Cryptocurrency — also known as crypto — is a digital currency designed to work as a medium of exchange. It uses cryptography (the practice of securing communication under a third party) to secure and verify transactions, as well as to control the creation of new units of a particular cryptocurrency. This guide to cryptocurrency is an easy to understand glossary to help you keep up with this digital currency.
A blockchain is the network on which the cryptocurrency operates. It works like a spreadsheet, shared by multiple users, to record everything securely. Every time it gets updated with a new transaction (also called a block), everyone sees the change, and it gets added to the sheet (or chain). You can’t reverse or change anything once it’s done.
It means you’re “holding” your crypto instead of selling it. An investment strategy where you hold an investment for a long period of time, regardless of changes in the price or markets. It’s spelt wrong because someone wrote i am “HODLING” in a Bitcoin forum in 2013 and the internet loves an inside joke. It’s now commonly expanded to mean “Hold On for Dear Life.”
It’s the smallest unit of a bitcoin – one 100 millionths (0.00000001 BTC) of one to be exact. Often more useful to buy things than an actual bitcoin worth millions of naira. Named after the mysterious anonymous inventor of bitcoin, Satoshi Nakamoto.
Acronym for decentralized finance -it’s open to everyone so you don’t have to trust a middleman. It is based on the idea that the financial system should not be controlled by monopolistic third-party providers. It relies on cryptography, blockchain and smart contracts to make complex financial applications.
In a decentralized system, there’s no CBN-like institution printing or controlling the currency. Mining is the process of using computing power to verify and record blockchain transactions. Miners are regular people who help run the system. A portion of the new coins is rewarded to the miners for their efforts.
A wallet is a secure digital wallet used to store, send and receive digital currency. It is where you “store” your cryptocurrency – or to be more accurate, where you store the private keys used to access your public address and sign for transactions. A combination of the recipient’s public key and your private key is what makes a bitcoin transaction possible.
7. Cold Storage
If a wallet is the digital address where you keep crypto, this is like a wallet you keep in a safe deposit box. Cold storage is digital but it’s not connected to the internet so no one except you can get to it. Minimizes the likelihood of unauthorized access and cyber hacks.
Cryptocurrencies can be difficult to understand if you don’t know the basics. This guide to cryptocurrency should help you understand the new way of transacting and storing value that is markedly better than traditional fiat and gold. It carries risk like any other investment. However, the gains and losses of cryptocurrency tend to occur much faster than with other currency investments.
Bitcoin is a technological tour de force.