Cryptocurrency Terms From Those Who Have Been Around Block
You may have heard of the language of love, but have you heard of the language of cryptocurrency? I personally find them equally exciting. You may think that this language sounds difficult to learn, but actually it is easier to learn than the language of love and has fewer grammar rules than a language like German.
If you need a crash course in cryptocurrency terms, then read on.
The Language of Cryptocurrency
What does that mean, you may ask? It's pretty simple, especially once you get started.
Cryptocurrency language is a specific type of lingo that people in the cryptocurrency world use. If you read this piece, then you should end up at least at the beginner's or intermediate level. Trust me, once you learn the basics, you could talk with experts without sounding like a noob or even talk to your friends and family and sound like an expert yourself.
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The Language of Cryptocurrency Vocab
One of the most important things to learn in any language is vocabulary. In this section, I will share some of the most important vocab terms, divided into sections.
Just like in foreign language class, where vocab terms may be divided into sections like food, clothing, or family, the language of cryptocurrency can also be divided into the following sections: vocab on different types of currency, vocab on the history and important people in cryptocurrency, vocab on how cryptocurrency is created and collected, vocab on the future of cryptocurrency, and miscellaneous vocab on cryptocurrency.
Hopefully these sections will make the process of learning easier. It can be overwhelming to just have a bunch of vocab terms thrown in your direction, but order and an idea of how these terms are related to each other should give you the context you need to become fluent and understand everything when reading about cryptocurrency.
Vocab on Different Types of Currency
In order to understand what this is all about, it is important to first differentiate between different types of currency, namely cryptocurrency, altcoin, and fiat currency. Here we will also define the gold standard, in order to understand from where currency gets its value.
Cryptocurrency has two important features that differentiate it from the physical currency we typically use. The first feature is that it is a digital or virtual currency. The second feature is that it is secured via cryptography, which is why the cryptocurrency is called cryptocurrency.
While the term Altcoin may confuse some people, who may think that Altcoin is just another type of cryptocurrency, like Bitcoin, Altcoin is actually just another word for cryptocurrency. Altcoin was termed by joining together the words "alternative" and "coin".
Fiat currency is the official term for the physical currency that we typically use. Unlike cryptocurrency, fiat money is issued by governments and derives its power from the government that issued the currency. This is also different from a currency that must be backed by a physical commodity, such as gold or silver, in order to have any power.
As mentioned in regard to fiat currency, some currencies in the past have derived their power from being backed by a physical commodity. While there is currently no country that uses the gold standard, it is still important to understand the concept of how different things have given the power to currencies in the past. In respect to the gold standard, some countries used to have currencies whose value was directly linked to gold.
Vocab on the History & Important People in Cryptocurrency
It is not possible to completely learn a language without understanding its history and some of the key players involved. Here we will discuss some of the key players, what their role in cryptocurrency was, and which cryptocurrencies are important to the history and present of cryptocurrency.
David Chaum
David Chaum is an American cryptographer who helped build the technical foundation for cryptocurrency in the early 1980s. He did this by creating what is known as a "blinding" algorithm that is essential for what web-based encryption is today. This algorithm is what allows for electronic currency transfers, which are referred to as "blind money". This money and the algorithm are referred to as "blind" because of the complete privacy that is ensured.
DigiCash
As mentioned above, David Chaum was an important player in the creation of modern cryptography, but it does not explain his full relationship with cryptocurrency.
After creating this "blinding" algorithm, David Chaum moved to the Netherlands in the hopes of commercializing his algorithm and idea of "blind money". David successfully did this with a company called DigiCash. DigiCash only lasted until the late 1990s, but the idea of cryptocurrency stuck and has led to where it is today.
Satoshi Nakamoto
Satoshi Nakamoto discussed the idea of Bitcoin in a 2008 white paper entitled Bitcoin: A Peer-to-Peer Electronic Cash System. Bitcoin rolled out the following year.
