If you’re new to crypto this article is for you so please don’t quit reading after the 1st paragraph.
Bitcoin (BTC) users are frustrated because hashrate power halved recently and has caused a backlog of slow and expensive transactions. BTC miners are finding 4 blocks an hour and therefore have jumped ship to mine Bitcoin Cash (BCH) which is now producing 43 blocks an hour.
“Dude, slow down, what the heck does any of that even mean?”
I get it. The terms, opinions, arguments and technology thrown around in the cryptocurrency world can be overwhelming. That’s a big reason why I started Learn Crypto Investing (LCI). When people don’t understand something it is highly unlikely that they will embrace it.
Because I want crypto to go mainstream, I feel that it is imperative that the community does a better job of explaining things in a simple way.
Therefore, I’ve put together a starter kit list of terms that are used frequently in the crypto space. Experienced users will most likely take issue with some of my explanations as they might not go deep enough into the underlying technology. I get that too. Let’s try to not get lost in the weeds and give our “noobs” (I really don’t like that term by the way) a foundation to build their crypto knowledge upon.
Without further ado, here’s your “KISS (keep it simple stupid) List”:
|Crypto Term||Simple Definition||Really Simple Definition|
|Address||Just like your home address, only this is where people can send you crypto.||example: 116E2mUDc63AELSZpaGmdVvTV48Xntq2U7|
|Altcoin||Any crypto that ISN’T Bitcoin||Examples: Litecoin, Monero, Dash|
|Bitcoin||The 1st & most valuable cryptocurrency||gold|
|Bitcoin Scams||Any person or site promising to give you a 20% daily return. Often scam sites show fake credentials & keep your money for a certain time period. They tend to show a “days online counter” on their sites as well. There are many scams out there so please be careful to not give your information to anyone that looks suspicious. NEVER give out your private key to ANYONE!||Just like the circus, they pack and leave town with your money rather quickly.|
|Bitcoinairre||new word for Bitcoin investors that have become millionaires due to their crypto investments.||This would be you if you invested $1,000 in 2010. This can still be you in the somewhat near future.|
|Block Reward||Amount given to the miner who’s machine hashes (solves) a complex math problem. Currently the reward is 12 BTC, but every 210,000 blocks the reward is halved (meaning it will go down to just 6 BTC).||Like winning a scratch off lottery ticket.|
|Blockchain||The ongoing ledger that tracks all transactions & most importantly doesn’t require a central authority to verify those transactions||never ending chain created by lots of computers|
|Blocks||A group of transactions that are like pages in a record book||a new Bitcoin block is made every 10 minutes|
|Cloud Mining||An alternative form of mining that allows you to lease space on someone else’s powerful servers. In exchange for not needing to put together a mining rig and rack up huge electricity bills, you can go through a 3rd party who gladly handles this for you while taking a large chunk of the profits.||Like leasing a car rather than buying, except that this car still pays you every morning.|
|Cryptocurrency||Deriving from “cryptography” as a way of sending a secret message. A cryptocurrency uses cryptography as a means of creating a safe method of payment. There are over 900 cryptocurrencies competing for market share and Bitcoin is the largest and most famous.||Cryptocurrency will help you diversify your investment portfolio or send money securely to anyone in the world. You can also use it to buy goods or services at a growing list of merchants.|
|Decentralization||One of the biggest selling points of cryptocurrency as there is no need for a central authority to verify transactions. This allows for quick and cheap transactions.||Attention Governments & Corporations, nothing for you to see here.|
|Digital Currency||Sometimes cryptocurrency is referred to as digital currency||We did mention Bitcoins are not a physical coin right?|
|Digital Wallet||Similar to your checking/savings account with your bank, a digital wallet is where you store your digital currency. There are hot (online) and cold storage methods (hardware you can buy and carry around with you). It is common for people to have multiple wallets for multiple currencies. A good beginner wallet I recommend is Coinbase (see link to the right).||Coinbase|
|Exchange||A place where you can trade cryptos. You can trade Bitcoin (or any altcoin) for USD or Bitcoin for another crypto (i.e. Litecoin).||Crypto version of the New York Stock Exchange (NYSE).|
|Fork||A split that occurs when a group of developers decide to change the system. Bitcoin recently had a group of people that wanted to make changes to increase size and speed of transactions. This hard fork created 2 chains and 2 forms of Bitcoin. From the fork in the chain we now have the original Bitcoin and a new coin called Bitcoin Cash||Just like a fork in the road; you can take the path of least resistance or follow the road less traveled|
|FUD||Fear, Uncertainty & Doubt||When impatient, emotional traders exit a coin, it is usually because of FUD & many times is a poor choice. In fact, FUD provides some good opportunities to buy discounted coins.|
