The cryptocurrency industry is one that interests many different people. Especially when it comes to personal wealth growth and investments. We’ve all seen the success stories of people becoming overnight millionaires by simply investing in a crypto project that they have a lot of faith in. Cryptocurrency presents each and every one of us with an opportunity to quickly and easily grow our money. As long as we know what we’re doing, of course!
When it comes to knowing what you’re doing in the cryptocurrency investment space, it’s going to take some effort and research on your part. There is a lot to know about crypto for beginners, from understanding when to invest to knowing about the risks of digital asset investments and managing those risks. You also need to understand the lingo and get familiar with the crypto glossary and terms used in the marketplace and when trading.
One of the best places to start with crypto for beginners is understanding all of the different and important terms that exist in the cryptocurrency world. There are many different aspects and factors in the crypto industry that you’ll need to get a grip on before you start pumping any of your own money into a project or coin.
That’s why we’ve created a beginner’s guide to crypto terms. After reading this guide, you’ll understand all the different moving parts of online investments and digital asset accrual.
Let’s jump right in.
It’s probably most appropriate to kick off any beginner’s guide to crypto by starting with a definition of what cryptocurrency is. Many people think they have a rough idea of what cryptocurrency is. But most run with the definition that is a form of online currency in which you can invest in order to expand and grow your own tangible personal wealth. While this is not the worst definition ever, there’s a lot more to it…
So, what is cryptocurrency?
The first part of any definition of cryptocurrency is rather straightforward. It is indeed a form of online currency or money. However, as you can see in the definition above, many people forget to mention the fact that cryptography secures these online currencies. This is where the “crypto” part of cryptocurrency comes in.
The fact that cryptography secures these digital assets and currencies means that it is virtually impossible to counterfeit these coins and assets. And, it’s nearly impossible to double-spend them.
One of the most defining features of any type of cryptocurrency is that no central authority controls or administers them. Instead, many teams of engineers create these coins and tokens, usually as the backing to a certain technological advancement, feature, or project. This leads us to what it means for cryptocurrency to be decentralized.
When it comes to decentralized finance, many people in the crypto industry see it as a means to replace the current financial system. This is the traditional banking system that controls and moves all our personal wealth and finances.
Cryptocurrency, for the most part at the moment, falls under what we would term a decentralized financial system. There is no central authority like a bank or government who decides what happens to our money, how much of our money is going to be taxed, and other financial related regulations. There are also no middlemen in decentralized financial systems. This means that transfers can usually take place between users with no processing times or hefty transaction fees.
Transactions within the cryptocurrency world do not need the approval of governments or banks. This is key in what makes this online financial system decentralized. Many financial experts believe that a majority population moves to more decentralized forms of finance could be happening a lot faster than we think. And cryptocurrency transfers and investments are pioneering this evolution.
Now we get into a more technical term that really should be broken down in a thesis-like explanation. There is a lot about the blockchain that many people don’t understand. Even those who are experts within the online currency and digital asset industry are still learning new things about blockchain technology every single day.
Whenever you read up about cryptocurrency and the things that are affecting the marketplace, you will always come across the term “blockchain”. Many people will skim over this. But it really is important to know how cryptocurrency operates on the blockchain before getting heavily into investments.
In the simplest of terms, the blockchain refers to a digitally distributed ledger that keeps track of every little transaction that might happen therein. Every coin that exists within the cryptocurrency world is underpinned by some form of blockchain technology. Especially if the creators of that coin engineered it for buying, selling or trading. Other digital assets like NFTs are also bought and sold via blockchain technology.
There are many other uses for the blockchain, with cryptocurrency being its most notable in the modern world.
There are many different ways to become an owner of a set portion of cryptocurrency coins and tokens. One of the most popular ways to really accrue large sums of crypto wealth is through cryptocurrency mining.
But what is crypto mining? And what do you get if you do enough of it?
Anyone who mines cryptocurrency will have the job of verifying and pushing through any of the transactions that happen via blockchain technology. Many coins require independent bodies to verify transactions. That’s where the miners come into play. Any crypto miner will need a rig that is powerful and has enough CPU capacity to enter the blockchain and verify multiple different transactions.
