While you’re still learning about cryptocurrencies it’s common to bounce from fascination to confusion within the same sentence- it’s a brand new technology after all, and some of these terms haven’t fallen into common use yet.
So it’s useful to have a glossary of crypto words to reference before it all starts to sound like gibberish. Let’s start with the big one:
Blockchain
It’s pretty simple really- a blockchain is a huge file of information containing the complete history of every transaction of a coin ever made. Most cryptocurrencies have their own blockchain, such as Bitcoin and Dash, and some piggyback on the blockchain of another, such as Golem, which exists as a token on the Ethereum blockchain.
Digital Wallet Address
A sequence of letters and/or numbers, usually between 27 and 34 characters. Every address is unique. Here’s an example of a Bitcoin address: 1MvSr21cJZhnLxbLc4o8fVsE6viFWfsqWA. Every coins that exists on a blockchain is assigned to a wallet address- making it easy to see who owns what.
Digital wallet
You store physical money in your physical wallet, you store digital money in your digital wallet- software either installed on your computer or on a secure server, which allows you to interact with digital coins and store them at a digital address.
Private Key
Every digital address has a unique private key that has the power to open its corresponding wallet without the need of a password. So, when you set up your own digital wallet on one of the guides on this site and are given your own private key, you should make a point of storing it safely and never, ever sharing it with anyone.
Hardware wallet
A physical device devoted to keeping coins safe- by keeping your digital wallet’s private key stored and encrypted. Without access to the hardware wallet, which is itself protected by a password, no-one can access your digital wallet except yourself. I highly recommend getting one yourself if you have any amount of crypto you’d be upset to lose.
Alt Coins
To some people everything but Bitcoin is an alt coin. To some people everything but Bitcoin and Litecoin is an alt coin. To some people everything but Bitcoin and Ethereum is an alt coin. You see where I’m going with this- what makes a coin an alt coin is based on the opinion of whomever you ask. Though remember Bitcoin did come first, so I’m not sure it will ever be considered an alt coin.
Fiat Currency
Fiat currency is defined as legal tender whose value is backed by the government that issued it. So think dollars, pounds, euros etc. Crypto has no central bank so it’s not a fiat currency.
Digital currencies exchange
This is a web platform that facilitates the conversion of one coin to another (for example Bitcoin to Ethereum) based on the current exchange rate. Some platforms allow you to buy crypto using fiat currency, for example Coinbase, while others specialize in converting digital coin to digital coin, for example Changelly.
ICO (initial coin offering)
An initial coin offering is a means of crowdfunding using cryptocurrency, where a startup company will release a digital currency for investors to purchase (often in the hope it’s going to be the ‘next big thing’).
Dapp
Shorthand for a Decentralized Application, a Dapp is a piece of software with a standard UI (user interface) but utilizing a decentralized back-end, meaning it doesn’t run on your computer, instead typically making use of a blockchain and smart contracts.
Smart Contract
Smart contracts help people exchange money, property, shares- pretty much anything of value- in a transparent, conflict-free way. Both parties can see the code of the contract, and thus the outcome. Smart contracts also avoid the services of a middleman- for instance, when sending money to a friend, banks are the middlemen, taking their cut every step of the way.
Open Source
Software that has its original source code freely available for download so it can be audited, modified and redistricted by anyone.