Cryptocurrency, often referred to as “crypto”, was introduced to the world in 2013 by Satoshi Nakamoto, a pseudonym used by the creator(s) of Bitcoin. Although the identity of Satoshi Nakamoto has remained unknown, crypto has grown and evolved rapidly since its inception and it can be a whirlwind for newcomers. As a beginner, it’s important to understand what crypto is before you consider investing in it. In this blog post, we will give you a brief overview of cryptocurrency and provide you with definitions of common terms used when talking about cryptocurrency.
What is Cryptocurrency?
Cryptocurrency is a decentralized, digital currency based on cryptography. There’s a lot to unpack here, so let’s break it down into simpler terms.
Decentralized means that there is no specific person, company or government in control. Instead of a bank or financial institution that manage funds and transactions, the participants control cryptocurrency. The transfer of funds takes place between two individual parties without the need for a centralized entity, like a bank, to oversee those transactions.
It’s important to understand that crypto is a digital currency, meaning it has no physical form and only exists virtually. This also means that all transactions and exchanges take place online, whether on a mobile device or computer.
Because crypto is a virtual currency, transaction records have to be securely stored somewhere. Records of your crypto transactions are stored on something you might have heard called the blockchain, which is a storage technology that allows digital information to be recorded and distributed, but not edited. The blockchain is more complicated than that, but for our purposes, just know that the blockchain is unalterable and anonymous.
Secured Using Cryptography
Cryptocurrency is based on a security practice called cryptography, which is a method used to to secure transactions and verify transfers between two or more parties. Basically, the sender “encrypts” the message, shielding its contents from unwelcome third parties. When the recipient receives the message, they “decrypt” it, allowing them to read its contents.
To sum it up, cryptocurrency is an online, virtual currency that is not controlled by a bank or centralized entity. Transactions are recorded and stored on the blockchain using a security method called cryptography.
Glossary of Crypto Terms
There are many ways you can go about buying and selling crypto, so we recommend doing extensive research before you begin trading cryptocurrency. Here are some terms to get you started that will help you during your research:
Altcoin: Any coin other than Bitcoin. There are thousands of cryptocurrencies that exist and new ones are being created all the time.
Bitcoin: The first and most well-known cryptocurrency.
Block: A group of data within a blockchain. Blocks only hold a particular amount of information. Once the limit is reached, a new block is formed.
Blockchain: A storage technology that allows transactions to be anonymously recorded and distributed, but not edited.
Decentralized: No specific person, company or government controls funds and transactions.
Exchange: a platform where you can buy, sell and trade cryptocurrency.
Peer-to-Peer: Two users working together directly without the interference of a third party.
Public Key: Similar to your bank account number, this is your wallet’s address. This key can be shared with others to send or request funds.
Private Key: An encrypted code that gives direct access to your cryptocurrency. The private key should not be shared with anyone.
Wallet: A place where cryptocurrency is stored. Wallets are either referred to as hot (online) or cold (offline). A hot wallet is easier to access but is more susceptible to hacking. A cold wallet can help protect your crypto from theft and hacking.