You can think of cryptocurrency mining as a game that will bring you passive income. Your rig will automatically mine and verify transactions if you find the right software to do so. The more mining you do and the more transactions you verify, the more crypto rewards you will receive, which can then be converted into real, tangible money.
You will need a powerful rig that can mine for long periods of time, uninterrupted, in order to make any real money as a cryptocurrency miner.
If you’re interested in cryptocurrency mining, you’ll hear a lot of people talking about hash rates and the amount of mining their rigs can complete in a single sitting in comparison to weaker rigs for example. A hash rate basically refers to the computing power that any device has. It’s basically a measure of processing power.
Rigs, especially in the mining section of the crypto industry should be pretty powerful in terms of hash rates. The more powerful they are, the more transactions can get verified on the blockchain. Many people who are experts in Bitcoin specifically refer to hash rate as bit network-specific calculations.
Crypto exchange platforms provide an essential service to those who wish to get into digital asset trading and investments. Without a platform on which to make these trades and on which to sell your assets, there would be complete lawlessness without security in this industry.
Basically, a crypto exchange platform can be looked at like any other type of stock exchange site or platform. Except for the fact that it does not deal in stocks, it deals in the trading of different types of cryptocurrencies.
On these sites, you can register an account, link your bank details, open up a cryptocurrency wallet, and securely select the coin you want to purchase and invest in. These sites are extremely easy to use as most of them are entirely user-friendly to cater to cryptocurrency investment beginners.
Here are a few examples of great cryptocurrency exchange platforms that you should try if you’re new to crypto investments:
Well, this one seems rather simple, right? What is a wallet used for? Most people own a wallet so that they can store their money for later use. Well, a cryptocurrency wallet is used for pretty much the exact same thing – to store your digital finances and secure any online wealth that you may have.
In simple terms, this is exactly what a cryptocurrency wallet is. But when you look at these wallets a little bit deeper, you’ll see that they are quite a lot more complicated. There are many different types. Many different crypto exchange platforms will provide options for different types of wallet. And many of those who partake in cryptocurrency investments will choose a type of wallet depending on their experience level in the industry and how they are looking to secure their investments.
Here are a few different types of cryptocurrency wallets:
There are two different types of cryptocurrencies on the market – Bitcoin, and everything else. Bitcoin is obviously the premier coin on the market and even for people who are not completely clued up on the cryptocurrency industry, Bitcoin will be a token that they’ve heard of at some point before. Bitcoin was also the token that pioneered online and digital asset investments when it exploded into mainstream popularity just under a decade ago.
From that explosion in popularity came along many new coins and tokens. All engineered by professional teams who saw the potential that the industry had as a decentralized mode of accruing personal wealth. So basically, what experts in the industry decided to do was to allow Bitcoin to be the lone-standing, number one coin. Every other coin birthed from its success would then get classified under what is now termed as an “altcoin” or an alternative coin to Bitcoin.
Is Ethereum an Altcoin?
Ethereum is by far the second most popular cryptocurrency on the market right now. For extended periods of time it was actually generating more investment potential than Bitcoin. This begs the question if a coin were to explode into a similar popularity status as Bitcoin (much like Ethereum has done), will it still be considered an altcoin?
Well, those who are experienced in the cryptocurrency industry are sticking to their guns and insisting that despite having a market cap of around $200 billion, Ethereum is still an altcoin. And it is the most popular altcoin on the market by quite some distance.
As you can see, the crypto glossary of terms is quite extensive, although not too difficult to understand. The terms explained and defined above strictly fall under a beginner’s guide to cryptocurrency. Each one of them clearly explains more about crypto and provides more than enough information for you to start off your cryptocurrency investment journey,
Of course, the crypto sphere is enormous. There’s so much more information that we haven’t covered in this guide that explains the crypto world in far more detail. Once you start your investment journey you will come across terms that require a bit more research, and you’ll move from beginner to intermediate. We also have crypto guides that delve deeper into the industry so you can learn as you go.
For now, these terms are more than enough to get you started with investing in cryptocurrencies and building your own, decentralized bank of personal finances.
