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Cryptocurrency terms you must know before you invest

If you have decided to invest in cryptocurrency but are unfamiliar with a number of common terms, continue reading to find out everything you need to know.

crypto common terms
Image: Unsplash

If you have ever been tempted to invest in cryptocurrency but have found yourself deterred by complex industry jargon or words that resemble an unfamiliar language, it may be worth taking the time to familiarise yourself with a number of common terms.

The process of researching the ever-expanding cryptocurrency industry as a beginner can seem like an insurmountable task but by starting from the bottom and gradually climbing the ranks at a pace that suits you, you can find out everything you need to know and master the art of cryptocurrency overnight.

If you are determined to invest in cryptocurrency but require additional information before you can proceed, continue reading to familiarise yourself with common cryptocurrency terms and what they entail.

Bitcoin 

If you have made the decision to invest in cryptocurrency, you have more than likely done so as a result of Bitcoin. It is, in the very simplest of terms, the first and most valuable cryptocurrency that launched in early 2009 and kickstarted the ongoing cryptocurrency movement that is continuing to take the world by storm today.

In the years since it has well and truly exploded into the mainstream, its value has steadily climbed, despite a number of minor and major fluctuations, from an original worth of just $0.09 to a record-breaking $60,000.

It is common for first-time cryptocurrency investors to invest their entire savings into Bitcoin but to protect yourself from wild price fluctuations that occur from time to time, it may be a better idea to diversify your wallet. 

Blockchain 

blockchain image

When it comes to investing in cryptocurrency, you must understand the fundamental role that blockchain plays throughout the entire process. It is, essentially, a digital form of record-keeping on a decentralized ledger where transactions can safely and securely take place across a wider network.

This creates a permanent and largely unchangeable ledger of data that is protected from a number of external threats such as hackers, data breaches, and theft.

The key difference between a database and a blockchain is that a database tends to structure data into separate tables whilst a blockchain structures its data into blocks strung together on an irreversible timeline with an exact timestamp visible for added safety and security. 

Staking 

In the wider world of cryptocurrency investment, staking is the name given to the process of verifying transactions by allowing investors to earn rewards on their holdings.

It involves holding existing funds in ‘cold storage’ in a wallet to support the operations of a blockchain network and is available with cryptocurrencies that rely on the proof-of-stake model to process transactions. If you have a basic understanding of staking, it may also be worth researching the best coins to stake to allow you to make a substantial return on your cryptocurrency investments down the line.

When compared to the original proof-of-work model that requires mining devices to solve complex mathematical equations, staking has proven to be a more energy-efficient method from start to finish and can be a great way for you to earn a passive income from your cryptocurrency endeavors if you have your heart set on cryptocurrency investment as a secondary income source or just to make a quick buck.

Wallet

brave browser crypto wallet
Image: KnowTechie

If you have chosen a cryptocurrency to invest in, you must choose a cryptocurrency wallet to store your holdings in. It can take the form of either a device, physical medium, program, or service and stores the public or private keys for your cryptocurrency transactions.

Wallets can also be hot, which means they are online and software-based, or cold, which means they are offline and, more often than not, stored on a device.

To choose the best cryptocurrency wallet for you, you must consider a number of factors including its ease of use, level of safety and security, portability, anonymity, and, last but certainly not least, which individual coins it supports.

When you have made your decision, you must do your research and put it to the test by trading small amounts of digital currencies until you are happy and satisfied with the service you are receiving.

It may take a considerable amount of time until you have found the right cryptocurrency wallet for you and your individual investment needs but by trusting the process, you will be glad you waited. 

Ethereum 

If you have a basic knowledge and understanding of cryptocurrency, you have probably heard of Ethereum. It is a decentralized blockchain with smart contract functionality launched in 2013 where developers can create new applications.

You may have also heard of its associated currency, Ether, which is currently edging closer towards Bitcoin by sitting in second place when it comes to trade volume and market capitalization.

If you have made the decision to invest in cryptocurrency, it may be worth taking the time to familiarise yourself with a number of common terms beforehand.

This includes Bitcoin, blockchain, staking, wallet, and Ethereum. By doing so, you can find out everything you need to know ahead of time and kickstart your investment journey with a basic knowledge and understanding of cryptocurrency.

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