Cryptography, keys and blockchains: Understanding the language of cryptocurrencies

If you are one of the millions of people around the world who have become interested in cryptocurrencies in the last couple of years, at some stage, you might have found yourself struggling with the lingo and jargon used in the industry, which often proves off-putting for newcomers.

The widespread use of lingo and jargon is made all the more difficult by the fact that the terms themselves are often used to refer to concepts, ideas and technology that are highly technical and difficult to understand.

The issue of not fully understanding this technical jargon is not just one of understanding and fluency in this world, however. Unfortunately, there are a number of malicious individuals in the cryptocurrency world who will use this lack of understanding to fool or trick novice investors out of their investments.

Thankfully, this does not need to be the case. While the barrier to entry can admittedly be quite high for novices just getting start trading and investing cryptocurrencies, there are a lot of resources out there to help improve your cryptocurrency knowledge.

In this short article, we will discuss some of the most common phrases, terms and concepts you will likely come across in your cryptocurrency trading and investment journey. Hopefully, by the end of this article, you will be able to understand the language of cryptocurrencies!

Regardless of whether you are a hardcore day trader hoping to make their fortune, or a more casual trader just keeping track of the latest updates to the OKX cryptocurrency list, understanding these terms will hopefully make the experience a more enjoyable one.

Altcoin

An ‘altcoin’ is essentially any coin — or digital currency — that isn’t Bitcoin. Although this phrase might become outdated and of limited use over time, altcoins today include everything from Ethereum to the many thousands of cryptocurrencies out there with minimal value. Investing in altcoins is often viewed as higher risk given that they tend to have a much less stable market value.

Blockchain

Blockchain is essentially the technology that most cryptocurrencies are built on. It acts as a form of digital record keeping, which records information regarding transactions made on the network. A blockchain is the result of sequential blocks — or data points — that build on each other. This creates a permanent, unchangeable ledger of recorded transactions and other data.

Block

A block is essentially a group of data or an individual data point on a blockchain. Each block will contain a certain amount of information relating to a transaction or series of transactions. Once it can’t hold any more information, a new block will be formed to continue the chain.

Cold storage (or cold wallet)

This refers to a particular way of storing cryptocurrency. In contrast to cryptocurrency that is stored in an online wallet or hot wallet, cold wallets store crypto offline. One form these come in is a hardware wallet, which is a physical device with memory. Often, they look like a USB memory drive. Cold storage and cold wallet solutions are considered much safer than ‘hot’ or online wallets, as they are less likely to be accessed by an unauthorized third party. However, there is always a risk of losing a hardware wallet, rendering the crypto stored in it inaccessible.

Cryptography

A method of keeping information secret by scrambling it into essentially indecipherable information. The original information can only be decrypted by a specific key.

Decentralization

Decentralization is one of the most important principles in the crypto space. It refers to the idea of distributing power away from a central point of authority. Cryptocurrencies are inherently ‘decentralized’ as information is verified on the ‘blockchain’ rather than by a central power or authority. Information stored on the blockchain will need majority approval by all users to be verified or to have changes made to it. Decentralization is often identified as one of the major benefits of cryptocurrencies. It is also closely linked to other popular developments in the cryptocurrency world, such as ‘Decentralized Finance’ (DeFi) and ‘Decentralized Applications’ (DApps).

Gas

The ‘gas fee’ is essentially the fee that developers will have to pay to the Ethereum network in order to make a transaction or verify information. Gas is generally paid in ether.

Hash

The hash is the string of numbers and letters that identify blocks on the blockchain and that are tied to crypto buyers and sellers. Hash strings are always unique.

Mining

This is the process by which Bitcoin and other similar cryptos are created. It involves computers solving complex cryptographical puzzles, for which the reward is the creation of new digital currency. When these new coins are verified, the currency has been fully mined. Mining acts as a reward for solving the cryptography puzzles and verifying transactions.

Key

The ‘public key’ is the address for the wallet where you store units of cryptocurrency, which acts like a conventional bank account number. Your ‘private key’ is the encrypted code that allows you to access this wallet/currency.