Cryptocurrency 101

1. Cryptocurrency

A cryptocurrency is a digital or virtual currency that uses cryptography for security. Unlike traditional currencies issued by governments, cryptocurrencies operate on decentralised networks based on blockchain technology. Read more here.

2. Blockchain

A blockchain is a decentralised digital ledger that records all transactions across a network of computers. Each block contains transaction data, and these blocks are linked together, forming a chain. This technology underpins cryptocurrencies by ensuring secure, transparent, and tamper-proof transactions.

3. Wallet

A cryptocurrency wallet is a digital tool that allows users to store, send, and receive cryptocurrencies. Wallets come in various forms, including hardware wallets (physical devices for e.g., a thumb-drive), software wallets (applications), and paper wallets (printed keys).

4. Private Key

A private key is a secure, encrypted code that allows access to a cryptocurrency wallet. It must be kept confidential, as anyone with the private key can control the funds in the wallet.

5. Public Key

A public key is an address that others can use to send cryptocurrency to your wallet. It is derived from the private key but cannot be used to access your wallet.

6. Exchange

A cryptocurrency exchange is a platform where users can buy, sell, and trade cryptocurrencies. Exchanges can be centralised (CEX), where a company manages the transactions, or decentralised (DEX), where trades are conducted directly between users without an intermediary.

7. Altcoin

Altcoin stands for "alternative coin" and refers to any cryptocurrency other than Bitcoin. Examples include Ethereum, Ripple (XRP), and Cardano (ADA).

8. Mining

Mining is the process of validating and adding transactions to a blockchain. Miners use powerful computers to solve complex mathematical problems, and in return, they are rewarded with newly minted cryptocurrency.

9. Smart Contract

A smart contract is a self-executing contract with the terms of the agreement directly written into code. These contracts automatically execute and enforce the terms once predefined conditions are met, eliminating the need for intermediaries.

10. Token

A token is a unit of value issued by a project or a platform built on an existing blockchain. Tokens can represent various assets, including currencies, utility rights, or even physical objects.

11. DeFi (Decentralised Finance)

DeFi refers to financial services built on blockchain technology that aim to recreate and improve traditional financial systems using decentralised protocols. This includes lending, borrowing, trading, and earning interest without intermediaries like banks.

12. Stablecoin

A stablecoin is a type of digital asset that tends to be less volatile than other cryptoassets because it is typically pegged to a stable reserve asset, such as a fiat currency (like the US dollar) or commodities (like gold).

13. Fork

A fork occurs when a blockchain diverges into two separate paths due to a change or update in the protocol. Forks can be soft (backward compatible) or hard (resulting in two distinct blockchains).

Conclusion

Understanding cryptocurrency jargon is essential for navigating the market with confidence. By familiarising yourself with these common terms and concepts, you'll be better equipped to make informed decisions and engage with the crypto community. At Mach D Trading, we're here to simplify your trading journey, providing the tools and knowledge you need to succeed in the world of digital assets.

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