Beginners of the Crypto World

Getting started with cryptocurrency can be really hard, specially with all the terminology jargon, here are some of the most common terms that you will see in the crypto world:

Bitcoin, Ethereum, Litecoin, Altcoins, Coins, Tokens, Exchange, Marketplace, Lending, FIAT, ICO, Blockchain, Encryption, FOMO, FUD, Pump and Dump, Market Cap, ROI, Mining, Mining Rig, Fork, PoW, PoS, Software Wallet, Hardware Wallet, Cold Storage, Ledger Nano, Smart contract, Satoshi, Wei, DAO

 

Here is a non-technical quick explanation of the most common terms that you come across in the cryptocurrencies world:

 

Bitcoin: Is a digital and universal value transfer system that allows to send money through the internet without the need of a central trust entity. The system uses encryption to establish trust. It's virtually unhackable witch means really secure.

Ethereum: is a decentralized software platform that enables Smart Contracts and Distributed Applications to be built and run without any downtime, fraud, control or interference from a third party.

Altcoins: Generally, any crypto-currency other than Bitcoin or Ethereum. (Among the most important ones are Ripple, Litecoin, Dash, NEM, Bitconnect, NEO, Monero and Iota)

Tokens: Refers to the ‘currency’ of projects built on the Ethereum network that have raised money via issuing their own tokens. Examples: Golem, Augur, Substratum, Crypto20, Etc…

ICO: Initial Coin Offering, equivalent to an IPO in the non-crypto world. Startups issue their own Coin or token in exchange for Bitcoin or Ether. This is essentially crowdfunding using Cryptocurrencies.

FIAT: It's money that has been issued by a Government or Central Bank, usually attached to the economy of a country. Example: US Dollars.

Exchanges: These are websites where you can buy, sell and exchange crypto-currencies with FIAT currencies.  

FOMO: Fear of Missing Out. The overwhelming sensation that you need to get on the train when the price of something starts to skyrocket.

FUD: Fear, Uncertainty, and Doubt. Baseless negativity spread intentionally by someone that wants the price of something to drop. A recent FUD event orchestrated by Jamie Dimon CEO of JP Morgan, where he basically said that Bitcoin was a Ponzi Scheme and a SCAM brought the price of Bitcoin to a low of $3300 and them to go shortly after and break the all-time high (ATH) of $6000

ROI: Return on Investment. The percentage of how much money has been made compared to an initial investment. A ROI of 40% in a $100 investments is $40

Lending: In the crypto world means that you will lock your cryptocurrency in a term deposit for a period of time in order to have a capital gain or ROI. Currently it is a very lucrative activity where you can get your initial investment back in around 100 days.

Blockchain: The classification of technology that Ethereum falls into. Blockchains are distributed ledgers, secured by cryptography. They are essentially public databases that everyone can access and read (transparent), but the data can only be updated by the data owners. Instead of the data residing on a single centralized server, the data is copied across thousands of computers worldwide (peer-to-peer).

Node: A computer that possesses a copy of the blockchain and is working to maintain it, usually a miner or a staking wallet.

Mining: The process of trying to ‘solve’ the next block on a blockchain. It requires huge amounts of computer processing power to do it effectively, and it is rewarded with crypto.

Mining rig: A computer especially designed for processing proof-of-work blockchains, like Ethereum, Dash, Zcash and Monero. They are usually regular computers with multiple high-end graphic cards(GPUs) to maximize their processing power.

Fork: A situation where a blockchain splits into two separate chains. Forks generally happen in the crypto-world when new upgrade rules are built into the blockchain’s code.

PoW: Proof-of-work. A proof of work is a piece of data which is difficult (costly, time-consuming) to create but very easy for others to verify and which satisfies certain requirements. Producing a proof of work can be a random process with low probability so that a lot of trial and error is required on average before a valid proof of work is generated.

PoS: Proof-of-stake: This means anyone holding a Coin that supports PoS in their wallet will receive interest on their balance in return for helping maintain security of the network.

The satoshi: is currently the smallest unit of the bitcoin currency recorded on the block chain. It is a one hundred millionth of a single bitcoin (0.00000001 BTC). The unit has been named in collective homage to the original creator of Bitcoin, Satoshi Nakamoto.

Gas: A measurement of how much processing power is required by the ethereum network to process a transaction. Simple transactions, like sending ether from an address to another address, typically do not require much gas. In the other hand deploying a smart contract require a lot more gas.

Gas price: The amount of ether to be spent for each gas unit on a transaction. The initiator of a transaction chooses and pays the gas price of the transaction. Transactions with higher gas prices are prioritized by the network.

Wei: The smallest denomination of ether. 1 Ether = 1000000000000000000 Wei (1018