3 Cryptocurrency Terms You Have to Get Familiar with Before Investing
Cryptocurrencies are blazing hot at the moment and more people are starting to pay attention. If you’re a beginner investor, you should know that cryptocurrencies are not easier to understand or trade than traditional financial instruments. While cryptocurrencies are often portrayed as the people’s currency, they are still very complex and only people who understand them should invest in them. One of the first things you’ll need to understand is all the jargon surrounding them. Let’s take a look at a few cryptocurrency terms you need to get familiar with before you invest.
The Blockchain
The blockchain is the foundation for cryptocurrencies, but it’s still surprising to see how few people truly understand them, even in the crypto space. The blockchain is a ledger system that distributes copies of every transaction performed to a network of interconnected computers.
One thing you should know is that anyone can have a blockchain and it doesn’t have to be used for cryptocurrencies. Any type of organisation that needs to keep records can use the blockchain, so don’t always assume that good news surrounding the blockchain will do anything for cryptocurrencies.
Private and Public Key
Private and public keys play a central role in cryptocurrencies. The public key is like a PO box address. It will be publicly available and will allow people to send coins to you. It will also be used to identify your transactions on the blockchain. Your public key, on the other hand, is like the key to that PO box. It needs to stay in your possession at all times and cannot be shared as this would allow people to access your funds. You will need to use both when transacting and they will need to be stored on a wallet.
Cryptocurrency Wallet
You cannot trade coins unless you have a wallet. Even when coins are stored on an exchange, which is not recommended, a wallet will be used. The goal of your wallet is to preserve your public and private key and make sure that the private key is properly encrypted.
A Blockchain Glossary is a list of common or technical terms from Blockchain / Cryptocurrency, Blockchain Wallet and its related technologies.
You should know, however, that a wallet can simply be a piece of paper with your private and public keys on it. But, if you want your information to remain secure, you’ll need to pick either a cold wallet or a software one.
Cold wallets look like USB keys and are considered the safest way to preserve your public and private key because they don’t have to be connected to the internet, but they’re not the most efficient. Software wallets are more flexible and are better for fast trading and everyday transactions.
So, we would suggest that you get yourself a cold wallet to store large quantities of crypto and a software one for your everyday funds. And, before you pick a Bitcoin Wallet UK, you have to check what type of protocol it uses and how safe it is. This is something you’ll be able to easily verify with other members of the community.
These are some of the most important terms you’ll need to understand before trading crypto. This will allow you to stay safe and will give you a better understanding of how cryptocurrencies work in general.