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Cryptocurrency can feel overwhelming to newcomers with its technical jargon and ever-evolving concepts. Understanding the basics makes navigating the world of digital assets much easier. While there are loads of terms used in crypto discussions and on crypto sites it is fair to say some are more essential than others. This article explores key terms that every crypto user should be familiar with, starting with the foundation of it all – blockchain.
Blockchain
At the heart of all cryptocurrencies lies blockchain technology. A blockchain is a decentralized digital ledger that records transactions across a distributed network of computers. Unlike traditional financial systems that rely on a central authority blockchains operate through a peer-to-peer system. No single entity controls the network.
Each transaction is bundled into a block and added to a continuous chain of previous transactions. This chain is immutable which means once a transaction is recorded it cannot be altered or deleted. The security of blockchain comes from cryptographic hashing which is a method that transforms transaction data into a unique string of numbers and letters. Every block contains a reference to the previous block and this helps form a secure and transparent chain of records.
This is one of the reasons why crypto has been adopted by certain industries. It is secure and offers a lot of benefits including being very fast to move money around. Crypto has grown quickest in the casino gaming world as people need the speed of transactions and value convenience. Casinos are growing their selections of payment methods to cater to more people anyway and with blockchain being so popular it has given them another way to accommodate more players.
A crypto casino can be a prime example of the technology being used in the way that it was intended. A lot of people assume that an online crypto casino is going to be vastly different from other types but actually it is usually just the currency that changes. Some crypto casinos have extra games such as Crash games – these have become synonymous with the growing crypto casino industry.
Wallet – Where Crypto is Stored
One of the first terms in the crypto glossary is a wallet. To hold and manage cryptocurrency users need a wallet. A crypto wallet is a software program or hardware device that allows users to store and receive digital assets. Wallets do not actually hold crypto in any physical way. They store the keys which grant access to the funds on the blockchain.
There are two main types of wallets:
- Hot Wallets: These are connected to the internet, making them convenient.
- Cold Wallets: These are offline storage devices. They offer higher security by keeping private keys offline.
People have a lot of different options for digital wallets and may even end up with more than one. These are about added functionality as well as keeping funds safe.
DeFi – The Future of Finance?
Decentralized Finance refers to blockchain-based financial services that operate without traditional banks or intermediaries. DeFi platforms offer lending and potentially interest-earning opportunities all without the need for a central authority.
Blockchain and crypto fall within the DeFi category. These are just examples of how DeFi may look – a user can access DeFi lending protocols and the system also enables yield farming – this is where users provide liquidity to decentralized exchanges (DEXs) in exchange for rewards.
NFTs
This is a very closely related term (a bit like DeFi). Non-fungible tokens have taken the digital world by storm as a way to represent unique digital assets on the blockchain. Unlike cryptocurrencies, these NFTs are one-of-a-kind and cannot be exchanged on a one-to-one basis.
NFTs are commonly used in art and music and are finding more uses for things like gaming. They exploded into public awareness when a lot of people found out that they were potentially a way to play games and own a unique item within or even just have a specific piece of art that can’t be reproduced or owned by anyone else.
Gaming has been a huge example of NFTs growing in popularity and the gaming world is full of early adopters who tend to understand the concept of blockchain and crypto. The Thunderpick World Championship even has its prize fund distributed in cryptocurrencies and gains a huge number of viewers.
Smart Contracts
People who explore the world of crypto will likely come across the term Smart Contracts. A smart contract is a self-executing contract with the terms of the agreement written directly into the code. These contracts operate on blockchain networks and enforce agreements between parties without the need for intermediaries.
Ethereum was the first major blockchain to introduce smart contracts as it allowed developers to build decentralized applications and financial services on its network. The beauty of smart contracts is their transparency and efficiency. They execute automatically when conditions are met and don’t rely on human interaction.
All of the above terms are likely to come into the vocabulary of people who embrace cryptocurrencies and the underlying technologies. There are hundreds of crypto words to be aware of but these are some of the absolute fundamentals of crypto and the way it works.
