HomeThe Top 10 Cryptocurrency Terms Every Serious Investor Must Know

The Top 10 Cryptocurrency Terms Every Serious Investor Must Know

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By CNBC-TV18 June 30, 2021, 5:44:21 PM IST (Updated)

The Top 10 Cryptocurrency Terms Every Serious Investor Must Know
Cryptocurrencies can be overwhelming if you suddenly start to read about them, especially technical terminologies. A lot of newbies ponder about some of the most commonly-used terms in the crypto world and start to feel left out when they can’t figure out what they mean. Worry not, as we’ve rounded up the top 10 crypto lingosthat every cryptocurrency investor is most likely to encounter on their wondrous journey through this exciting new technology.


Here they are, in no particular order.

1.Decentralized finance (DeFi)

DeFi (which also sounds like defy) is a blanket term used to describe decentralized alternatives to traditional finance systems. It encompasses centralized finance and other aspects of banking such as money management, payment processing, insurance, etc. DeFi is meant to give access to these traditionally exclusive systems to opening them up to the public in a democratic manner without having intermediaries such as brokerages, exchanges, or banks.

2. Mining

In the crypto world, mining refers to the process of creating new bitcoins. While mining, new cryptocurrencies are produced, somewhat like finding gold or diamonds while mining for it. Unlike gold or diamonds, crypto mining is done by solving computational math problems, thereby making the bitcoin payment network trustworthy and secure by verifying its transaction information.

3. Non-fungible tokens (NFTs)

If there’s one word that’s been buzzing through 2021, it’s NFTs. Non-fungible tokens, or NFTs, enable virtual transactions between collectibles like art, music, and trading cards using smart contracts. When someone buys an NFT, they receive a certificate secured in Blockchain technology, making them the owner of that specific digital asset. NFTs are non-replicable and can only have one official owner at a time.

4. Satoshi Nakamoto

Satoshi Nakamoto is an individual, or group of individuals, credited with founding the world’s first cryptocurrency, Bitcoin. While many attempts have been made, the founder of Bitcoin remains completely anonymous to this day. On the other hand, if you hear the word ‘satoshis’, it can mean something completely different. ‘Satoshis’ refers to a fractional unit of Bitcoin that you can transact with, say 0.05 bitcoin for example.

5. Private Key

A Private Key is your password that consists of a very important string of numbers and letters you should not share with anyone. If someone is able to access your Private Key, you could lose all your funds in a matter of seconds. This key is also necessary to verify transactions when selling or withdrawing your crypto assets. Just as important as it is not to share your Private Key, it’s also important to not forget them.

6. ICO

ICO is an acronym for “Initial Coin Offering”. It usually occurs when the creator of a new cryptocurrency puts up an initial batch of its coins for purchase. It’s pretty much the same thing as an IPO that lists on stock exchanges, but in a crypto environment. Since everyone can participate in ICOs, it's important to keep an eye out for upcoming cryptocurrencies that have the potential to become huge.

7. Blockchain

Blockchain is a fundamental aspect of the crypto world and refers to the digital ledger of all the transactions ever made in a particular cryptocurrency. It differentiates cryptocurrencies from other currencies by making the transaction public to everyone on the blockchain. Every transaction made on a blockchain is saved onto thousands of computers all around the world, and it must always match to ensure there is no double-spending.

8. ERC20

ERC20 is a scripting standard used within the Ethereum blockchain that dictates a number of rules and actions that an Ethereum token or smart contract must follow and steps to be able to implement it. ERC is an acronym for “Ethereum Request for Comment”, and the ERC20 standard has been in use since 2015. ERC20 is exclusively used on the Ethereum platform. There are quite a few crypto projects built using the ERC20 framework.

Some of these include Tether, Binance Coin, Chainlink, Dai, Wrapped Bitcoin among others. As of December 2020, there are 829 projects based on the ERC20 framework, according to Ethereum data provider Etherscan.

9. PoS vs PoW

PoS and PoW are terms that are used to create blockchains through common agreement. PoS stands for Proof of Stake that is used to scale up transactions involving large blockchains without running up a huge electricity bill. PoW, which stands for Proof of Work, is a decentralized consensus mechanism that requires members of a

given blockchain to solve an arbitrary mathematical puzzle and earn cryptocurrency for their effort.

Both proof-of-work and proof-of-stake are what are called “consensus mechanisms,” the method by which a blockchain maintains its integrity. Proof of Stake was created as an alternative to Proof of Work, which is the original consensus algorithm in Blockchain technology, used to confirm transactions and add new blocks to the chain.

10. Sharding

Sharding refers to the practice of splitting up the entire blockchain history so that each node doesn’t generate a complete copy of it. Sharding is considered as a scaling solution for blockchains, especially the larger ones that begin to slow down the network performance as it tries to carry out the entire blockchain.

Now that you know the most important words in cryptocurrency, which one were you most surprised to learn about?

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