Alt-Coins: These are crypto assets that arose in the aftermath of bitcoin’s popularity and are frequently used to diversify a portfolio. There are thousands of alt-coins, but Cardano, Ethereum, Ripple, and Solana are the most popular. Bitcoin: Digital currency that allows for peer-to-peer transactions on the internet. It operates free of any central control or the oversight of banks or governments and instead relies on peer-to-peer software and cryptography.
Blockchain: This refers to the technology that many popular crypto assets are based on. Blockchain groups transactions into ‘blocks’ that are chained together and uses cryptography to verify all transactions. All transaction data is public and available for everyone to see. This makes it virtually impossible for anyone to forge a transaction.
Crypto Assets: These are digital assets that are encrypted and may be moved, stored, and exchanged electronically. You might be wondering why this phrase is used instead of the more commonly used ‘cryptocurrencies.’ This is due to the fact that not all crypto is a currency. Some crypto assets are programmable assets with a purpose and functioning that differs significantly from currency.
Cryptography: This entails secret writing, or the capacity to send messages that only the intended receiver can read (with a secret ‘key’). It protects against double spending by ensuring the security of transactions and participants.
DAO: This stands for Decentralised Autonomous Organisation. They’re similar to crypto fan clubs in that they work for a common objective and allow each member a vote in decision-making. The financial transactions and regulations of a DAO are recorded on the blockchain, eliminating the need for a third party to be involved in the transaction.
De-Fi: Decentralised finance is a catch-all phrase for peer-to-peer financial services on public blockchains, most notably Ethereum. These could include loan and borrowing applications, for example. DeFi strives to eliminate the middleman, as seen in traditional finance/centralised finance, in order to make the process faster and more efficient.
Double Spending: This occurs when someone modifies a blockchain network, allowing modified blocks to be added to the chain. This means that the individual who made the change can get their money back. However, due to the nature of blockchain, the chances of this happening are small.
Ethereum: The second most valuable crypto asset by capitalisation, Ethereum is a platform that allows you to send cryptocurrency to anyone for a nominal cost. It also powers open-source applications that no one can take down. It’s a financial services, gaming, and app store that won’t steal your data or censor you.
Fork: When someone makes a change to the blockchain, it is called a fork. It causes a split in the chain, resulting in a second blockchain with the same history as the first. Typically, a fork occurs to improve the security of a crypto asset or to introduce new functionality. A ‘soft fork’ is a blockchain’s equivalent of a software upgrade. As long as all users agree to it, it becomes the asset’s new set of standards. When anything changes so drastically that the new version is no longer backwards compatible with previous blocks, it is referred to as a “hard fork.” When the blockchain divides in two, this is what happens.
Halving: The process of halving the rewards of mining the crypto asset once each set of 210,000 blocks is mined is known as bitcoin halving. By lowering mining rewards, the amount of bitcoin in circulation does not grow exponentially, putting downward pressure on its price. It happens every four years on average, with the next halving expected in 2024.
HODL: This acronym stands for ‘hang on for dear life, even if the price is falling,’ and is commonly used among crypto asset investors. It’s a slogan coined by crypto investors to encourage people to keep their crypto investments even while they’re losing money.
ICO: An Initial Coin Offering (ICO) is the cryptocurrency version of an Initial Public Offering (IPO). An ICO can be used by a firm wanting to raise capital for a crypto coin or application. Investors that participate in an ICO are given a crypto asset, which may be tied to the company’s product or represent a share in the enterprise.
Memecoins: These are coins based on internet memes, themes, or jokes (a ‘meme’ is a virally transmitted cultural symbol or social idea). Dogecoin and Shibu Inu are two examples. It’s worth mentioning, though, that some Memecoins can be used for other purposes and functionality.
Mining: This is the process of verifying new crypto asset transactions and the means by which new crypto assets enter the market. It employs hardware to solve a challenging mathematical problem, with the first computer to solve the problem receiving the next block of bitcoin and the process continues. For completing blocks, bitcoin miners are rewarded with new bitcoin. Because there is a risk of duplicating, counterfeiting, or double spending the same coin, Bitcoin must be mined. Attempting to hack the network becomes significantly more expensive as a result of mining.
NFT: This stands for ‘non-fungible token’. They’re digital assets that reflect one-of-a-kind items like artwork, real estate, collectible cards, or even a tweet. They’re essentially a digital certificate that validates asset ownership. They are ‘non-fungible’ since each has its own blockchain-based code and cannot be substituted for another asset of the same sort. Crypto assets, on the other hand, such as bitcoin, are fungible.
Peer-to-Peer Software: This refers to the exchange of assets between individuals without the use of a central authority. Peer-to-peer exchanges allow buyers and sellers to conduct business without the involvement of a third party. A peer-to-peer platform helps buyers and sellers promote their offerings by acting as a facilitator. People are moving away from centralised exchanges and toward decentralised exchanges as their interest in crypto grows.
Private Key: A private key is a string of letters and numbers that allows you to access and control your cryptocurrencies, similar to a password. It should not be shared with anyone because it essentially unlocks the vault containing your coins and allows them to be moved or transacted.
Proof of Stake: This is a type of consensus mechanism used to validate crypto asset transactions. Owners of the crypto asset can stake their coins, giving them the ability to check and add fresh blocks of transactions to the blockchain.
Private Key: This allows you to receive crypto transactions to your crypto wallet. Because anyone can send transactions to your public key, it can be freely shared.
Satoshi: Satoshi is the smallest unit of bitcoin and is named after Satoshi Nakamoto, the crypto asset’s creator and founder. The satoshi to bitcoin ratio is one bitcoin to 100 million satoshi. Because the price of bitcoin has increased, smaller denominations are required to do smaller transactions.
Stablecoin: A stablecoin is a digital currency that is tied to a ‘stable’ reserve asset, such as the US Dollar in order to maintain price stability. According to current government plans, they may soon be recognised as a viable method of payment in the United Kingdom.
Wallet: In order to possess and store crypto assets, you’ll need a wallet, which is typically a smartphone app that can house your crypto. You may open an account on a cryptocurrency exchange to swap real money for crypto, and these sites will keep your coin in a hot wallet for you. Crypto is held by the exchange or supplier via an app or your PC with a hot wallet. However, this is more vulnerable to hackers, and investors will be left with no way to retrieve assets if an exchange closes. Some customers prefer to use a third-party wallet provider to transfer and store their crypto assets, which is usually free. A cold wallet is a portable encrypted device, such as a USB drive, that allows you to carry your crypto asset physically. They’re obviously more secure than hot wallets, but they’re also more expensive.
White Paper: In the case of cryptocurrency, a white paper is a document issued by developers that define the technology and goal of the project they’re working on.
All opinions and views expressed or suggested by the Digital Zeitgeist are not necessarily the same opinions and views held by or suggested by GPM-Invest plus any and all partners, affiliates, parties, or third parties of GPM-Invest. Any type of media distributed by GPM-Invest IS NOT financial advice. Please seek advice from a professional financial advisor.