The Mysterious Satoshi Nakamoto
The Satoshi Nakamoto mystery is like a holy grail of sorts, for a large number of cryptocurrency advocates. People have tried to hunt him down for well over 11 years now, and to this day no one knows his true identity. Just recently online detectives have discovered in the first version of Bitcoin (v0.1.0), Satoshi Nakamoto allegedly used a Russian proxy to hide his location and identity.
Bitcoin (BTC) is the most popular cryptocurrency on the market and has been since its debut in 2009.
Fork
When a single blockchain diverges into two or more paths, this is considered a fork. Forks can come in one of the following two forms:
Hard Fork: A hard fork refers to a fundamental change in the way the blockchain operates. Because the change is so extensive, it requires every node in the network to upgrade their software. If they fail to upgrade their software, then they will not be compatible with the new processes and are no longer even on the same blockchain.
Soft Fork: A soft fork has less drastic effects than a hard fork. While a soft fork does come with a change in the rules of the network, the nodes of the network will have no problem continuing to validate transactions with the old software.
Bitcoin Cash
Bitcoin Cash (BCH), sometimes referred to as Bcash, is a very popular cryptocurrency and is an example of a fork of Bitcoin (BTC).
BitCash
While less popular than Bitcoin or Bitcoin Cash, BitCash (BITC) is another cryptocurrency. BitCash is interesting because it has roughly the same value as USD, US dollars. This is not generally the case, as cryptocurrency values have a wide range.
Vocab on How Cryptocurrency is Created & Collected
The process of creating and collecting cryptocurrency may seem a bit strange at first if you are not used to such a monetary system. In order for you to understand cryptocurrency, it is a good idea to first introduce you to this creation and collection process.
Mining is the term used to describe the process by which cryptocurrency is created.
Because mining is the term used to refer to the creation of cryptocurrency, a person who conducts this mining is referred to as a miner.
Cryptocurrency can only be created when a complex computational math problem or puzzle is solved. Because of how complex this computational math problem is, it can only be solved by a high-powered computer, which is much more powerful than the average computer you would normally use at home.
When the complex computational math problem is solved, it results in a block, which contains the transaction data of what will turn into cryptocurrency.
As the name suggests, a blockchain is a chain, or collection, of these blocks of transaction data. A blockchain is essentially a database of the collected cryptocurrency transaction data.
There is only a finite amount of Bitcoin out there. In order to maintain a fixed supply of Bitcoin, the block rewards, aka miner's rewards, which is the payment a miner receives for mining Bitcoin, are halved every 210,000 blocks of Bitcoin mined. This means that approximately every 4 years, miners only receive half of what they would have for the same level of effort mining, which means that they have to work twice as hard to get the same amount of Bitcoin from mining.
Because of this halving, it is believed that Bitcoin will max out at 21 million.
As mentioned before, cryptography is the process by which cryptocurrency is secured. Cryptography both protects and secures the information and communications of cryptocurrency via the use of codes.
Vocab on the Future of Cryptocurrency
Now that you have an idea of what cryptocurrency is and how it is created, it is time to look to the future of cryptocurrency. Here we will discuss the two main debates regarding the future of cryptocurrency right now: deflation and the coming monetary renegotiation.
Deflation
Deflation is defined as "a general decline in prices for goods and services, typically associated with a contraction in the supply of money and credit in the economy". Some economists have raised concerns that Bitcoin specifically may suffer from hyperdeflation, which is when deflation happens quickly and in an extreme measure, or a deflationary spiral, which is characterized by a decrease in both demand and price.
However, it does not seem likely that Bitcoin can or will be affected by deflation. While Bitcoin has seen a large increase in purchasing power over a short period of time, which is an indicator of hyperdeflation, there is no indicator that there will be a decrease in demand, which would be necessary for a deflationary spiral to occur. Rather, it seems likely that Bitcoin having a fixed supply will cause it to be a rare commodity and will thus cause it to increase in demand.
Monetary Renegotiation
Many people are discussing and debating the coming monetary renegotiation. What exactly does this mean? It means that cryptocurrency, with Bitcoin at the forefront, will play a big role in the future of the economic market. The monetary renegotiation may be a renegotiation of our money systems and which currencies we use.
