Important Crypto Terms You Should Know [Guide For Beginners]

Published on: January 26, 2023
Last Updated: January 26, 2023

Important Crypto Terms You Should Know [Guide For Beginners]

Published on: January 26, 2023
Last Updated: January 26, 2023

The world of cryptocurrencies is vast and complex, and to someone entirely new to the market, trying to read up on the topic on the internet might prove a fruitless endeavor given all the technical jargon thrown about expecting you to know them already.

To that end, we’ve compiled a shortlist of terms that are sure to be useful to know when you’re next researching crypto on the net.


A portmanteau of alternative coin. Since Bitcoin launched in 2011, thousands of other cryptocurrencies have followed in its footsteps, and all of them have since been called ‘altcoins’ to differentiate them from the original. 

Other than Bitcoin, altcoins have been a famous investment for cryptocurrency traders; platforms like Kraken, Kucoin, and Bitcoin Up provide information about different altcoins, especially their market value trajectory.

The latter also makes trading possible by connecting users with professional brokers in the field.

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A blockchain is a digital database of all transactions in a specific cryptocurrency that has ever been recorded on the blockchain.

Blocks make up these transactions. When a block is full, a new one is formed. Certain blockchains can have an endless number of blocks, whereas others have a fixed number.

Every transaction on a public blockchain, such as Bitcoin’s, may be seen by everyone. As Bitcoin becomes more widely accepted, it will become simpler to link a transaction to a specific person.

Meanwhile, a private blockchain like Monero is completely inaccessible; connecting a transaction to a specific address is impossible. This is a key feature that draws customers looking to do transactions anonymously.

Blockchains do not have a central repository for the ledger. There are several computers and servers throughout the globe that copy the same file. Because of this, it is seen as a decentralised system.

Decentralized Apps (dApps)

Decentralized applications, or dApps, are blockchain-based apps that can be used in the real world.

Ethereum is sometimes referred to as the mother of decentralized applications, and developers use it to build new apps on top of its blockchain, which is why Ethereum was created.

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DApps cannot be defined in a way that applies to everyone, being open-source, decentralised, incentivised, with validators needing to be compensated with cryptographic tokens, and protocol-based, with the community agreeing on a cryptographic algorithm that can be widely adopted.

Decentralised Finance (DeFi)

Alternatives to conventional (centralised) finance are referred to as DeFi, an umbrella word encompassing decentralized financial services.

Banks, money management, payment processing, and insurance are part of DeFi’s services. Access to a traditionally privileged sector has been democratized thanks to DeFi goods and services.


Network nodes validate individual transactions. A node may produce a new block on the blockchain by solving a cryptographic challenge after there are enough outstanding transactions.

The cryptocurrency’s first-place node will be awarded a certain number of units for successfully solving this task (e.g. nodes on the Bitcoin network are paid with Bitcoins for creating new blocks).

Mining is the term used to verify transactions and create new blocks to the blockchain; in the same way that precious metals such as gold rise in value via this process, Bitcoin increases in value through this method.


A computer connected to the Internet and running a certain cryptocurrency software.

When a transaction is validated, the nodes are in charge of placing it into a new block on the blockchain. In other words, a cryptocurrency network of nodes keeps it afloat.

A light node is a machine running a lite version of the crypto program, which generally includes payment verification.

One purpose of several cryptocurrency systems that enable light nodes to operate is to enhance the number of nodes accessible, perhaps increasing the network’s efficiency and decreasing the time it takes to verify transactions.

Meanwhile, a full node is when all the transactions (and blocks) that have ever been registered for a certain cryptocurrency are on a single machine running the entire software of the project.

By running a complete node, transactions can be verified independently of a third party.

Private Key

The cryptocurrency in your wallet can only be spent if you have a private key (a string of randomly generated characters).

It’s like a password; you must use your wallet to make payments and transfer money. Your money will be inaccessible if you lose it, and there’s no way to get it back once you do.

Smart Contracts

Simply put, smart contracts are standard legal contracts written in computer code.

Like a traditional legal contract, a smart contract binds several parties to a certain outcome, but instead of spoken instructions, each party receives instructions in the form of computer code.

This way, the contract details are open to review and approval by both parties before signing. 

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To begin with, cryptocurrencies were meant to be used as electronic money. Once individuals learned that the same technology (i.e. blockchain) could be used for other purposes, particularly smart contracts, they began to utilize it in other ways.

Tokens are the common name for the cryptographic units used by initiatives that aspire to provide additional functionality beyond simple digital money.

A security token is a subclass of tokens that represent real-world assets like corporate stock, real estate, and so on.

While security tokens are more heavily regulated than other crypto initiatives, they are anticipated to streamline the purchasing, selling, and trading of certain types of assets.


Cryptocurrency wallets are where you keep your money safe. You must have seeds, keys, and addresses for your wallet to work. Wallets come in a variety of forms, including hot and cold.

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A hot wallet is an internet-connected cryptocurrency wallet. There are both online and mobile applications available. Because payments may be sent and received instantaneously, a hot wallet is more convenient. 

However, hackers may be able to acquire access to them over the Internet. Unlike a hot wallet, a cold wallet is disconnected from the Internet.

For example, you may install this program on a USB device. Cold wallets are your best bet if you’re looking for the most secure method of storing your cryptocurrency.

Hot wallets are easier to use, while cold wallets provide a higher level of security. Why? If Coinbase is hacked, then you might lose all of your cryptocurrency.

A cold wallet cannot be hacked unless the recovery seed is somehow physically accessed by outsiders.

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Written by Allison Langstone

Allison produces content for a business SAAS but also contributes to EarthWeb frequently, using her knowledge of both business and technology to bring a unique angle to the site.