Everybody wants to be a part of the cryptocurrency that is taking the world by storm. If you look at the LTC to INR value now as compared to its value a few years back you will realize that crypto-economy holds potential. Cryptocurrency is easy to understand and when you have a grasp of it you can make investments. Every time you are investing your hard-earned money you make it a point to research and understand what you are investing in. Why should cryptocurrency be any different? When you are just starting to read about cryptocurrency you may be confused due to the jargon that experienced investors use. Here is a list of terms that you should understand for making an investment in cryptocurrency.
Terms used in cryptocurrency
- Decentralized – Cryptocurrency is often referred to as a token that works on a decentralized network or blockchain. Decentralization refers to a wall of a network of systems that work together in a distributed fashion to achieve a single objective. Decentralized applications that run on such a network, avoid a single point of breakdown.
- Decentralized Finance – DeFi is a wide term used for decentralized alternatives to conventional finance. DeFi includes banking payments, insurance, and so on. In short, it includes all that you can carry out related to finance using cryptocurrency.
- Fiat currency – The currency that you use on a daily basis in the world that you can find in your wallet is known as Fiat currency. Dollars, Rupees, and Euros are examples of Fiat currency.
- Mining – Mining is a process that is carried out to gain cryptocurrency. It is the process of verifying transactions on a blockchain which results in cryptocurrency as a reward. You need to solve complex mathematical equations and you need to have hardware that can support such a level of computations.
- Consensus mechanism – It is the underlying technology behind the main functions of blockchain technology which makes them an essential feature of all cryptocurrencies. Proof-of-stake and proof-of-work are the most used consensus algorithms.
- Altcoins – Any coin besides Bitcoin is known as an altcoin. One of the most popular old coins is Ethereum. Other than this Stellar, Ripple, Tether, Avalanche, Litecoin, Cardano, and Solana are some of the other popular altcoins.
- A private key and a public key – When you are investing in crypto it is advised that you get a Crypto wallet to keep your cryptocurrency safe. The wallet does not physically contain the currency however, it provides you with a unique string of numbers and letters that is known as a private key. If you share this private key with anyone, they can withdraw your funds using this private key. It is necessary to verify transactions when trading aur withdrawing crypto. A public key is one that is shared with other crypto holders and is used to receive crypto.
- Smart contracts – An exciting feature of the Ethereum blockchain is smart contracts. They are essentially digitized legal contracts. Just like a normal contract a smart contract enforces both parties to hold up their end of the bargain and once that is done the payment is dispersed automatically. Both parties take a look at the terms and conditions making the deal transparent and fair.
- Stable coins – Stable coins are cryptocurrencies that try to rely on a stable asset such as Fiat currency. They also have their value linked to stable assets like gold or other cryptocurrencies as well. USDT is one of the most popular stablecoins. USDT to INR value depends largely on the US dollar itself.
- Gas – Whenever you make a transaction on the blockchain you need to pay a fee which gets passed on to network participants. The cost of computing power done by the participants is known as gas.
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These terms will make a difference when you are trying to make an important decision. You can enjoy the spoils of cryptocurrency if you understand what you are investing in and you have all the information in your hand.