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DataDrivenInvestor
Jan 23
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Here are 15 key terms that investors need to understand to navigate the world of cryptocurrency:
1. Blockchain: A decentralized, digital ledger that records transactions across a network of computers. Blockchain is the technology that underlies most cryptocurrencies.
2. Bitcoin (BTC): The first and most well-known cryptocurrency, created in 2009 by an unknown individual or group using the pseudonym Satoshi Nakamoto.
3. Altcoin: Any cryptocurrency other than Bitcoin. There are thousands of altcoins in existence, each with its own unique features and uses.
4. Mining: The process by which new Bitcoins and Proof-of-Work (PoW) altcoins are created, and transactions are verified on the blockchain. “Miners” utilize robust computers to answer complex mathematical equations to get rewarded with newly minted Bitcoins/altcoins for their efforts.
5. Staking: “staking” or “Proof-of-Stake” (PoS) is a consensus mechanism by which a blockchain network reaches a consensus on which blocks are added to the chain. Instead of having miners perform computational work to validate transactions and create new blocks as in Proof of Work (PoW), in a PoS system, validators (often called “stakers”) are chosen to create new blocks based on the number of coins they hold and are willing to “stake” as collateral.
6. Wallet: A software program that stores a user’s private keys and allows them to send and receive cryptocurrencies. There are several different types of wallets, including software (online wallets like TrustWallet or MetaMask are “hot wallets), hardware wallets (like the Leger Nano X or the Trezor Model T are called “cold wallets,”) and paper wallets, which is a non-custodial cold wallet — meaning you keep the keys, and it isn’t connected or online).
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7. Private Key: A secret code allowing users to access and control their cryptocurrency holdings. Losing or revealing a private key can result in losing all associated funds. These are typically 12 or 24-word phrases.
8. Public key: A public address that can be used to receive cryptocurrency. It can be shared with others to receive payment. If you use Binance, they give you an address, called a BSC wallet, which is typically very long and impossible to remember. Now, with Unstoppable Domains, you can buy an easy-to-remember wallet name to use instead of any other provided by an exchange for $20 or $40. Some are as expensive as $15,000. So, if you think about some outstanding domain names, you could buy and sell them.
9. Smart contract: A self-executing contract with the terms of the agreement written into code. Smart contracts are often used in the management of blockchain-based assets. One writer compared smart contracts to a “legal contract from a vending machine.”
10. Decentralized Finance (DeFi): A financial system constructed with blockchain technology that allows for decentralized trading, lending, and borrowing of crypto assets.
11. Initial Coin Offering (ICO): A fundraising method in which a new project or company issues its own cryptocurrency in exchange for funding.
12. Token: A digital asset representing ownership or proof of membership in a particular project or organization. Tokens can have many uses, including representing a unit of value, a vote, or access to a particular service. Tokens are often used to pay Play-to-Earn (P2E) players.
13. Bear market: A market where prices generally fall, and investors are pessimistic. A prolonged cryptocurrency bear market is often called a “crypto winter.”
14. Bull market: A market where prices generally rise, and investors are optimistic. A prolonged cryptocurrency bull market is often called a “bull run.”
15. Volatility: The rate at which the price of a particular asset, such as a cryptocurrency, changes over time. Cryptocurrency prices are known for their high volatility, making them risky investments.
Guy from Coin Bureau shows us how to set up the Leger Nano X.
To navigate the market effectively, investors in the cryptocurrency market must be well-versed in these terms.
Unless you’re staking, never leave your coins on the exchange. We have seen to many “too big to fail” exchanges bite the dust. Get a “cold wallet” and use it.
While the cryptocurrency market is still relatively new and unpredictable, understanding these key terms can help investors make informed decisions and potentially profit from their investments.
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DISCLAIMER: This article is for entertainment and informational purposes only. It should not be considered financial or legal advice. Not all information will be accurate. I am not a financial adviser, and you should consider anything I write as informational and friendly banter to show you what is possible if you invest your money in these vehicles. However, there are no guarantees. Consult a financial professional before making any significant financial decisions.
Note: This post contains affiliate links. Read my disclosure statement for additional information.
Stephen Dalton is a retired US Army First Sergeant with a degree in journalism from the University of Maryland and a Certified US English Chicago Manual of Style Editor. Also, a Top Writer in Business, Investing, Travel, Fiction, Transportation, VR, Sports, Design, Creativity, and Short Story.
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