Crypto

Things to Know Before Going to Cryptocurrency: The Beginner’s Guide

Defi, Fomo, Node, These are not newly-language words or alien language. These are from the class of many new and main key terms from the world of cryptocurrency or blockchain technology.

What is Blockchain Technology?

Blockchain is a type of distributed database system shared among computer networks with the help of nodes. As a type of distributed database system, it stores information electronically in a digital format. It is best known for the basic and important role in cryptocurrencies, and majorly for Bitcoins. Blockchain technology is used for maintaining a decentralized and secure record for crypto transactions. One of the major differences between a typical database and blockchain is that it stores information in structured ways, and collects data together in blocks that have a certain storage capacity. When the storage occupies, it closes and links to the previous filled block in this way building a chain of data which is then Blockchain technology.

What is cryptocurrency?

Cryptocurrencies are a form of online payment system in exchange for goods and services. Multiple companies and businesses issue their own currencies we call tokens. We trade those tokens for the goods and services the company provides. You can also trade those tokens in exchange for the real currency of your own country or some other like USD.

These cryptocurrencies only work with a help of blockchain technology in order to record and secure transactions over a decentralized node to ensure security.

Cryptocurrencies are not just regular investment option, and in numerous ways, it represents an alternative way of the world as compared to traditional bonds and stocks. It is something between unfamiliar emerging technologies, acronyms, learning basics take some time even if you urge to learn traditional investment.

 

Just like any other venture investment, it is really important to understand what and how you are going to invest before starting. It is much important if you are going to invest in something which is just evolving and there are more speculations in the market just like cryptocurrency.

Beginning;

Before beginning, there are a few prerequisites that you must know before getting your hands dirty in the crypto world. As you are going to trade your life savings, emergency funds, and secure a traditional retirement plan. As we said earlier, in the beginning, you only have to put that among which you are ready to lose, and crypto experts suggest that to these digital assets you only have to dedicate only 1-5% of your portfolio depending upon the amount.

There is another item In your checklist before beginning your journey into the crypto world is the understanding of what you are getting into, which includes what crypto is and how it’s different from other investments, besides these, you also must know what factors can affect the crypto market by any means either directly or indirectly.


Terms you must know in Crypto World:

Here are some of the key phrases or terms which you must know before getting into cryptocurrencies to better understand their world.

Bitcoin:

It is the first and most popular or valuable cryptocurrency, launched in 2009 by Satoshi Nakamoto. Its value has steadily climbed since then with wild and minor fluctuations but in the past few years due to covid lockdowns, it’s has climbed massively and reached an all-time high price of $64,000+ and then within few weeks or months lost its value to $30,000.

Altcoin:

A coin other than bitcoin is an altcoin. This coin is anything from the second-highest valued coin other than bitcoin is Ethereum, and multiple other coins with their values from higher to minimal values based upon investors interest and their market cap value. Cryptocurrency experts always suggest that one should stick to mainstream and bigger valued coins for their investments.

Bitcoin Cash:

It is a P2P electronic cash system that forms from a fork of actual bitcoin. It is designed for better-optimized transactions, as bitcoin is too volatile to be accepted as a currency that’s why bitcoin cash is used instead.

Block:

It is a group of data within blockchain technology, in cryptocurrency blockchains. Transactions recorded stores in these blocks which users do while buying or selling coins. In each block, there is a certain amount of data that you can store, and the rest transfers to the next block and links to the previous one to form a chain.

Coin:

Digital cash or value is independent of any other cryptocurrency or blockchain network. There are some blockchains that are the same as their coins like bitcoin & Ethereum but most of them are different.

Coinbase:

It is one of the most popular centralized cryptocurrency exchanges. Which has just made history recently by only crypto exchange listing on Nasdaq.

Cold Wallet:

Cold wallet is just like a cold storage for keeping your digital assets safe from being theft or hacked, as it’s a complete offline hardware wallet, a devices like USB drives, but these devices come with their own risks of losing with your assets.

Decentralized:

It is a principal of power distribution away from their central point. Blockchain technologies are traditionally decentralized because they actually require users’ permission to make changes or operate instead of central authority like normally, we have in our financial systems.

