Basic Crypto Terminology Explained for Beginners

Right now Bitcoin is edging closer to $40,000 and the broad altcoin market seems to be doing better as well, following several months of underperformance. Prices are more attractive compared to 2021, but it is not recommended to enter this market without some basic background knowledge. Let’s take a look at some basic terms that all traders need to be familiar with, as part of the process of learning how the industry functions. 

Standing for “Hold On for Dear Life”, this term refers to a passive investment strategy in which people buy crypto and hold onto it for the long run, despite the short-term volatility. Those who embrace this approach believe valuations will continue to rise over time, leading to increasing returns. 

Another important process to understand is halving. This means that the reward in crypto for each block mined on the blockchain is cut in half. According to the crypto experts at NAGAX, a platform that offers both crypto trading and exchange services, halvings are crucial for price developments because they mark the end or beginning of a new 4-year cycle. This is true for all cryptos, and especially for Bitcoin.

This can create a deflationary effect and thus push prices higher in the long run. Halvings occur regularly (once a few years), and it is not difficult to know in advance exactly when they are set to take place.

Non-fungible tokens (NFTs) are basically the right over some kind of digital entity, be it music, art, or even content. NFTs witnessed exponential growth in 2021, mainly because, compared to crypto, these are one-of-a-kind digital instruments which provide ownership for an underlying asset. It is possible to mint NFTs based on collectibles, art, music, and many other assets. At the same time, people can buy or sell fractional ownership of these assets, something that enables the purchase of assets that would have been too expensive for the wider public. 

On top of cryptocurrency trading using platforms like NAGAX, other innovations driven by blockchain technology also exist. A smart contract, for instance, is a kind of algorithmic program that enacts the terms of a contract automatically, based on its code. Platforms such as Ethereum, Neo, Tezos, Tron, or Algorand use smart contracts to function. If you’re new to blockchain, you need to be aware of how it is used, and where it is used.

Security remains one of the main concerns among cryptocurrency holders, leading to the creation of cold storage solutions. This basically enables users to store crypto on a physical device, such as a USB drive, that can’t be accessed via the internet by an unauthorized third party. This naturally provides higher security than a crypto wallet, though these wallets in general are also very encrypted.