G’day! If you’re new to crypto, the lingo can sound a bit like another language at first. But don’t worry—I’ve broken down the most common terms for you in simple English for people aged 40 and over.
1. Cryptocurrency (Crypto)
A cryptocurrency is a type of digital money. Unlike regular money, it’s not controlled by any bank or government. Instead, it runs on a technology called blockchain.
Example: Bitcoin, Ethereum, and Litecoin are all cryptocurrencies. Think of them like a new kind of money that you can send or receive over the internet.
2. Blockchain
Blockchain is the technology that makes cryptocurrencies work. It’s a digital record-keeping system that tracks every transaction made with crypto. Imagine it like a big digital ledger that everyone can see, but no one can change.
Example: When you send crypto to someone, the transaction is recorded on the blockchain, so everyone knows it happened.
Why is this good?
This is beneficial because it provides transparency and security. Each transaction is verified by multiple participants on the network, making it very difficult to alter or tamper with the records. It also eliminates the need for a central authority like a bank to manage transactions, making the system more decentralized and often more efficient.
3. Wallet
A crypto wallet is like a digital version of your real wallet, you know the one you never have room for in your pocket, but for cryptocurrencies. It holds your coins and keeps them safe. You can have hot wallets (online) or cold wallets (offline).
Example: If you want to buy and store Bitcoin, you’ll need a wallet to keep it in, just like you’d need a bank account for your regular money.
Hot vs. Cold wallets, whats the difference?
Hot wallets are online wallets that are connected to the internet, making them more accessible but less secure, while cold wallets are offline storage options that offer enhanced security but are less convenient for quick access.
4. Exchange
An exchange is where you buy, sell, or trade cryptocurrencies. It’s like a stock market, but for crypto. Some of the popular exchanges in Australia are CoinSpot and Swyftx.
Example: If you want to buy Bitcoin, you would go to an exchange, trade your Australian dollars for Bitcoin, and have it transferred to your wallet.
What’s the difference between a crypto exchange and a crypto broker?
A crypto exchange is a platform where you can directly buy, sell, or trade cryptocurrencies with other users, often offering a wide range of coins and trading tools. In contrast, a crypto broker acts as a middleman, allowing you to buy or sell cryptocurrencies at a set price, often with fewer features but a simpler user experience. Think of exchanges as marketplaces and brokers as convenience stores—they both let you access crypto, but the process and flexibility differ.
5. Altcoins
Altcoins are any cryptocurrencies that aren’t Bitcoin. There are thousands of them, and they can be riskier or more volatile than Bitcoin.
Example: Ethereum, Litecoin, and Ripple are all considered altcoins.
Why do we have the term altcoins?
It’s simple. The term altcoins stands for as you probably guested “alternative coins” and is used to describe all cryptocurrencies other than Bitcoin. Bitcoin was the first cryptocurrency and remains the most well-known, so when new coins were created, they were seen as alternatives to Bitcoin. Altcoins often aim to improve upon Bitcoin’s design by offering additional features, faster transaction speeds, or different use cases, such as Ethereum enabling smart contracts. Essentially, the term highlights their role as “alternatives” to the original crypto.
6. Market Cap
Market cap (short for “market capitalization”) refers to the total value of a cryptocurrency. It’s calculated by multiplying the price of one coin by how many coins are in circulation.
Example: If Bitcoin is worth $50,000 per coin and there are 18 million coins, the market cap would be $900 billion.
7. Volatility
Volatility means how much the price of a cryptocurrency goes up and down. Crypto is known for being highly volatile, meaning the prices can change a lot in a short time.
Example: One day, Bitcoin might be worth $40,000, and the next, it could jump to $45,000 or drop to $35,000—fast.
8. HODL
This term comes from a misspelled word “hold,” and it’s used to describe the strategy of holding onto your crypto for the long term, even when the price goes up and down.
Example: If you bought Bitcoin when it was $5,000 and you still have it today, you’ve been “HODLing.”
9. FOMO (Fear of Missing Out)
FOMO is when you see others making money in the crypto market and feel pressured to buy in quickly because you don’t want to miss out.
Example: You hear your mates talking about how they made money from Bitcoin when the price was going up, and now you’re worried you’re missing out. Which is exactly why you are here reading this article. 🙂
10. Bear Market
A bear market is when the price of crypto is going down over a period of time. It’s like a downward trend.
Example: If Bitcoin was once worth $50,000 and slowly dropped to $30,000 over several months, that’s a bear market.
11. Bull Market
A bull market is the opposite of a bear market. It’s when the price of crypto is going up, and people are feeling confident.
Example: If Bitcoin’s price starts climbing from $30,000 to $50,000, that’s a bull market.
Note: Bear and Bull Markets are general trading terms and not only used in cryptocurrency trading.
12. Token
Tokens are a type of cryptocurrency. Some are used for specific purposes, like buying services or products on certain platforms, while others are just another type of investment.
Example: Ethereum uses “Ether” tokens to pay for transactions and services on the Ethereum network.
Is there a difference between Tokens and Coins?
Yes, there is a difference between tokens and coins.
- Coins: These are digital currencies that have their own independent blockchains, like Bitcoin (BTC) or Ethereum (ETH). They can be used as a store of value or a medium of exchange.
- Tokens: These are built on existing blockchains, like Ethereum or Binance Smart Chain, and often represent assets or utilities within a specific project. Tokens can be used for things like voting, staking, or paying for services on their respective platforms.
Example:
- Coin: Bitcoin (BTC) is a coin with its own blockchain.
- Token: Uniswap (UNI) is a token built on the Ethereum blockchain, and it’s used to participate in the governance of the Uniswap exchange.
By understanding this difference, you can better assess which digital asset might be suitable for your investment goals.
Still confusing? We will uncover this topic in a more detailed article here on CryptoXGen.
13. Trading Pairs
When you trade crypto, you’re usually exchanging one type of crypto for another. A trading pair shows you which two coins you can swap.
Example: BTC/AUD means you can trade Bitcoin for Australian dollars.
Note: Trading Pairs is a general trading term and not only used in cryptocurrency trading.
14. Stop-Loss
A stop-loss is an order you place to sell a crypto if its price drops to a certain level. It helps protect your investment if the market goes against you.
Example: You buy Bitcoin at $50,000 and set a stop-loss at $45,000, so if the price drops that far, your Bitcoin will automatically be sold to limit your loss.
15. Gas Fees
Gas fees are the costs of making transactions or running applications on a blockchain. These fees are usually paid in a cryptocurrency like Ethereum (ETH).
Example: If you want to send Bitcoin to someone, you may need to pay a small fee for the network to process the transaction.
What kind of applications are on a blockchain?
Blockchain applications are essentially products of blockchain technology. They are built on the foundational principles of blockchain, such as decentralization, transparency, security, and immutability. The most common types are: Cryptocurrencies, Smart Contracts, DeFi (Decentralized Finance), NFT Marketplaces, Gaming, Supply Chain Tracking, and Supply Chain Tracking.
My Final Words
Understanding these basic terms is the first step towards feeling comfortable with crypto trading. It’s a world that can seem a bit complex at first, but take it one term at a time, and before you know it, you’ll be a crypto pro trader amongst your friends and family, the start at your next BBQ!
Important Note: Always remember to do your own research and never trade more than you can afford to lose.
Crypto doesn’t have to be confusing. Start small, ask questions, and let’s take this journey slowly with confidence.