- Date : 22/03/2022
- Read: 5 mins
Looking to dive into the immersive cryptocurrency market, start your journey by first knowing these crypto terms.
Cryptocurrencies are becoming mainstream, and more and more individuals are jumping on the bandwagon of this new cryptocurrency market. As the Indian government had proposed taxes on cryptocurrency transactions, it has fueled its adoption, and the chances are that it might become legal real soon. Due to this anticipation, many new investors are trying out their luck in the market. As a beginner, the cryptocurrency market may look confusing, but it gets pretty straightforward as you try to understand the basics.
In this cryptocurrency guide, we'll cover ten such often used crypto terms, which you should surely know to be called a cryptocurrency expert.
Blockchains are the basic underlying structures behind every cryptocurrency. As the name implies, this technology includes blocks of data interlinked on a publicly available network.
Blockchains have a distinct feature that the blocks cannot be altered once they become a part of the blockchain. This makes blockchain technology the best choice for storing critical things that should never be changed. It has many other benefits, and it powers almost 90% of all cryptocurrencies that you've heard till now.
DeFi is the crypto term for decentralized finance. Cryptocurrencies were created to shift the power to the people by making things decentralized. A decentralized finance coin or exchange means that the ability to do something is not concentrated among a few people. Instead, it is the users that have the power to do anything.
DeFi opposes traditional banking infrastructure where transactions cannot occur without a trusted third-party intermediator. DeFi allows the two parties in the transaction to connect with each other and make the transaction without the requirement of any other person's validation.
There are two distinct groups in the cryptocurrency market: large-cap coins and altcoins. The large-cap coins consist of Bitcoin and Ethereum, whereas altcoins are all the other coins that are yet to be as big as Bitcoin and Ethereum.
Bitcoin and Ethereum are the bluechip stocks of the crypto world, and they are a good investment option for the long term and beginners. Altcoins are lower priced, and they can give you good returns if you invest wisely and hold on to the peak. In contrast, altcoins can be considered undermined stocks with good potential for high returns on investment.
Also Read: Types of cryptocurrencies
For beginners, coin and token may look the same, but there's a significant difference between the two. Coins are cryptocurrency projects with their own blockchain and ecosystem. Coins don't rely on any underlying infrastructure to do their work. Instead, they act as building blocks for other cryptocurrency tokens.
As coins have their own blockchain, they are self-reliant, and they are often a good investment because good people always run such big projects, and regular innovations from the team can give you exponential returns.
On the other hand, tokens are a type of cryptocurrency that live on other blockchains or para-chains of the blockchain project. Tokens are tradable assets of projects that enhance the functionality of an underlying blockchain.
Tokens don't have their own blockchain to live, and hence they reside on the blockchain like ERC20, Binance Smart Chain, and many others.
For example, Polygon Matic is a layer 2 scaling solution for Ethereum, and it helps the Ethereum blockchain scale efficiently under the increase in demand.
Cryptocurrencies are stored on blocks, and to gain them, one needs to perform heavy encryption-decryption processes. These processes are collectively known as mining. Mining is done using powerful computers having multiple GPUs and CPUs, and when the computer solves a block, the blockchain awards it with some native coins. So if you are mining bitcoin, you'll receive bitcoin when the block is solved.
Everyone knows wallets and digital wallets are no extraordinary things. These are software or hardware wallets where you can store your cryptocurrencies securely. Many people who like to hold their cryptocurrencies for a long time do so by storing them in an offline hardware wallet.
Just like the wallets we use for keeping fiat cash, digital wallets are used to protect and carry your cryptocurrencies to a secure place under your custody.
Everyone knows that whales are gigantic creatures in the real world, and they are known for their huge sizes. Similarly, in the crypto terms and finance industries, whales are individuals or institutions that hold a large sum of any particular cryptocurrency.
Whales regulate and move the cryptocurrency market. So if they are on a buying spree, the markets will generate instant returns, and if they decide to sell off due to their large holdings coming into the market at the same time, it can crash the market.
Also Read: Why Cryptocurrencies are so volatile?
Cryptocurrency maximalists used this slang extensively. It is a misspelt version of the word "HOLD," which was first used on a bitcoin forum. HODL translates to hold in real life, it is often used when the prices of any cryptocurrency fall significantly, and people provide each other assurance that the prices will rise again, and their losses will be cleared if they don't sell their tokens.
10. To the moon
As the name suggests, 'To the moon' describes the potential gains that a coin could offer. People use this as a metaphor to show that the prices will sometimes skyrocket, resulting in considerable profits to the person who holds this particular coin or token.
All these terms are enough for you to start your cryptocurrency. As you know these terms, you'll understand all crypto talks easily and learn more as you immerse yourself in this world.