Crypto-Vocabulary or Fifteen Essential Terms for All Crypto Traders
If you are looking to become a cryptocurrency trader, then you have to enlarge your vocabulary. Discover new terms and words from crypto trading.
Must-Learn: Fifteen Essential Terms for All Crypto Traders
Many words in crypto trading seem to be entirely incomprehensible, as if from a different language. Partly it is. To learn to understand other traders and their tips, remember these 15 main terms from the world of cryptocurrencies.
This word can be heard in any discussion of cryptocurrency. Blockchain is the foundation of any digital currency. In fact, this is a public electronic registry in which all cryptocurrency transactions are recorded, so when users make transactions or mine, it grows. However, the range of applications of this technology has not been limited to cryptocurrencies lately. Since the blockchain protects data from spoofing, it has found many applications, from banking to electoral lists.
- Market capitalization
The cryptocurrency market capitalization indicates the size of its market. This amount can be calculated by multiplying the number of currently existing coins by their current value. Market capitalization may indicate the level of demand for cryptocurrency.
The creators of some cryptocurrencies prior to launching the network arrange a preliminary sale: some to earn more on speculation, others because they really believe in their technology. Thus, until coins are issued, buyers receive tokens, which after the launch of the currency, can be exchanged for coins.
All cryptocurrencies are called Altcoins, except Bitcoin – they can be quite respected or promising, but Bitcoin was the first, so it occupies a special place.
- Fiat money
You can make money on cryptocurrency trading, but in stores, it is still rarely accepted. Also, it may be unreasonable to store savings in such a volatile asset – you need something more stable, for example, fiat money. This word denotes the conventional national currencies for all of us: euros, dollars, or yuan.
- Initial Coin Offer, or ICO
The initial offer of coins is similar to the initial public offering of shares on the stock market – when a new cryptocurrency project sells tokens before launch. For many, this is the most dangerous and exciting type of trading – you can be one of the first and get massive profits. At the same time, you can buy a token that will be useless without ever entering the market.
The fork is a situation where the cryptocurrency somehow fundamentally changes; most often, developers want to fix or add something. It would be easy to do if someone controlled the network, possessing most of the computing power, but more often than not. Also, a fork update may be issued to correct the error. Usually, after the fork, the price jumps sharply.
- Pump and dump
This term is famous thanks to sharp cyclical changes in the prices of bitcoin and other cryptocurrencies that have become known to the general public. Sometimes this happens after the news, and sometimes it is the result of manipulations by people with enough coins to influence the value of the cryptocurrency.
Most traders prefer to diversify their portfolio, which means that they do not have massive amounts in one cryptocurrency. Nevertheless, it happens differently. Later, one person or organization may have a noticeable percentage of all coins in circulation – and this is not only a status symbol. It is real power, because when such a market participant sells or buys, the amount of the transaction may affect the price of the cryptocurrency.
- Cryptocurrency exchanges
Yes, you can find a person and exchange coins with him, but in most cases, people buy and sell cryptocurrencies on exchanges. Choose an exchanger for your tasks – they are all slightly different, including a set of cryptocurrencies.
Each cryptocurrency is based on a particular equation. The existence of a blockchain is based on it. With its help, the correctness of each block of information is determined, and it serves as a guarantor of security, not allowing forging transaction data. Mining is the solution to this equation, and the one who solves it first gets a coin. Mining is available to anyone, and it takes a lot of time plus requires a powerful computer.
- Smart contracts
Smart contracts, this is one of the most useful and promising technologies related to cryptocurrencies – it is a software agreement that allows you to automate the transaction. For example, it can be a sale at a specified price or a conditional deposit.
- Wallet Addresses
Each wallet has a unique address, and this allows people and organizations to send funds to each other. In many cases, transactions are anonymous. Still, the address is visible to everyone – this is a random sequence of characters, which in no case should be lost because it points to your coins.
Yes, you guessed it right – wallets are really used to store cryptocurrencies, but they are different. Most novice traders use online wallets directly on exchanges; more serious specialists often prefer hardware wallets for security reasons. There is a third option – your wallet on your computer.
- Multiple signatures
The fact is that transactions in the blockchain are irreversible. Therefore, as a security measure, multiple signatures are sometimes used. The transaction requires the consent of several parties, which means that one unscrupulous participant will not be able to steal funds.
Naturally, you can learn more words and terms from the crypto trading activity, but before you dive deeper into the process – learn the basics.