Essential Crypto Terms
Explore a comprehensive collection of essential blockchain and cryptocurrency terminology and lingo right here. Our repository is regularly updated with fresh words and explanations.
Annual Percentage Yield (APY)
The term APY refers to the annual interest rate generated on an investment. It takes into consideration account compound interest, which is the total of both the initial deposit and its accumulated interest.
Annual Percentage Rate (APR)
The annual percentage rate (APR) expresses the annual interest rate as a proportion of the invested assets. This indicator enables you to compare various investment options. It establishes a standardized framework for displaying yearly interest rate statistics.
Bitcoin (BTC) is a cryptocurrency, or digital currency, that is meant to function as money and a form of payment independent of any one person, organization, or entity, hence eliminating the need for third-party involvement in financial transactions. Unlike fiat money, Bitcoin is produced, circulated, exchanged, and stored using a blockchain, a decentralized ledger system. Proof-of-work (PoW) consensus secures Bitcoin and its ledger, which is also the “mining” process that brings new bitcoins into the system.
The blockchain is the foundation of cryptocurrencies. It is a decentralized system in which financial data is distributed among numerous computers. This implies that transactions are not centralized, increasing security and removing the need for trust.
Cryptocurrency is a type of digital or virtual currency that use cryptographic techniques to ensure safe transactions. It is decentralized, as opposed to traditional money, which means that no central authority rules or regulates it. Cryptocurrency is essentially a sort of digital asset. It is built with blockchain technology to serve as a means of exchanging commodities or services.
Crypto wallets provide safe storage for cryptocurrency. Users may therefore store, send, and receive numerous cryptocurrencies. Some wallets also let users buy and spend coins straight from it. When choosing a crypto wallet, you should think about things like legislation, functionality, and extra features.
A custodial wallet, also known as a hosted wallet, is often accepted and managed by a third party (exchange or broker). It is a handy way to store and trade digital currencies such as Bitcoin. Custodial wallets are easy to use and have simple user interfaces, making them ideal for beginners and those looking for a hassle-free experience.
Furthermore, you may feel secure with these wallets. All transactions are handled and authorized by the mobile wallet provider. They make use of your private key, which is required to access your wallet and manage your assets.
Cold wallets do not have internet access. As a result, the likelihood of hackers getting unauthorized access to your wallet and stealing your crypto is much lower. As a result, electronic wallets are a good option for storing significant sums of cryptocurrency for a lengthy period of time.
Cold wallets might be hardware wallets (USB devices), paper wallets (printed QR codes), or even offline wallets. These wallets enable you to produce and keep your private keys offline, away from the risk of cyberattacks.
A decentralized autonomous organization is a new form of legal structure that lacks a central governing body and consists of members who all have the same goal of working in the best interests of the corporation. DAOs, which have grown in popularity as a result of bitcoin enthusiasts and blockchain technology, are utilized in a bottom-up management style to make decisions.
A decentralized application, or Dapp, is analogous to a digital app found on any smartphone or laptop, but it uses blockchain technology to safeguard user data from the companies behind it.
dApps are intended to be open-source, transparent, and resistant to censorship, allowing users to interact directly with the application without the need for intermediaries.
DeFi is an abbreviation for decentralized finance. Finance has always been centralized due to the need on trusted middlemen. If you wish to send money to a friend or family, for example, you rely on your bank to transmit it to the recipient’s bank. DeFi, however, does not need any intermediates. Participants have the ability to transmit and receive assets directly. In principle, this speeds up and lowers the cost of transactions.
Digital currency is a sort of money that can only be obtained electronically. It is generated as part of a computer network. It is vital, however, to distinguish between electronic and digital cash.
When you examine your bank account balance, the amount displayed is electronic money that may be withdrawn as cash if requested. Furthermore, electronic transactions, such as getting a paycheck, add to the amount of electronic money in your bank account. However, digital currency cannot be exchanged for cash.
Encryption is the process of employing an encryption method or cipher to turn readable plaintext into ciphertext (unreadable encrypted data). Only those who have access to the data may decrypt the ciphertext into plaintext.
Ether (ETH) is the cryptocurrency used by Ethereum applications and the network itself. People may use ETH to take ownership of their money and conduct secure Ethereum transactions without the use of middlemen. ETH is a global, decentralized money that cannot be manipulated by companies or lenders.
Ethereum is a blockchain network that allows you to build and use smart contracts. Ethereum was first proposed by Vitalik Buterin in late 2013, and it was publicly announced in July 2015. Ether (ETH) is the native cryptocurrency of Ethereum.
Fiat money is government-issued money that is not backed by a physical object like gold or silver. The value of fiat money is determined by the stability and legitimacy of the government issuing it, as well as the interaction of supply and demand.
A Fiat wallet, such as a USD fiat wallet, serves as a bridge between the traditional financial system and the realm of cryptocurrency. A fiat wallet allows users to rapidly sell their crypto holdings for US dollars, which are then safely held in the wallet.
Fiat to crypto
Fiat to crypto refers to purchasing Bitcoin with fiat cash. The word arose as a result of prior online trading platforms’ constraints, which mostly confined trading to cryptocurrency-to-crypto transactions.
A hardware wallet is a standalone device. Its function is to keep your private key and cryptocurrency safe. This cold storage works in the same way as external hard drives managed by encrypted software do. When you buy cryptocurrency via an online exchange, the asset exists online and is linked to the exchange’s system.
