24 Crypto Terms You Need to Know

If pro baller Scottie Barnes can teach us anything about crypto, it’s that rookies can absolutely slay. The key to levelling up is understanding the nuances that drive the market. This is precisely why every Bitcoin newbie should know the most common crypto terms. They form the backbone of discussions, news, and developments in the crypto space. If you don’t understand what’s happening, you’re going to get boxed Out. Here are the top 24 crypto terms every rookie should know. 

Altcoin

An altcoin is any cryptocurrency other than Bitcoin. Because Bitcoin (BTC) was the first crypto coin ever created, all others are considered an alternative to the original. Examples include Ethereum (ETH), Ripple (XRP), and Litecoin (LTC).

Bitcoin (BTC)

Bitcoin was the first-ever cryptocurrency and is the largest by market capitalization. It was created in 2009 by an unknown person or group of people using the name Satoshi Nakamoto. Bitcoin operates primarily as a digital alternative to traditional currencies and a means to store and transfer value without the need for a centralized intermediary, like a bank. 

Bitcoin ATM

A Bitcoin ATM is a physical kiosk that allows you to buy Bitcoin and other top cryptocurrencies with cash, which you typically can’t do with online exchanges. It works just like a traditional ATM, but instead of dispensing cash, it sends Bitcoin to your digital wallet. 

These ATMs are considered one of the easiest ways to purchase cryptocurrency, especially for beginners. They also require far less personal information compared to online exchanges, which is ideal for anyone who values privacy. 

Bitcoin Halving

Bitcoin halving is an event that occurs approximately every four years when the reward for mining new blocks is reduced by half, hence the term ‘halving’. When this happens, Bitcoin miners receive 50% less Bitcoin for verifying transactions. Halving events are part of Bitcoin's deflationary model to control the value by reducing the rate at which new Bitcoins are generated.

Bitcoin Mining

Bitcoin mining is the process of using computer hardware to solve complex mathematical equations in order to validate transactions on the blockchain. Bitcoin miners are rewarded with Bitcoin for contributing their computational power to maintain and secure the network. Simply put, Bitcoin mining is what powers the blockchain and facilitates transactions.  

Blockchain

A blockchain is a decentralized digital ledger that records and stores transactions across many computers. Transactions are irreversible and the ledger cannot be altered. The data is grouped into blocks and chained together in chronological order, hence the name “blockchain.” 

It’s decentralized because no person, group, or entity owns or controls the blockchain. Instead, miners play a large role in upholding it. They work to verify the legitimacy of crypto transactions which allows a blockchain to function efficiently without one, centralized authority - like a bank.

Cryptocurrency

Cryptocurrency is digital-only currency secured by cryptography, making it nearly impossible to counterfeit. It operates independently of a central authority, like a bank.

Crypto Wallet

A crypto wallet is a digital tool necessary to store, send, and receive cryptocurrencies. It exists to keep track of coin ownership and generate the public addresses you’ll need to make transactions. Wallets can be software-based or hardware-based.

But a crypto wallet doesn’t literally hold your coins like a traditional wallet holds your AUD. Instead, it stores the cryptographic keys required to access your cryptocurrency holdings on the blockchain.

Decentralized Applications (dApps)

Decentralized Applications (dApps) are software programs that run on a blockchain or peer-to-peer network of computers instead of a single computer. This makes them immune to centralized control and, therefore, less prone to failure. These apps offer various uses across industries, from finance to gaming and almost everything in between. dApps are known for their openness, security, and resistance to censorship.

Decentralized Finance (DeFi)

Decentralized Finance (DeFi) refers to services like borrowing, lending, and trading, that are built on blockchain technology and operate without traditional centralized intermediaries. 

Ethereum (ETH) 

Ethereum is a blockchain platform co-founded by a Russian-Canadian computer programmer named Vitalik Buterin. It’s known for its native cryptocurrency, Ether (ETH), which is the second-largest cryptocurrency by market capitalization. Ethereum not only supports transactions but also enables smart contracts and decentralized applications with its own programming language.

Exchange

An exchange is a crypto platform that allows you to buy, sell, and trade cryptocurrencies. Some popular online exchanges in Australia include Coinbase, Binance, and Kraken. 

Fork (Hard vs. Soft)

A fork is a change in a blockchain’s protocol that results in two paths, one following the old protocol, and one following the new. It can be a 'soft fork' or a 'hard fork.' Think of forks like changes to a train track:

A hard fork is a significant and fundamental change that makes previously invalid blocks/transactions valid. It’s like building a new train track that splits off from the original. Hard forks are non-backwards compatible, which means users can’t use both tracks. Users must either upgrade to the new blockchain protocol or stay on the old track (original blockchain) because the two protocols are incompatible with each other. This often leads to the creation of a completely new blockchain, like a train heading off in a different direction. 

