracts. Stated simply, it is possible to imagine a smart contract like a robot lawyer that is free of cheating and that makes sure that everything is accomplished as per the agreement.
8. FOMO & HODL :
FOMO and HODL are two common slang words in crypto world. The concept of FOMO (Fear of Missing Out) applies to when investors buy a cryptocurrency in a hurry because they observed it increasing its price and do not want to be left out of the possible gains. This tends to make emotional decisions rather than planning. Conversely, HODL is the idea of long-term holding of your cryptocurrency instead of selling it in the long run when prices fluctuate higher and lower. It was a misspelling of the word hold, but nowadays it is an often applied term to promote patience and long-term faith to crypto assets.
Let’s Wrap It Up :
The world of cryptocurrency might seem to be complex in the beginning, still, it gets a lot more understandable as soon as you learn the fundamental definitions and notions. Begin small- make sure your coins are in a wallet, find out how mining and staking works to get rewards and never forget that your personal key must never be lost. It will be easy to step in the crypto world and make a knowledgeable choice by doing it step by step and gradually developing your knowledge base.
We are going to take a closer look at the various methods of making money with cryptocurrency in the next posts and how you can build your crypto dollar by dollar in the future that is coming.
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