Crypto can be intimidating for newcomers. Not only are you branching into a new financial territory, but it sounds like every crypto trader on the internet is speaking in a different language.
Before you start trading cryptocurrency, it’s essential to understand the key terms that govern the crypto world. From blockchain to bulls to the iconic HODL, here is the official glossary for all crypto newbies.
Let’s start at the (very) beginning! What exactly is cryptocurrency? Simply put, cryptocurrency is digital money with which transactions are verified and records are maintained by a decentralized system using cryptography. Instead of using money created by a government and storing it in a bank, crypto is a currency that can be traded directly with no middlemen or central authority. This means that transactions are often quicker and less expensive to complete. Plus, every transaction or trade is made public on a ledger (also known as the blockchain) so it can be verified.
Fiat is a government-issued currency. It has value because a central authority decided it did, and the masses trusted the central authority. The Canadian dollar, British pound, and Euro are all examples of fiat. Cryptocurrency challenges the idea of fiat by providing a decentralized way to buy and trade digital currency that still has real value.
Cryptocurrency was designed to be a decentralized network, unlike traditional banking. Through the lens of crypto, decentralized also means that there is no central point that has authority over the blockchain network. Instead, the network is spread equally between users, also known as “nodes”.
Blockchain is essentially a massive digital ledger. Think of a physical ledger that a bank might keep to record transactions. Only this one is online and available for anyone around the world to see. The blockchain consists of a series of public “blocks” or verified transactions, which work together to keep the system safe and secure.
Crypto miners use hardware and technology to validate new blocks of cryptocurrency and enter them onto the blockchain. They are typically rewarded with digital tokens in exchange for helping to keep the system secure.
Proof of Work (PoW)
Proof of Work refers to the work that crypto minors do to keep blocks verified. PoW is a system for proving that transactions have been verified. Most cryptocurrencies, including bitcoin, use this system.
Arguably the most popular cryptocurrency, bitcoin is believed to have launched the crypto movement back in 2009. The creator(s) of bitcoin famously goes by the pseudonym Satoshi Nakamoto, but their true identity is still a mystery.
Any cryptocurrency other than bitcoin is called an altcoin. A few of the most popular altcoins are Ether, XRP, and Dash. To learn more about these altcoins, visit our Support Hub.
A token is a unit of cryptocurrency, sometimes referred to as a crypto coin. For example, bitcoin is a token.
A fork is a change to the code of the blockchain. A soft fork is a non-contentious split in the blockchain that can create new, valid blocks that are different from the original blocks but remain as one blockchain going forward. A hard fork is often the result of a disagreement amongst the mining community (or the validators) that results in two different blockchains following the fork. The creation of bitcoin cash was the result of a fork of the original bitcoin blockchain.
The market capitalization is the total market value of a cryptocurrency. To find the market cap for a specific cryptocurrency, multiply the total number of units outstanding by the coin’s price.
If a cryptocurrency is bullish, that means the trader (or the “bull”) thinks it will rise in value.
If a cryptocurrency is bearish, that means the trader (or the “bear”) thinks it will decline in value.
This might be crypto’s favourite slang. HODL came to be when an enthusiastic trader misspelled the word “hold” on social media. Since then, crypto traders have turned it into an acronym for “hold on for dear life”. If you’re deciding not to trade a currency, you’re hodling.
This one is almost exactly like it sounds. Every crypto trader has a virtual or physical wallet where they store their digital currencies.
Public & Private Keys
Both public and private keys are pieces of information made up of numbers and letters. A public key is what you use to deposit your crypto holdings, like a bank account number. A private key is what you use to access your personal wallet, like your secret PIN used to access your debit card.
Just like with traditional money, it’s always a good idea to keep your digital assets safe. Cold storage allows you to hold your crypto and private keys offline to prevent against the risk of theft or hacking. Some crypto trading platforms have built in cold storage solutions. Bitvo, for example, holds 95% to 100% of customer funds in cold storage.
A cryptocurrency exchange is a marketplace where people can buy and trade crypto. There are several Canadian crypto exchange platforms, all with their own set of unique benefits.
How to start trading crypto
Now that you’re a crypto terminology wiz, it’s time to get trading! Read our step-by-step guide to learn where to start, including beginner’s trading tips and how to choose a trusted crypto trading platform.
How do you buy Bitcoin in Canada?
You sign up with Bitvo, a fast, secure and easy to use cryptocurrency trading platform.