The recent downfall of FTX and its former CEO, “The King of Crypto” has caught the attention of major media outlets and brought cryptocurrencies back into the spotlight.
Nevertheless, the language that is used to discuss these digital assets (Bitcoin, Blockchain, cryptocurrency exchanges) can still be confusing.
Whether these terms are new to you or you just need a refresher, here are the main concepts and their meanings.
Bitcoin is a type of digital currency (cryptocurrency). It is similar to traditional currencies like the US dollar, British pound, and euro. Other well-known examples include Ethereum and Dogecoin. Unlike traditional currencies, however, digital currencies are not backed by any central bank. Bitcoin is popular amongst those who believe in the power of decentralization to bring financial freedom. However, this also makes it very volatile, as its value changes according to the will of the market.
Blockchain is the technology behind all cryptocurrencies, as well as other products such as non-fungible tokens. It is a virtual ledger that records cryptocurrency trading, buying, and selling. All of these transactions are linked together into one chain. A large network of volunteers verifies these transactions using computer programs. Blockchain is distributed, meaning it is not stored on any single machine or network, and it is not owned by any one company. Everyone has access to the information.
Cryptocurrency is a term used to describe digital currencies like Bitcoin, which are stored on the Blockchain.
A crypto exchange is a digital platform on which investors can buy, sell, and trade cryptocurrencies. Just like traditional investing, a crypto exchange serves as a broker, allowing people to exchange traditional money like dollars and pounds into digital assets such as Bitcoin or Ethereum. Most transactions involve fees.
This is a place where investors store their cryptocurrency. Digital assets can be stored just like cash in a traditional wallet. There are two types of crypto wallets, hot and cold. Hot wallets are connected to the internet, allowing for quick and easy transfers. Cold wallets, similar to USB flash drives, are designed to store cryptocurrency offline, usually for longer-term storage.