Investing in crypto? Top 10 important terms you need to know

There is no doubt about the fact that the world of cryptocurrencies is vast. The numerous developments that happen each day can result in many intricacies and fluctuations in this world of finance.

Whether you are a beginner or you have been a part of this arena for a while, you will have to keep abreast of the new changes that are happening in and around the ecosystem as they may affect the prices of the cryptos.

Here are 10 important and advanced terms that you need to know regarding cryptocurrencies.

Tokenomics – The combination of ‘token’ and ‘economics’ refers to the study of digital assets and currencies, particularly cryptocurrencies.

The study of cryptos, their value, their patterns, etc along with understanding all about the creators of these tokens, how they are allocated, and distributed, their respective market caps, etc is what comes under this umbrella term.

Whales – In the crypto world as well, whales are referred to as the people, institutions, or individuals that hold a large sum of any cryptocurrency. Whales have the power to make changes to the crypto market.

A buying spree can lead to the generation of huge returns in the market, and large sales can cause a crash.

HODL – HODL or ‘hold on for dear life’ technically originated from a typo in the bitcoin forum. Essentially, it refers to a passive strategy that people use when they want to buy and hold on to certain cryptos instead of engaging in trades.

This is done in the hopes of increasing its value.

CBDC – Central bank digital currencies or CBDCs are digital versions of the currency that is regulated by central banks. They are secure and much less volatile than cryptos and therefore, there is often a debate between CBDC vs stablecoin.

However, CBDCs are regulated and governed by a central authority and do not follow the decentralized mechanisms of cryptocurrencies.

Fork – Blockchain users usually want to make a lot of developments in their blockchain.

When the users make certain changes to their rules, the result can often lead to two paths – one of the paths can follow the old rules while the other one splits off to form a different one.

As a result of this, two paths are created to use. For example, a fork of BTC is bitcoin cash.

Fiat – This refers to the currency that is issued and recognized by the governments. For example, the fiat currency for India would be the rupee. This is the money that is circulated in the banks.

Fiat is different from cryptos as they are regulated and controlled by the government or central authority. The value of this currency may not rise or fall dramatically.

Gas – This is the fee that is charged when a person is operating on the Ethereum network. The gas fee is used to allocate and designate resources related to the Ethereum virtual machine to enable decentralized apps on the network to run independently.

Small operations may cost about 3-10 gas while a full transaction may cost 21,000 gas. This will depend on the overall demand and supply between the miners and the users.

Minting – When a new coin is introduced via circulation, the process is called minting.

It may seem similar to mining, however, you can find certain differences on a deeper level. Minting can happen with the use of a proof-of-work consensus mechanism or another process called staking which follows the proof-of-stake mechanism.

DeFi – DeFi or decentralized finance includes conducting several financial transactions without the interference of any exchange, government body, financial institutions, bank, etc.

Digital currencies and cryptocurrencies also used the DeFi mechanism. Some large-scale DeFi projects include protocols that involve seamless automated transfers between the buyers and sellers.

Mining – This is the procedure of minting new tokens. Once the minting process is over, the tokens become a part of the blockchain. The process of mining is very important to cryptocurrencies.

Having a reliable mining system that comprises the use of a complex set of computers on which equally complex mathematical equations need to be solved. This process develops new tokens.

Getting to know these important terms regarding cryptocurrencies in any crypto industry blog before you begin investing in the sector would be an ideal plan as it would be highly helpful as you will be able to identify and speak the language just as a professional would!