April is financial literacy month, so let’s talk cryptocurrency. Cryptocurrency, bitcoin and NFTs have become increasingly popular terms in the world of personal finance. So if you want to master yourself financially, here’s how to speak crypto.
What is cryptocurrency?
The term cryptocurrency is a contraction of the words cryptography and currency, and refers to any form of digital currency supported by cryptography. Supporting digital currencies with cryptography makes one’s cryptocurrency holdings secure and anonymous.
When you own a cryptocurrency coin, you don’t actually own a physical asset. Instead, you keep your cryptocurrency in a digital wallet. And since cryptocurrency is decentralized, meaning it is not regulated by any bank or government, it is very difficult to recover your assets if your wallet is lost or stolen. Make sure to keep your digital wallet safe!
How do cryptocurrency and bitcoin work?
Let’s discuss the difference between cryptocurrency and bitcoin. Cryptocurrency is a general term. It refers to any form of digital currency that is backed by cryptography. Bitcoin is a form of cryptocurrency. Bitcoin is the original and most popular form of cryptocurrency. Other popular “altcoins” or other types of cryptocurrency include Ethereum, Dogecoin, Litecoin, Tether, Binance, and Monero.
A blockchain refers to the computer science concept that is central to how cryptocurrencies work. Blockchains record transactions in a secure, immutable manner. Most cryptocurrencies store all their historical transaction information in the blockchain. Part of the process of mining new bitcoins or other forms of cryptocurrency involves verifying the transactions in the blockchain database with intensive calculations done by powerful computers.
What is an NFT?
A non-fungible token or NFT is a term used to refer to a unique digital asset backed by some form of blockchain cryptocurrency. One way to think of an NFT is as a way of determining whether a particular piece of digital art is an original. Most digital art, such as photos or videos, can be easily and completely reproduced, so there’s no way to tell which of the many copies is the original. NFTs are a way of “proving” that the version you have is the original.
How do you pronounce crypto?
Here is a short list of cryptocurrency related terms that you should have on your radar:
Blockchain — a type of administration that records the result of successive blocks that all build on each other. Blockchain is the technology that supports cryptocurrencies such as Bitcoin.
Coinbase — a popular cryptocurrency exchange where people can buy and sell various forms of cryptocurrency.
DAO — A decentralized autonomous organization or DAO is a type of loose organizational structure built on blockchain technology.
DeFi — Decentralized Finance or DeFi refers to financial transactions (such as cryptocurrency) that are done outside the traditional banking structure
Mining — How new cryptocurrency coins are formed and transactions on the blockchain are verified
stable coins — Stablecoins are cryptocurrencies backed by a non-digital currency or asset
Wallet — Like your physical wallet that contains your physical currency, your cryptocurrency wallet contains the digital information that represents your cryptocurrency coins.
It comes down to
If you are considering buying an NFT or getting paid in cryptocurrency, you may want to exercise caution. Most financial experts recommend that you keep only a small portion of your total portfolio in cryptocurrency. Since the cryptocurrency market is relatively new, it can be extremely volatile. If you want to invest some of your money in cryptocurrency or NFTs, it is best to only invest an amount that you would like to lose yourself.
Do you know how to speak crypto? What other terms do you want to learn? Let us know in the comments below.
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Dan Miller (102 posts)
Dan Miller is a freelance writer and founder of PointsWithACrew.com, a site that helps families travel for free/cheap. His home base is in Cincinnati, but he tries to travel the world as much as possible with his wife and 6 children.
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This post How to pronounce crypto – MintLife Blog
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