Cryptocurrency Basics
Bitcoin (BTC)
The first and most well-known cryptocurrency, created by Satoshi Nakamoto in 2009. Often called "digital gold," Bitcoin serves as a store of value and medium of exchange without requiring banks or governments.
Altcoin
Any cryptocurrency other than Bitcoin. Examples include Ethereum (ETH), XRP, Solana (SOL), and thousands of others. Each altcoin typically aims to improve upon Bitcoin or serve different purposes.
Blockchain
A digital ledger that records transactions across multiple computers. Think of it as a tamper-proof accounting book that everyone can verify but no one can alter without consensus.
Wallet
Software or hardware that stores your cryptocurrency private keys. It's like a digital bank account that only you control. Popular types include hardware wallets (safest), mobile apps, and browser extensions.
Private Key
A secret code that proves ownership of your cryptocurrency. Never share this with anyone - whoever has your private key controls your funds. Usually stored as a 12-24 word recovery phrase.
Public Key/Address
Your cryptocurrency "bank account number" that others use to send you coins. It's safe to share publicly and looks like a long string of letters and numbers (e.g., 1A2B3C4D5E6F...).
Trading & Exchange Terms
HODL
A misspelling of "hold" that became a crypto meme meaning to buy and hold cryptocurrency long-term regardless of price fluctuations. Originally from a Bitcoin forum post in 2013.
Bull Market / Bear Market
Bull market = prices rising over time (optimistic). Bear market = prices falling over time (pessimistic). These terms come from how bulls attack upward while bears swipe downward.
Market Cap
Total value of all coins in circulation (price × supply). Bitcoin has the highest market cap (~$1+ trillion), making it the most valuable cryptocurrency by total worth.
Volatility
How much a cryptocurrency's price swings up and down. Crypto is highly volatile - prices can change 10-50% in a single day, making it risky but potentially rewarding.
Limit Order vs Market Order
Market order = buy/sell immediately at current price. Limit order = buy/sell only when price reaches your specified level. Limit orders help avoid paying too much during price spikes.
Spread
The difference between the highest buy price and lowest sell price. Exchanges make money from spreads. Smaller spreads = better prices for you.
DeFi (Decentralized Finance)
DeFi
Financial services (lending, borrowing, trading) built on blockchain without traditional banks. Think of it as rebuilding the entire financial system with transparent, programmable code.
Smart Contract
Self-executing contracts with terms written in code. Like a vending machine - insert coins, get product automatically. No lawyers or middlemen needed.
Liquidity Pool
Funds locked in smart contracts to enable trading. Users contribute equal values of two tokens (like ETH/USDC) and earn fees from trades. Essential for decentralized exchanges.
Staking
Locking up cryptocurrency to help secure the network and earn rewards (like interest). Think of it as putting money in a savings account that helps run the blockchain.
Yield Farming
Moving crypto between different DeFi protocols to maximize rewards. Like shopping for the best interest rates, but more complex and risky.
DEX (Decentralized Exchange)
Trading platforms with no central authority. Examples: Uniswap, SushiSwap. You keep control of your funds, but trades might be slower and more expensive than centralized exchanges.
Security & Storage
Cold Storage
Storing cryptocurrency offline where hackers can't reach it. Hardware wallets and paper wallets are cold storage. Safest option for long-term holding.
Hot Wallet
Cryptocurrency storage connected to the internet (mobile apps, browser extensions, exchange accounts). Convenient for trading but more vulnerable to hacks.
Seed Phrase / Recovery Phrase
12-24 words that restore access to your wallet if lost. Write it down on paper and store safely - it's the master key to all your cryptocurrency.
2FA (Two-Factor Authentication)
Extra security requiring two forms of identification (password + phone code). Essential for exchange accounts. Use Google Authenticator or similar apps, avoid SMS when possible.
Phishing
Fake websites or emails trying to steal your login information. Always double-check URLs and never click suspicious links. Legitimate companies never ask for private keys.
Rug Pull
When developers abandon a project and steal investors' money. Common with new DeFi tokens. Research projects thoroughly and never invest more than you can afford to lose.
Technical Concepts
Gas Fees
Transaction costs on Ethereum and similar networks. Like paying postage to send mail - busier networks cost more. Can range from $1-100+ depending on network congestion.
Proof of Work (PoW)
How Bitcoin validates transactions using computational puzzles. Miners compete to solve puzzles, winner adds new block and earns rewards. Secure but energy-intensive.
Proof of Stake (PoS)
Alternative to mining where validators are chosen based on their stake (ownership). More energy-efficient than PoW. Used by Ethereum 2.0, Cardano, and Solana.
Fork
Changes to blockchain rules. Soft fork = backwards compatible upgrade. Hard fork = creates new blockchain (like Bitcoin Cash from Bitcoin). Can result in free new tokens.
Hash
Unique digital fingerprint for data. Changing even one character creates a completely different hash. Used to verify transaction integrity and link blockchain blocks together.
Node
Computer that stores and validates blockchain data. Full nodes store the entire blockchain history. More nodes = more decentralized and secure network.