A Beginner’s Guide to Basic Crypto Terms

Get a handle on the most common crypto terms.

Cryptocurrency

Cryptocurrency is a type of digital asset that functions as a currency. Cryptocurrency is easy to understand when you split it up into its two terms. “Currency,” as we know, defines it as an asset used for trade (buying, selling, exchange). “Crypto” refers to cryptography, the system on which it is based. Cryptography is the process of encrypting and decrypting information. An example of a cryptocurrency is the popular Bitcoin.

Blockchain

We can’t go further into any of the other popular crypto terms without first explaining the blockchain. The blockchain is a huge information file, or digital ledger, which stores all the transactions made in a cryptocurrency. It is made of ‘blocks’ (a digital permanent record, filled with transaction history) which are chained to each other through a cryptographic signature — hence the term ‘blockchain.’ Each time a block is filled to capacity, another block is added to the chain.

DeFi

Speaking of ‘decentralized’, another popular term you might spot is DeFi — which is short for Decentralized Finance. DeFi is a financial system built on blockchains, which means that it operates without the use of a centralized bank.

DEX

DEX is another term that is useful to know. It stands for decentralized exchange, meaning an exchange which operates without a central authority. The advantage that DEX has over CEX (centralized exchange) is that it is harder to breach.

Public key and Private key

The first thing you need if you’re going to buy or trade in cryptocurrency is a digital wallet. A digital wallet is an application, installed on a PC, smartphone, or remote server, which serves as storage for digital currencies and other crypto assets. The wallet uses public addresses (or public keys), and private keys to function.

Fiat

Fiat currency refers to the types of currency which are controlled by countries and states, as well as central banks. I.e the kinds of coins and currency we use on a daily basis (for example: Euro, USD, CAD, etc.).

Smart Contract

A smart contract acts as a regular contract, but the terms are executed as code running on a blockchain. The benefit of smart contracts is that it runs automatically when contract conditions are met, as pre-defined by the contract creator. This means that contracts can be enforced without the need for a third-party, such as a lawyer.

Liquidity Pool

A liquidity pool, in DeFi terms, is a pool of tokens that are locked in a smart contract. The purpose of these pools is to facilitate efficient trading on decentralized exchanges, while rewarding investors.

Other Types of Crypto Assets

Aside from cryptocurrency, such as BitCoin, which is used to make digital transactions, there are other types of crypto assets (with different purposes), which we’ll talk about briefly here:

Ways to Earn Money on Your Crypto Assets

There are currently three methods to gain profit from your crypto assets, and we’ll explain the processes briefly here. Each method is different, and the one you end up preferring would depend on your expertise and experience.

Providing the Road to Regulatory Clarity in the Blockchain Industry.