Cryptocurrencies aren’t replacing credit cards yet — only 6% of Americans used or bought cryptocurrency last year — but they’re becoming more of a household name.
That’s because major companies like PayPal and Overstock.com now accept cryptocurrency as payment and Tesla founder Elon Musk made headlines when he snapped up $1.5 billion worth of cryptocurrency earlier this year.
Even if you have no intention of jumping on the crypto train, it’s worth knowing more about it — if only to understand how a 2013 dog meme joke evolved into the sixth largest new digital currency. (No, really). Here’s a look at some of the most common cryptocurrency terms to help break down what it’s all about.
But first, what exactly is cryptocurrency? Essentially, it’s an unregulated digital form of payment that sprung up in 2009 with the invention of bitcoin, the most popular cryptocurrency. (Etherium comes in second.)
Unlike currencies like the U.S. dollar or the Japanese yen, cryptocurrencies aren’t regulated by any government and the transactions don’t go through a bank. Instead, cryptocurrency transactions happen online and are recorded on an encrypted digital ledger.
Address: A long series of letters and numbers that determines where a cryptocurrency is received.
Altcoin: Any cryptocurrency that isn’t bitcoin. Altcoins make up about 40% of the cryptocurrency market.
ATH: Abbreviation for all-time-high, the highest price to date for a specific type of cryptocurrency.
Bitcoin: The first form of cryptocurrency and the one with the biggest market share.
Blockchain: The online digital ledger that is used to record a series of verified public cryptocurrency transactions. This database stores information in “blocks,” — each holding a set number of past cryptocurrency exchanges — that are then connected together. Although blockchain technology was created for the use of bitcoin, it’s also being explored for use in everything from shipping and healthcare to banking.
Cold storage: When cryptocurrency holdings are kept in cold storage, it means they are in digital wallets that are not connected to the internet. That keeps them safe from being hacked.
Exchanges: Platforms that allow people to buy and sell cryptocurrency. Major cryptocurrency exchanges include Binance and Coinbase.
Fiat currencies: Government-issued and backed currencies like the U.S. dollar or the European Union’s uro.
Market cap: The total market value of all of a specific cryptocurrency’s coins. To find out the market value, multiply the number of outstanding coins by the current price of the coins. Some types of cryptocurrency have a set limit of coins that can be “mined” every year. In the case of bitcoin, the founders decided to create a lifetime limit of 21 million bitcoins that can be uncovered.
Mining: The process used to uncover new units of a type of cryptocurrency. People known as “crypto miners” use technology and hardware to solve complicated equations to verify new blocks of cryptocurrency that get added to the blockchain. As a reward for their work, miners receive digital tokens.
Private and public keys: Pieces of information consisting of a string of letters and numbers that people can use to access their crypto holdings. Public keys are similar to bank account numbers and are used to make deposits.
Private keys are similar to a debit card PIN and allow people to access their digital cryptocurrency holdings. It’s critical to never forget or lose your private key because there’s no way to access your wallet if you do.
Token: A unit of a type of cryptocurrency.
Wallet: Digital spaces where people can store, send and receive digital currency. Hot wallets are connected to the internet while cold wallets are not.