Depending on who you ask, we are either in a recession now or heading towards one soon. This might sound like the crypto market’s value is fading, but it’s the opposite! Bear markets open up opportunities for people to invest at a lower price point. Hence, now is the best time for you to learn about cryptocurrency and enter the market. That’s why we provided this crypto glossary for you to catch up on before joining the market.
Blockchain technology
A blockchain is a shared ledger or database distributed digitally to the public. It records all transactions made on the blockchain network and publishes the information online.
We call it a blockchain because it compiles and stores transaction data in blocks. The blocks connect to create one neverending chain. Blockchain technology refers to all the tech needed to maintain the database: This includes computers and servers – also called nodes.
Nodes are responsible for validating information. They check the security of the blockchain regularly to ensure the data is still the same. No one can erase, edit, or otherwise tamper with important data on the blockchain. This makes it a secure and transparent distributed ledger.
Most blockchain technologies use smart contracts to facilitate transactions. They erase the need for a central authority checking for safety. A developer makes smart contracts out of code. They execute automatically during a transaction, meaning you won’t ever have to sign anything.
Cryptocurrency
Cryptocurrency is a digital currency and payment system that lives on a blockchain. It allows anyone to make quick transactions across borders, as long as they have internet access. Cryptography keeps most cryptocurrencies safe, by encrypting their data.
Using encrypted technology in this way ensures that cryptocurrency is both a digital currency and a virtual accounting system.
Bitcoin
Bitcoin (BTC) is the first and most well-known cryptocurrency. Satoshi Nakamoto, an anonymous blockchain developer, created BTC in 2008. There are over 100 million BTC users. While one Bitcoin is now worth about $17,000, it reached $68,780 at its height.
There are a limited number of Bitcoins – 21 million. Anyone can discover new blocks of Bitcoin through a process called mining. BTC, and all other cryptos that use mining, use the proof-of-work consensus mechanism.
Suggested reading: Proof-of-stake vs. Proof-of-work – Ultimate Guide
At present, there are 6.25 BTC in each block. When it was first launched, there were 50 BTC in every block. The crypto’s peer-to-peer network allows for seamless anonymous transactions.
Ethereum
Ethereum takes second place as the world’s most popular cryptocurrency. Vitalik Buterin created the cryptocurrency and its blockchain platform in 2013. Ether (ETH) is the platform’s native cryptocurrency. Unlike Bitcoin, Ethereum has an infinite supply cap. Its blockchain technology is more versatile. Anyone can use the platform to create blockchain projects and decentralized applications (DApps).
Examples of DApps include:
- Decentralized crypto exchanges.
- NFT marketplaces.
- Video games.
- Decentralized credit services.
- Decentralized finance services.
- DAOs (Decentralized autonomous organizations).
- And more.
Developers can also create their crypto tokens on the Ethereum platform and non-fungible tokens (NFTs).
Instead of mining, users of ETH follow the proof-of-stake model. ETH users receive ERC-20 tokens in proportion to the amount of capital they invest (or stake). By locking up and holding their coins through a smart contract, they prove their dedication to the blockchain.
Stablecoins
Stablecoins are pegged to the price of a reference asset. Usually, their value is tied to the price of a fiat currency, like the US dollar. Developers use stablecoins to reduce market price volatility. Since crypto traders use stablecoins to buy crypto, they also act as a reserve of that cryptocurrency. In case the cryptocurrency loses value, stablecoins provide a temporary fallback.
Tether (USDT) is one of the oldest and most valuable stablecoins. It has a 1-to-1 ratio with the US dollar and a market cap of over $68 million. Stablecoins have unequaled liquidity. This makes them useful to easily invest in or trade away other cryptocurrencies.
Crypto exchange
A crypto exchange is an online marketplace to buy, sell and trade various cryptocurrencies. Binance, Coinbase, and Kraken are some of the most well-known exchanges on the market. These platforms make it easier to trade multiple cryptocurrencies with other anonymous users.
Pro tip! Don’t forget you can exchange cryptocurrency right here on YouHodler with great rates!