A soft fork is a slight adjustment to the existing train track without necessarily splitting it. New changes to the blockchain's protocol make previously valid blocks/transactions invalid. However, unlike a hard fork, soft forks are backward-compatible. That means users have the option to continue using the original blockchain protocol. It’s more like upgrading the existing track instead of building an entirely new one that branches off in a different direction. 

Gas

Gas is the fee paid to conduct transactions and execute smart contracts on the Ethereum network. The gas fee compensates for the computing energy required to process and validate transactions.

Hash Rate

A hash rate is the measure of computational power per second used when mining cryptocurrency. A higher hash rate increases the chances of validating the next block and receiving the reward. 

Initial Coin Offering (ICO)

An Initial Coin Offering (ICO) is a fundraising method in which new cryptocurrencies are sold to investors in order to raise capital. 

Mining

Mining is the process of validating new transactions and recording them on a blockchain. In cryptocurrencies like Bitcoin, mining involves solving complex mathematical puzzles with powerful computer hardware. 

Non-Fungible Token (NFT)

A Non-Fungible Token (NFT) is a unique digital token that represents ownership of specific items using blockchain technology. Contrary to popular belief, an NFT is not a digital art file. It is a unique, immutable code that is tokenized to exist on a blockchain and is commonly used to establish proof of ownership of an underlying asset. 

Unlike cryptocurrencies like Bitcoin or Ethereum, where each unit is identical and interchangeable, each NFT is distinct or "non-fungible". This means that each NFT has a unique identifier that cannot be replicated or replaced with something else. The blockchain records the creation, sale, and current ownership of each NFT. This ensures that its history and authenticity are permanently and transparently logged.

Proof of Stake (PoS)

Proof of Stake is a blockchain consensus mechanism that is more energy-efficient than traditional methods like Proof of Work (PoS) because it doesn't require nearly as much computing power. Instead of owning physical mining hardware, called nodes, users simply need to ‘stake’ a certain amount of specific coins by depositing them into a dedicated wallet. 

The process of staking works like a lottery, where users compete for the chance to validate transactions and create new blocks to earn rewards. The probability of being chosen depends on how many coins they’ve staked. The more you stake, the more likely you will be chosen to validate. Those who cheat or validate incorrectly risk losing a part of their stake, which encourages honesty.

Proof of Work (PoW)

Proof of Work (PoW) is a system used by some blockchains, including Bitcoin, to validate transactions and add new blocks to the chain. Think of it as a complex puzzle-solving contest. In PoW, computers compete to solve challenging mathematical puzzles, and the first one to solve them gets the right to add a new block to the blockchain. 

This process is known as 'mining', and the computer that solves the puzzle is rewarded with some of the cryptocurrency. The puzzles are difficult, so PoW requires significant computing power and energy. This level of effort is what ensures the security and integrity of the blockchain. It would take so much money and computing power to alter past transactions, that it’s practically impossible to pull off.

Satoshi Nakamoto

Satoshi Nakamoto is the pseudonym for the person or group of people who created Bitcoin and authored its original white paper in 2008. Satoshi Nakamoto also developed the first blockchain database as part of the implementation of Bitcoin.

Smart Contracts

Smart contracts are self-executing contracts with the terms of the agreement directly written into code. They automatically enforce and verify the terms of a contract when certain conditions are met. Smart contracts run on blockchain technology which makes them secure and tamper-proof. 

Here’s an example: In real estate, a smart contract could automatically transfer ownership of a property once payment is received without the need for realtors, lawyers, and other middlemen.  

Stablecoin

A stablecoin is a type of cryptocurrency that pegs its value to a stable asset, like gold, the US dollar, or another crypto coin to minimize volatility. The top stablecoins include Tether (USDT), USDC (USDC), and Dai (DAI). 

Token

A token is a digital unit designed with a specific utility in mind and provides access to the services of a specific project or used for transactions within its ecosystem. They’re similar to arcade tokens or casino chips, but instead of tangible items, they exist digitally on a blockchain.

Unlike cryptocurrencies like Bitcoin or Ethereum, which are intended to be digital currencies, tokens often serve more specific and varied roles within their native platforms or applications. The most popular example is a Non-Fungible Token, which can be used to represent ownership of digital and real-life assets, like a piece of art or real estate. 

Start Your Crypto Journey With Localcoin!

Now that you know the most important crypto terms, you’re poised to become rookie of the year! Localcoin ATMs can help you buy Bitcoin like Scottie Barnes scores points, easily and with confidence. 

They offer a simple, user-friendly way for you to buy Bitcoin and other top cryptocurrencies with cash. Rookies and seasoned pros alike can find a Localcoin ATM in every major Canadian city.