10 Common Crypto Terms You Should Familiarize Yourself With
- By Localcoin
- February 24, 2022
At Localcoin, our mission is to provide a simple, secure buying and selling experience of digital currency for customers across North America. From running North America’s largest Bitcoin ATM network to our online retail platform, we are constantly seeking to innovate in the blockchain infrastructure space. Welcome to our blog, where customers can educate themselves on the world of cryptocurrency, learn more about our company vision and more!
If you’re looking to dive deeper into the world of cryptocurrency, you’re bound to come across some terminology you’re unfamiliar with. Cryptocurrency and the technologies it relies on are relatively new and rapidly evolving. Whether you’re getting into cryptocurrency for the first time or you’re just looking to refresh your knowledge, we’ve got you covered. Read on and we’ll cover 10 very common crypto terms that you are sure to encounter as you delve into cryptocurrency!
Decentralization is the founding principle of cryptocurrency. Most cryptocurrencies including Bitcoin are decentralized, in that they operate on peer-to-peer networks without a central authority such as a bank or a government. This means they work without the need for intermediaries who know your personal information and have access to your funds. The ability to make financial transactions without a middleman is one of many reasons why people use cryptocurrency.
A blockchain is a type of secure database where data is grouped into blocks and chained together in chronological order hence the name “blockchain.” In the context of cryptocurrency, blockchains are used as public, digital ledgers (records) of all transactions made pertaining to their respective coins. This network is decentralized because no one owns the ledger. Instead, miners play a large role in upholding blockchains. They work to verify the legitimacy of crypto transactions which allows blockchains to work without one, centralized authority. See Proof-of-Work Mining & Proof-of-Stake Mining.
3. Crypto Wallet
A Crypto Wallet is a necessary part of holding and transacting crypto coins. They exist to keep track of coin ownership and to generate the public addresses you’ll need to make transactions. To clarify, they don’t literally hold your coins like a traditional wallet does! Your Bitcoin, Ether, Litecoin, etc. all exist on the blockchain, and your crypto wallet simply gives you access to them via private keys.
4. Public Addresses & Private Keys
A Public Address is created by your crypto wallet. It tells a crypto exchange or Bitcoin ATM where to send your crypto coins.
This is public information that will also be seen on a blockchain. But not to worry — your coins are protected by encryption, and are kept away safely via private keys that only you know.
Private Keys are long sequences of letters and numbers generated by your wallet that are unique to you. They act as your personal password for accessing your coins. It is the crypto wallet owner’s responsibility to keep their private keys private.
An Altcoin describes any coin besides Bitcoin. Because Bitcoin was the original cryptocurrency, any other crypto coin is considered an alternative to the original. Some popular altcoins include Ethereum, Litecoin and Dogecoin.
6. Proof-of-Work Mining & Proof-of-Stake Mining
Proof-of-Work ( PoW) is the original method for mining cryptocurrency. Crypto mining is a necessary part of maintaining decentralization and circulating new coins. Here’s how it works:
- Using large amounts of energy, miners verify the legitimacy of crypto transactions.
- Once these problems are solved, blocks of transactions are considered verified and are added to the blockchain.
- In return, miners receive newly minted coins as rewards.
Proof-of-Stake (PoS) or “staking” is an alternative to mining that aims to address the energy concerns surrounding PoW mining. Instead of rewarding large energy use, PoS incentivizes validators to hold large amounts of the coin, and the validator with the largest holding will “win” the ability to verify transactions and earn rewards.
A fork can occur to a crypto coin when the community wants to make a change to the blockchain’s protocol, whether that be changing a rule, adding a feature or new functionality. A real-life example of a fork is Ethereum’s move to a proof-of-stake model. A fork may even result in an entirely new coin being created in some situations.
8. DeFi & Dapps
“DeFi” is short for Decentralized Finance. It describes financial systems that use decentralized blockchain technology. Crypto coins like Bitcoin, Litecoin and even Dogecoin are decentralized finance systems. Some Dapps on the Ethereum network also make use of DeFi systems.
“Dapps” or Decentralized Apps are software applications, popularized by the Ethereum network. Dapps are resistant to censorship; instead of being hosted on one server controlled by an entity, they are powered by blockchain technology. Examples of dapps in existence today include ones for gaming, insurance, crowdfunding, trading and more.
9. Smart Contract
Smart Contracts are written agreements between parties just like any other contract, but they automatically execute on their own without the need for an intermediary, such as a lawyer or mortgage advisor. Smart contracts are especially beneficial for developers who create apps that facilitate trades, such as a crypto trading Dapp.
10. Non-Fungible Token (NFT)
Non-Fungible Tokens (NFTs) are largely being used as digital assets that represent pieces of art, whether that be an illustration, a song, a video, etc. “Non-fungible” means unique, as every NFT is a distinctive token representing a different piece of art. Many believe that NFTs are shaping the future of fine art collections. On the Ethereum network, the ownership and transferring of NFTs is managed via Smart Contracts.
Start Your Crypto Journey With Localcoin!
Now that you know more about the ins and outs of crypto, start buying and selling your own coins with the help of Localcoin.
Localcoin ATMs offer a simple, user-friendly way for anyone to buy and sell Bitcoin, Ethereum, Litecoin and Dogecoin. Newcomers and experts alike can easily access Localcoin ATMs when and where they need to. As one of North America’s largest Crypto ATM networks with more than 800 terminals across Canada and the U.S, we make buying and selling cryptocurrencies easy and accessible for crypto enthusiasts in their communities!
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