The Covid-19, or coronavirus, pandemic is playing a big role in this. It seems that the current deflation issues caused by the coronavirus pandemic are resulting in a decrease in trust of fiat currencies and an increase in Altcoin. It seems that deflation of fiat currencies is good news for Bitcoin.
Miscellaneous Vocab on Cryptocurrency
Ok, so miscellaneous is not a very specific grouping, but there are always exceptions to grammar rules and miscellaneous vocab terms when learning a new language, and the language of cryptocurrency is no different.
What ties these terms together is that they are terms that you may think you know, but in relation to cryptocurrency, they have a slightly different meaning. In language class, these types of words are sometimes referred to as "false friends", since the words may have a similar form or sound similar to other words in your native language, but really they have a different meaning.
This key does not refer to the physical key that you would use to open a lock, but it does have a similar usage in the virtual world.
I already told you that cryptography is what secures cryptocurrency, but have you wondered how that really works? I did also mention that cryptography makes use of codes. Well, keys in the language of cryptocurrency refer to a cryptographic code. These keys can come in one of the following two forms:
Public key: A public key, as the name suggests, is public and thus accessible to everyone. There is even a publicly accessible directory that allows you to easily look up public keys. The purpose of a public key is to allow people to send you cryptocurrencies and for you to be able to accept cryptocurrencies from others.
Private key: A private key, as the name suggests, is private and thus not accessible to everyone. Only the owner knows the private key, which is what allows them to pay out cryptocurrencies.
Be careful not to lose this private key. There have been many cases in which people have either lost their Bitcoin private keys or died without ever passing on their Bitcoin private keys to their next of kin. An estimated 3 million Bitcoin, which equals about $25 billion, has been lost because of this.
If there are virtual keys and virtual currencies, it only makes sense to also have a virtual wallet, right?
Well, in regard to cryptocurrency, the public key described above acts as a sort of virtual wallet. This is because the public key is what allows you to both collect and hold your cryptocurrency, kind of like a physical wallet would with fiat currency.
Just like traditional wallets can be made of leather or fabric, there are multiple forms that a cryptocurrency wallet can come in, including:
Hot Wallets: Hot wallets are actively connected to the Internet. While this can make transactions easier, it does mean that your wallet will be more vulnerable to hacks. Hot wallets can come in the form of mobile wallets, desktop wallets, or exchange wallets.
Cold Wallets: Cold Wallets are not actively connected to the Internet, which means that they will not be vulnerable to hacks like hot wallets. An example of a cold wallet is a paper wallet.
Hardware Wallets: A hardware wallet is a type of cold wallet that secures your private keys in a physical device, such as on a USB drive. Hardware wallets have the best of both worlds, including ease of transactions and increased safety in the form of protection against hacks.
Money Management
Are you interested in investing in cryptocurrency? If so, then money management could help you reach your financial goals. If not, then money management could still help you reach your financial goals.
There are plenty of money management articles out there that can help you figure out how to handle money, but you don't need much more than the basics.
Financial Planning Basics
Whether your goal is to be wealthy or just gain control of your finances, financial management and financial planning basics could change your life.
The purpose of financial management is to have a better idea of how you spend your money, so that you can make better decisions based on your personal financial goals and lifestyle. Financial management requires you to plan, monitor, direct, and organize your financial resources, as well as prioritize your financial resources in order to meet your personal financial goals.
Great point to start is to open a savings account. In this way, you can learn how to manage your money on monthly/yearly level. Are you interested in a savings account? If you are, here are some recommendations for you:
Conclusion
Learning a new language can be difficult and definitely takes time, but I hope you have increased your fluency level in the language of cryptocurrency after reading this article.
Remember, one of the most important things to do when trying to learn a new language is to familiarize yourself with as much vocab as possible. I did the grunt work by collecting the most important cryptocurrency terms, and now you just need to practice. There are many ways to practice vocab, whether it is with a partner or by going through flashcards on your own. Do whatever works best for your individual learning style.