The downward spiral of FTX and its former CEO, the “King of Crypto,” has garnered massive media attention, putting cryptocurrency conversations back into the limelight.
But for many, the language of crypto — bitcoin, blockchain, crypto exchange — still remains cryptic.
Don’t worry.
If this is your first time hearing these words or you just need a refresher, here are a few key terms and what they mean…
Bitcoin is a type of digital currency (cryptocurrency). Similar to traditional currencies like dollars, pounds or euros, there are many types of digital currencies. Other popular ones are Ethereum and Dogecoin. However, unlike traditional currencies, Bitcoin is not backed or controlled by centralized financial institutions. Instead, it’s decentralized. This makes it popular with people who believe that decentralization can bring financial freedom, but it also makes it extremely volatile – the value rising and falling at the whim of bitcoin buyers and sellers.
Blockchain is the technology underlying all cryptocurrencies and many other products such as NFTs (Non Fungible Tokens). All cryptocurrency buying, selling and trading is recorded in this virtual spreadsheet, which is arranged in blocks that are linked together in a giant chain. Each cryptocurrency transaction is individually recorded on the blockchain by a vast network of volunteers who use computer programs to verify its authenticity. Because the blockchain is decentralized, it is not stored on a computer or network or owned by any company. The information is accessible to everyone.
Cryptocurrency is the term for digital currencies like bitcoin that exist on the blockchain.
A crypto exchange is the digital platform where investors can buy, sell and trade cryptocurrencies. Similar to traditional investing, a crypto exchange acts as a broker, allowing people to transfer traditional money like pounds or dollars from their banks into cryptocurrencies like bitcoin or ethereum. Most transactions come with fees.
A crypto wallet is a place where investors store their cryptocurrency. It stores the virtual assets much like a traditional wallet holds cash. There are two types, a hot wallet and a cold wallet. Hot wallets are connected to the internet, making them more accessible for fast transfers and easy access. Cold wallets are physical devices, such as purpose-built USBs, that store crypto offline, typically for more secure and longer-term storage.
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