If you’re just getting started with cryptocurrency, the lingo can seem like a foreign language. Technical crypto terms get thrown around constantly, leaving beginners feeling confused and lost. But don’t worry – this guide will help make sense of some of the most critical crypto vocabulary.
Blockchain
At the heart of cryptocurrencies like Bitcoin lies blockchain technology. A blockchain is a decentralized, distributed public digital ledger that records all transactions. It’s essentially a long chain of “blocks” containing confirmed data that cannot be altered, making it highly secure and transparent.
Cryptography
The “crypto” in cryptocurrency refers to the cryptographic techniques used to secure transactions and control the creation of new coins. Cryptography scrambles data into an unreadable format that can only be decoded with the right digital keys.
Mining
New units of cryptocurrency are created through a computational process called mining. Crypto miners use powerful computers to solve complex math puzzles to verify and add transactions to the blockchain. As a reward for contributing processing power, miners are awarded newly minted coins.
Nodes
Nodes are computers (or devices) on a blockchain network that store a full copy of the entire blockchain and help validate and relay transactions. There is no single entity controlling nodes on major blockchains like Bitcoin – instead, they are decentralized across a peer-to-peer network.
Wallets
A cryptocurrency wallet is software or physical hardware device that allows you to securely store, transfer, and track ownership of your digital coins and access your crypto funds. There are different types of wallets, ranging from user-friendly mobile apps to more advanced hardware wallets.
ICO
An initial coin offering (ICO) is an unregulated way for cryptocurrency startups to raise capital by selling newly issued crypto tokens to investors. It’s similar to an initial public offering (IPO) on the stock market, though ICOs have been highly risky and speculative.
Altcoin
Any cryptocurrency other than Bitcoin is considered an “altcoin,” short for “alternative coin.” Ethereum, Litecoin, and Dogecoin are some of the most well-known altcoins. There are thousands of different altcoins in existence.
Stablecoins
Stablecoins are a type of cryptocurrency whose value is tied 1:1 to an external asset like the U.S. dollar or euro to maintain price stability. Popular stablecoins include Tether, USD Coin, and Dai which aim to avoid the notorious volatility of other cryptos.
HODL
HODL is purposefully misspelled crypto slang that has become a tongue-in-cheek motto meaning “hold on for dear life” – i.e. holding onto your cryptocurrency despite price swings rather than selling. It stems from an accidental 2013 online post by someone claiming they were going to “hodl” rather than sell.
Smart Contracts
Not all cryptocurrencies have this capability, but some blockchains like Ethereum allow the deployment of self-executing smart contracts – essentially programmable digital agreements that automatically carry out actions based on predetermined conditions.
Now that you have a basic Crypto 101 vocabulary, you’ll be able to keep up when conversations start getting technical! Of course, there’s still much more to learn about this rapidly evolving space. But having a grasp on this fundamental terminology is a great start.