Decentralized Finance (DeFi):

Any of the financial activities that operate without the involvement of any central authority like banks, govt, or any other financial institution are decentralized finance alias as DeFi.

Decentralized Apps (DApps):

All those applications which carry out transactions without intermediaries are called decentralized apps and those are developed and deployed on blockchain technology. All DeFi activities are carried out through DApps, Ethereum is considered as the main network which supports DeFi activities.

Digital Gold:

Crypto Experts sometimes compared a few of the high valued and structured cryptocurrencies as digital gold based on their technology and market value. Bitcoin is one of their examples.

Ethereum:

It is the second-largest cryptocurrency based on its value and trading volume. It is also a network and software development platform for developers to create new applications, associated with a currency named ether. There are multiple other currencies on the Ethereum blockchain.

Exchange:

It’s a digital marketplace for cryptocurrency for buying and selling.

Fork:

It’s a path’ blockchain user creates it when they change a rule. It divides into two paths one stores the old rule while the other create a new blockchain. For example, if a fork of bitcoin splits, it will result in bitcoin cash.

Gas:

It is a fee that developers must have to pay in order to use the Ethereum network system. You pay it in the form of ether. 

Genesis Block:

It is the first block of cryptocurrency ever mined.

HODL:

It stands for “Hold On for Dear Life” that first came into sight in 2013 from a bitcoin forum. This term refers to a passive investment strategy in which people buy and hold for some time instead of selling or trading hoping that it may increase their value.

Halving:

It’s a featured in bitcoin code, that says after a certain number of blocks mined. Typically after every 4 years, the new bitcoin amount entering circulation becomes halve. Halving can impact the bitcoin price.

Hash:

It is a unique string created for cryptocurrency transactions that identify blocks and links with crypto sellers and buyers.

Hot wallet:

It’s a software-based internet-connected crypto-wallet and people use it for trading. These wallets are more convenient for trading and accessing your cryptocurrency. But these wallets get most targets from hackers and cybersecurity breaches than cold wallets. Its just like that a file you store at your home and is much safer than the one in the cloud which can be accessible to hackers.

Market Capitalization:

For cryptocurrencies, market capitalization refers to the total value of all coins. You can calculate the market value of cryptocurrency by multiplying the current supply of coins by the current value of the coin.

Initial Coin Offering:

It is just like the term initial public offering (IPOs) in the stock market, whenever the new coin launches, they ask for an initial coin offering (ICOs) in order to raise the capital for that cryptocurrency.

Mining:

It is a process in which coins are available for public trading and also it maintains the log transactions among users.

Node:

A system that connects computers to the blockchain network.

Non-fungible Tokens (NFTs):

Non-fungible tokens are units of value that indicate ownership of unique digital items, such as works of art or collectibles. NFT often stores on the Ethereum blockchain.

Peer-to-Peer:

I direct connection between two users without a third party.

Public Key:

It’s your wallet address which is similar to your bank account number and used for cryptocurrency transactions. You can share it with anyone in order to make payments either in or out.

Satoshi Nakamoto:

A person who has create bitcoin back in 2009. Till now no one truly knows this identity either it’s a single person or alias or name of a group.

Smart Contract:

An algorithmic program that automatically fulfills the terms of an agreement based on its code. One of the key-value proposals of the Ethereum network is its ability to enforce smart contracts.

Digital Fiat or Stablecoin:

Stablecoin attributes its value to another non-digital currency or product. Stablecoin is an official or government-sponsored currency on the blockchain. (For example, USDT, BUSD)

Token:

A unit of value on a blockchain usually consists of more than a simple transfer of value (such as a coin).

Vitalik Buterin:

Inventor of Ethereum blockchain back in 2015.

Wallet:

An online or offline place to store cryptocurrency. There are multiple exchanges that offer free digital wallets for saving and trading digital currencies.

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Adam is a Tech savvy software engineer and Certified digital Marketer. Who love to write about latest technologies and trends in tech world surrounding artificial intelligence, software development, digital products, app development, cryptocurrency and much more.

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