There are different types of crypto exchanges with different features. Some are centralized while others are decentralized. Some have built-in features like staking. Crypto exchanges are useful for beginner crypto investors, as they try to keep their platforms easy to navigate. Some crypto exchanges also offer margin trading. Investors can borrow funds from the crypto exchange to make trades and reap higher profits. This method of trading also comes with increased risks, though.
Decentralized crypto exchange
A decentralized crypto exchange (often shortened to DEX) is a blockchain-based platform for buying, selling, and trading cryptocurrencies. They use automated algorithms to conduct trades between users. For example, when you transfer money to your friend, the bank has to permit the transaction. Their smart contracts replace the third party that usually oversees exchanges so that users can interact directly.
DEXs offer an extra layer of protection through anonymity and their automatic smart contracts. However, DEXs don’t offer to keep custody of their user’s digital assets. Users keep their assets in their own digital “hot” wallets, which they can access through the DEX.
Cryptocurrency wallets
Just like how you keep your money in a safe or a bank account, crypto users keep theirs in a digital wallet. They consist of your public key and private key, which acts as your proof of ownership. You can create your cryptocurrency wallet, or you can set one up on a crypto exchange. There are two kinds of cryptocurrency wallets:
- Custodial
- and non-custodial.
A custodial wallet is managed by a centralized platform. To open one, users outsource their private key to that wallet and place their trust in the exchange. They can then log in to the wallet to make exchanges with a username, password, and public key. To buy or sell, a user simply has to input the other party’s public key (wallet address) and the amount of crypto. The custodial wallet will input the users’ private keys and automatically verify the transaction.
Non-custodial wallets are crypto wallets managed entirely by the user. With this wallet, users don’t have to give up their private keys to any institution. Since the user is in control of both keys, this wallet is censorship-resistant. However, they also require more energy to maintain.
The user has to manage their private key and digital assets alone. Misplacing the login information for their non-custodial wallet could cost them all their digital assets.
Web3
Web3 is the next iteration of the information system we use on the Internet – the World Wide Web. Ethereum co-founder Gavin Wood coined the term in 2014. Web1 lasted from 1994 to 2001, during the earliest years of the web. Web2 began around 2004 and is still ongoing. It includes user-created content on social media platforms, wikis, and blogs.
Suggested reading: What is Web3? – The Quintessential Guide
Web3 will focus on a decentralized online ecosystem. Users will build their own digital spaces, including worlds in virtual reality. It will operate on blockchain technology. It also prioritizes user security and privacy, allowing them control of personal data. We’re already seeing huge momentum towards Web3 with the rise of blockchain technologies and the Metaverse.
Web3 wallet
A Web3 wallet stores a user’s digital assets, just like any other wallet. They’re often non-custodial, as they operate on a decentralized blockchain application, known as a DApp (decentralized app). A Web3 wallet gives the user a unique private key or seed phrase for extra login security. Not only can they store valuable crypto or NFTs in the wallet, but they can also use it as a gateway to the Dapp.
Users can choose if they want to connect their wallet to the Internet or not. A wallet with an Internet connection is a hot wallet, while one without is a cold wallet. The user can also keep their identity anonymous, or tie their wallet to their public identity. This makes Web3 wallets much more versatile than traditional ones provided on a crypto exchange.
Pro tip! YouHodler is making a Web3 wallet. CLICK HERE to learn more.
Bonus terms: YouHodler words to know
Now that you got a few basic cryptocurrency terms under your belt, enter the YouHodler universe – which has a new crypto glossary of its own. Don’t worry, they are easy!
MultiHODL
Multi HODL is an original “booster trading” tool that enables you to buy or sell more crypto using our innovative lending engine. Loans help you take advantage of market volatility in bull and bear markets, allowing you to buy or sell many times more crypto than you could be compared to traditional buying and selling on exchanges.
Simply put, you can benefit from an asset’s anticipated rise or decline in price in a user-friendly way.
Dual Asset
Dual Asset is a type of dual currency investment service on YouHodler. It works similarly to traditional finance dual currency products. However, our version uses cryptocurrencies and stablecoins. Similar to Multi HODL, users pick a direction they think their chosen crypto will move. Depending on the outcome of their guess, they will either receive crypto or stablecoins as a “reward”. The result is an easy-to-use, stable investment tool to play with market volatility and manage risk.
Click the button below to put your knowledge to use and try YouHodler today!