|Gas Limit||When sending currency over the Ethereum Blockchain, it requires a fee (gas). The higher you set the gas limit, the faster your transaction is handled.||Just like pumping gas in your car to take you wherever you want to go. This gas is extremely cheap compared to ethanol though.|
|Halving||The reduction of mining rewards. Every 210,000 blocks Bitcoin reward is halved, so it essentially slows down the entry of new Bitcoins introduced into the system||Now your lotto ticket is worth only 1/2 as much as it used to be. Kind of like a new car the moment you drive it off the lot.|
|Hashing||Hashrate is the speed at which a block is discovered and the rate at which the related math problem is solved.||If you’re mining you want the machine with the most hash power.|
|HODL||“Hodl” is really just a funny way of saying “Hold”, as in, hold onto your Bitcoins and don’t sell! It came from a 2013 post on bitcointalk.org where a drunk investor spelled it wrong. See link to the right.||I AM HODLING|
|ICO||An “Initial Coin Offering” is how decentralized tech companies (those using blockchain tech) raise money. This is easier than going the venture capital (VC) route and does not require a company to give up equity. Instead, the company issues their own coins/tokens in exchange for Ethereum or Bitcoin.||Their distant cousin in the traditional investment world is an Initial Public Offering (IPO).|
|Mining||term used for discovering and solving blocks along the blockchain. A reward is given for solving the algorithm and lengthening the chain, called a mining reward.||The process of creating new coins.|
|Multisig||Means that more than 1 person has to approve in incoming or outgoing payment & companies use it to make sure morr than 1 person is responsible||Like a bank vault that requires 2 employees to open it.|
|Nodes||connection point that can receive, create, store or send data along distributed network routes||Basically a computer connected to the Bitcoin network|
|Nonce||the first “miner” to find a nonce that delivers a desirable hash is awarded valuable bitcoins.||A long number used only once that proves a Bitcoin transaction|
|Noob||Someone new to crypto||most people|
|P2P||In a “Peer To Peer” network, the “peers” are computer systems which are connected to each other via the Internet. Files can be shared directly between systems on the network without the need of a central server. This is why the blockchain is decentralized.||Essentially removing the middle man (bank, government, store) from having to verify transactions as people verify each other’s transactions. We always knew Napster was important!|
|PoS||“Proof of Stake” is less energy intensive as it doesn’t require computational power like PoW. It only requires that you prove you’re the owner.||It’s a greener way of mining (as opposed to PoW) & Ethereum is moving from PoW to PoS soon.|
|PoW||“Proof of Work” takes up a lot of electricity as it is the method of proving that the miner’s computer solved the complex math problem.||Bitcoin mining is done via PoW.|
|Public/Private Keys||Public keys can be used by any party to encrypt a message. The private keys are known only by the person receiving the message.||I’ll tell you my home address, but I’m not leaving you a key under the mat. NEVER give out your private key to ANYONE!|
|Pump & Dump||Crypto trading tactic used to quickly increase the price of an altcoin when a group of investors work together to buy at the same time. The price quickly shoots up & then unsuspecting investors begin to buy as well thinking that something good is happening. By the time they own the altcoin, the pump team has already sold (dumped) leaving an overpriced coin in the hands of those not in on it.||Don’t be these people.|
|Signature||A multi part math operation that allows your private key to prove the coins/wallet belong to you. This provides a high level of security.||Similar to you signing your name on a check, except this is digital & handled by math.|
|Smart Contract||This is similar to a real world contract. Once it is signed it can’t be altered. Its purpose is to enforce contracts by ensuring that cetain criteria are met.||Ethereum Blockchain is the most well known for using smart contracts. It is what all the new ICOs that are flooding the market use.|
|Virtual Currency||Sometimes cryptocurrency is referred to as virtual currency. Technically virtual currency is the umbrella and digital currency and cryptocurrency fall under it.||Online video games have been using virtual tokens for a long time.|
|Whales||Wealthy investors who buy a large portion of a coin in hopes to control its price in a way that favors them.||Don’t forget me when you become a Bitcoinairre Whale!|
|White Paper||This is a company’s business plan and is typically found on their home page around the time of their ICO. For some reason the standard ICO White Paper tends to be around 32 pages. The 1st crypto white paper written by Satoshi Nakamoto (Bitcoin inventor & no one knows who he actually is) can be found on the link to the right.||Bitcoin WP|
I hope this helps out so that the next time you see one of these words in an article you will at least have a basic understanding as to what they are saying. Also, next time you’re talking to a crypto geek tell them that while you may be a noob, at least you’re an educated one who is hodling!