Crypto is fast making headway into the mainstream finance world. The crypto market rose to a lofty $3 trillion industry in 2021, thereby establishing its significance in the global finance world. Although the crypto market dipped below $1 trillion in 2022 owing to a devastating crash, the emerging industry is predicted to grow by 5x by the coming 7-8 years. And in fact, as the crypto industry is currently recovering from the crash and the prices are low, there could not be a better time for purchasing cryptocurrencies.
Are you aspiring to purchasing cryptocurrencies? Well, then, you must make yourself acquainted with certain terms and concepts that you would need to know while purchasing cryptocurrencies. Crypto is a new world for all of us. It has just been little over a decade after the launch of the first-ever crypto, i.e. Bitcoin. Thus, it’s taking the world little time to get accustomed with the crypto terminologies. If you are a crypto beginner, it’s self-explanatory why you are not fully aware of the crypto terms. But, if you are looking forward to purchasing crypto, you do have to understand the terms and notions.
Key terms to know and understand while purchasing cryptocurrencies
A crypto exchange is a trading exchange that has been designed especially for crypto trading activities. It is the platform where you can buy crypto, sell crypto, trade crypto, as well as convert crypto into some other crypto and fiat. There are 3 types of crypto exchanges today for selling and purchasing cryptocurrencies- centralized exchange, decentralized exchange, and hybrid exchange.
Crypto coins and tokens
There is a tendency to use tokens and coins interchangeably in the crypto world but that’s not exactly the right thing to do. Both crypto token and crypto coin are cryptocurrencies but there is a difference. Crypto coins are cryptocurrencies that are developed on their native blockchain. For example, Bitcoin is a crypto coin, it has been developed on its native Bitcoin blockchain. On the other hand, token is a crypto that is being developed on a legacy crypto blockchain. For example, Polygon is a token as it has been developed on Ethereum blockchain.
Bitcoin probably needs no sort of introduction- however, since we are discussing the most important terms you need to know while purchasing cryptocurrencies, the list must feature Bitcoin. The king of crypto, Bitcoin is the #1 and the first-ever cryptocurrency. It serves as both payment and a lucrative investment vehicle. The coin commands the largest market cap, highest liquidity, and greatest pool of investors and traders in the crypto world. Though Bitcoin is the most expensive crypto yet you do not always need to buy 1 whole BTC for purchasing cryptocurrencies. The coin is divisible into fractions or Satoshis, and crypto users can purchase a bunch of Satoshis instead at a much lesser price. Every crypto investor must invest at some percentage of his/her crypto investment capital in Bitcoin.
All the coins available in the crypto world, apart from Bitcoin, are termed as “Altcoins”. As of October 2022, the crypto scene is bustling with around 18,000+ altcoins, if not more. The most significant altcoin is Ethereum, the 2nd largest cryptocurrency.
You might already know by now that cryptocurrencies are developed on blockchain platforms. These blockchain platforms verify blocks bring new currency into circulation either through mining or staking- based on the consensus mechanism followed by the blockchain.
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If it’s a PoW (Proof-of-Work) blockchain, then, the blockchain will follow the mining process for block verification and currency circulation. Bitcoin is a PoW crypto. If it’s a PoS (Proof-of-Stake ) blockchain, the blockchain will follow the staking process for block verification and currency circulation. Most of the coins and tokens today are PoS cryptos. Ethereum was originally a PoW coin. But after the Merge upgrade in the 3rd quarter of 2022, Ethereum has turned into a PoS coin.
These are one type of altcoins that have been developed out of jest. Most of the meme coins are themed on cute dog faces and are extremely popular today. However, the majority of the meme coins do not serve any solid use case and hence cannot be relied on in the long-term. You can opt for a meme coin when you are planning for purchasing cryptocurrencies but make sure to trade it off fast.
These cryptos are slightly different from other cryptocurrencies. While the majority of cryptocurrencies are valued based on their independent worth, stablecoins derive value from stable commodities. In other words, stablecoins are linked with a stable commodity, such as USD, to make the crypto more stable compared to other cryptocurrencies. If you are planning to include stablecoins while purchasing cryptocurrencies, you should mostly consider them as investment tools.
What are you going to do after purchasing cryptocurrencies?
Well, you can either trade off your holdings within a short while or else you can keep them on hold for a long term. There is a special crypto-exclusive term for the second category, called HODL or “Hold on for dear life”.
These are wallets where you will store the cryptos. Every crypto exchange has its own wallet where your funds will be stored after purchasing cryptocurrencies. Otherwise, there are 3rd party wallets, such as hot wallets and cold wallets. These wallets exist independent of exchanges. Hot wallets are placed online. Cold wallets are offline wallets and hence offer maximum security to crypto funds.
Crypto ATMs Crypto exchanges are not the only place from where you can buy cryptos. There are other places for purchasing cryptocurrencies as well. One of them is a crypto ATM. It functions just like a regular fiat ATM- the only difference is that it dispenses out crypto. Some crypto ATMs dispense multiple cryptos while some ATMs are designed for one particular crypto, say Bitcoin. Since Bitcoin is the most popular crypto, Bitcoin ATMs are the most popular and most frequented ones.