Withdrawing cash from cold storage removes them from the online exchange, giving you more control and security. Your crypto assets are only accessible through the physical wallet and a key. There are safeguards in place in the event that your cold storage is damaged or destroyed. If you keep your recovery seed phrase secure, you can retrieve your crypto assets.
Hot wallets are crypto wallets that are internet-connected. It provides rapid and easy access to your cash. People utilize it for regular cryptocurrency trading and spending. With a hot wallet, you can shift money, make online purchases, and trade cryptocurrency without going online.
Hot wallets are beneficial for busy traders and those who often utilize their cryptocurrency for various transactions due to their rapid accessibility. They provide you with real-time access to your funds, allowing you to profit from trading opportunities and respond fast to market movements.
Know Your Customer (KYC)
KYC stands for Know Your Customer and, in some cases, Know Your Client. KYC is the required procedure of verifying the identity of the customer when creating an account and on a regular basis.
The metaverse is a new three-dimensional digital realm that employs virtual reality, augmented reality, and other contemporary internet and semiconductor technologies to provide individuals with lifelike personal and professional experiences online.
The process of confirming transactions using a proof of work consensus technique is known as cryptocurrency mining. Mining is the process of solving a hash with billions of potential possibilities utilizing computer hardware. The more computational power you have, the more predictions you can make within each given window of time, and the more likely you are to earn newly minted cryptocurrency.
Non-fungible token (NFT)
Non-fungible tokens, also referred to as NFTs, are tokens based on the blockchain that each represent an original asset like a piece of art, digital property, or media. An NFT may be viewed as a permanent digital proof of ownership and authenticity for a certain item, whether digital or real.
Non-custodial wallets are often referred to as self-custody wallets. They provide consumers entire control and accountability over their cryptocurrency storage. Unlike custodial wallets, you have access to your private keys, perhaps making them more secure. There are several types of non-custodial wallets accessible. Hardware wallets, like as USB sticks, are available, as are browser-based, cellular, and other wallet solutions.
While non-custodial wallets provide more flexibility and control over cryptocurrency, they also come with more responsibilities. However, if you forget your login information for a non-custodial wallet, you may be unable to access your funds.
On-chain transactions are those that take place within the blockchain. They are reflected on both the public ledger and the distribution ledger at the same time. Transactions are considered to be “on-chain” once they have been approved and authenticated by miners or authenticators. Off-chain transactions are not considered to be “on-chain” transactions.
The public code, often known as the wallet address, is a Bitcoin wallet‘s unique ID. It is a string of alphanumeric characters that act as the recipient of payments or cryptocurrency. Every wallet has its public address. The address is usually made up of 26 to 35 alphanumeric characters.
When you provide a public address, every one may see how much Bitcoin you have saved in your wallet. A standard current account number and sort code make this degree of openness impossible.
The private key acts as a second password for a crypto wallet, much like an online banking password. Private keys are required for accessing a crypto wallet and starting crypto transactions, same as login credentials are required for transferring cash in online banking. Unauthorized usage might result in unauthorized transfers. In this instance, after you perform a Bitcoin transaction, the wallet provider has no way of undoing or retrieving it.
A paper wallet is a sort of cold wallet that offers a high level of protection for cryptocurrency storage. You may obtain this wallet by visiting particular websites that provide you with a unique private and public key pair. The keys are then printed onto a sheet of paper, which serves as your actual wallet.
One of the primary advantages of this style of wallet is its conventional design. Because it is not connected to the internet, the risk of online assaults or hacking attempts is eliminated. When it comes to utmost security, paper wallets are a popular alternative.
Quantum computing is a multidisciplinary area that combines components of computer science, physics, and mathematics. It employs quantum mechanics to answer complicated problems more quickly than conventional computers can. Research on hardware and development of software applications are both part of the realm of quantum computing.
Software wallets are a popular choice for storing, transmitting, and receiving crypto. They come in a variety of forms and sizes, with varying functionality such as remote access to your crypto assets. A web wallet is a sort of software wallet that functions through an internet browser. A web wallet is a convenient method to manage your coins online and to connect with web-based marketplaces.
Another alternative is a desktop wallet, which requires you to download software to your desktop computer. Because they are installed locally on your device, these wallets provide more control and security.
Smart contracts are a type of software that runs on a blockchain and ensures that all parties to a transaction fulfill their obligations. For the purpose of confirming that a financial transaction actually took place, a smart contract, for instance, may initiate the transfer of funds with a third party.
A stablecoin is a sort of cryptocurrency whose value connects to another “stable” asset like the US dollar, euro, or gold. The majority of the top cryptocurrencies by market capitalization, however, are erratic. Many say that these assets are difficult to utilize as a form of payment because of their unpredictable nature.
Crypto tokens are digital representations of an interest in an asset or are used to facilitate transactions on a blockchain. They may also be used to enable transactions on other blockchains.
Additionally, crypto tokens may be exchanged with one another. People commonly get them confused with cryptocurrencies due to the fact that they can also be exchanged, bought and sold.
Virtual currency is a type of digital money. It may be used to pay for goods and services between an undetermined number of people and companies through the Internet. Through approved exchanges, it may also be converted to legal money like yen, dollars, and euros.
Trading volume is the total value of a digital asset that was exchanged during a given time frame. This measure represents the volume of trading activity that a coin is experiencing either throughout the whole market or on a specific exchange. Exchanges often only consider the previous twenty-four hours when calculating trade volume.