Decrypting Crypto: 10 Common Cryptocurrency Terms Explained
Cryptocurrency is becoming a more popular online payment option and is also a form of investment for many people. It has many benefits such as allowing you to make payments anonymously and having the potential to grow in value. However, many people are put off by some of the complex terminology. What is an exchange? And just what is cryptocurrency mining? This post explains some of the basic terms for beginners.
First off, what is a cryptocurrency? These currencies are basically digital currencies that are not controlled by a government. They can be used to buy all kinds of products and services online just like regular currency. There is no cash form of these currencies. Check out this guide to some of the top cryptocurrencies.
Bitcoin was the first cryptocurrency and remains the most popular. Whether you want to use cryptocurrency to trade with or use it as an investment, Bitcoin is definitely a currency worth owning. It is sometimes abbreviated as BTC and the symbol ₿ is often used.
Ethereum is the second most popular cryptocurrency. It’s officially called Ether (Ethereum is actually the name of the blockchain it is traded on), but most people use the term Ethereum interchangeably. Ethereum is often abbreviated as ETH or displayed as the symbol Ξ.
A cryptocurrency exchange is a platform where you can buy and sell cryptocurrency. You can also buy and sell cryptocurrency products on these platforms. Some of the most popular cryptocurrency exchanges include Coinbase, Binance, Crypto.com, Bitstamp and Kraken (you can compare some of the best options here at Nerdwallet.com). You will need to use one of these platforms to buy cryptocurrency.
Cryptocurrencies all use blockchain technology. This is basically a way of digitally tracking the currency across the internet so that every transaction can be recorded and that no cryptocurrency is lost or falsified. Each cryptocurrency is monitored and maintained using its own ultra-secure blockchain.
To pay for the running of a blockchain, some cryptocurrency providers will charge small fees on each transaction. A good example is Ethereum, which charges fees known as ‘gas’ fees. These are worth factoring in whenever you make a transaction using a cryptocurrency.
Cryptocurrency is typically stored in a ‘wallet’. This is not a physical wallet but a digital wallet – usually a storage device or software that is password protected. You don’t have to store cryptocurrency in a wallet, but it is recommended to keep it from being stolen.
Creating new cryptocurrency involves completing elaborate calculations on a computer. This requires specialist software and a lot of computing power. This process is known as ‘mining’. Anyone can mine for cryptocurrency although you need the right technology and you need to be pretty digitally savvy. Services like Quotecolo.com can help. An incentive for mining cryptocurrency is that you are given rewards for doing so.
NFT (Non Fungible Token)
NFTs are the collectibles of the digital world. You receive a token that gives you ownership rights over a specific digital asset such as an image, song or video. NFTs can only be bought and sold using cryptocurrency.
ICO (Initial Coin Offering)
When a new cryptocurrency is launched, the company creating the cryptocurrency may provide an ICO. This typically involves giving out free coins to those willing to provide funding. It is a way of raising money for the launch of a new cryptocurrency. ICOs are typically advertised online on cryptocurrency news sites and forums.