13 Tips For Understanding Cryptocurrency Terminology

We are all aware that cryptocurrencies are something that we all talk about and that growth of popularity has created a real mess, not only among people but also among banks, companies, and even entire countries. Along with new technology, some new words, expressions, and terminology is being used, which many people find confusing, even those who are familiar with how the whole system works. All that is a reason more to show and explain how and what some terms actually mean, with a brief crypto history.

What are cryptocurrencies?

Imagine the currency not issued or overlooked by any state or government and which uses cryptography for the protection and security of everything going on and every transaction. Simply put, that is what they represent and why so many people are interested in these new currencies. A proper definition would be that cryptos are a subset of digital, alternative, and virtual currencies.

What is Blockchain technology?

Unlike fiat currencies that we currently use in our everyday life, and where control is centralized, blockchain technology (a type of cryptography) allows cryptos to be decentralized. That ensures that all info, personal data, and everything else cannot be changed easily, meaning that money is safe.

The market

Although it is only one of more than 1.400 cryptos available in the world, when someone mentions cryptocurrency, the first and instant thought is – Bitcoin. But since it all began in 2009, this world has changed and developed a lot, meaning that today, the crypto market is one with the highest growth, and it seems like that hype will not end soon.

In that market, the term ICO (Initial Coin Offering) is pretty similar to the term IPO (Initial Public Offering). IPO represents the first shares of one company when that company goes public, and ICO refers to the first cryptos sold by one company on the market.


1. Mining

It is the process of verifying an individual block of transactions in the network. What this often requires is a large amount of processing power, and for this process, miners are rewarded with a certain amount of mined cryptocurrency.

2. Block Reward

As we established, the miners have a huge role, and as such, they get rewarded for their work. That reward is also a motivation, and it represents a specific amount of cryptocurrencies for every block they mine.

3. Mining rig

It represents the computers specifically designed to verify transactions in blockchain cryptocurrencies such as Ethereum or Bitcoin. Such computers are usually several networked processors (CPUs) or graphics cards (GPUs).

4. Fork

It is a situation where a cryptocurrency gets split into 2 different currencies. This most often happens due to the change in the encryption protocol or some other technical characteristics. Then the newly created protocols are no longer connected to the previous ones in the blockchain, and a new transaction record is formed – a new cryptocurrency. Example: the division of Bitcoin into Bitcoin (BTC) and Bitcoin Cash (BCH) in August 2017.

5. Altcoin

It represents a term coined to say alternatives and a coin that actually applies to all cryptocurrencies except Bitcoin and Etherium.

6. ROI – Return On Investment

ROI refers to the percentage denoting the profit in relation to the initial investment. Example: A ROI percentage of 100 indicates that someone has doubled their initial investment.

7. Node

NODE refers to any computer on which a blockchain file is stored.  It is a computer that contains information about all transactions in the network.

8. Hashrate

This is the number of calculations that your equipment can report every second while trying to solve a math problem. “Hash rate” is measured in megahashs, gigahashs, and terahashs per second. The higher the hash rate, the better are the chances that you will solve the transaction block.

9. PoW

The term refers to a system designed so that finding an answer to a problem is hard or/and expensive, and varying the solution to a problem is simple or/and inexpensive. In particular, these are different mathematical algorithms that are solved by mining, which provides protection against various hacker attacks on the cryptocurrency network. The miner who first confirms the block of transactions by performing proof of work is rewarded with the amount of that cryptocurrency.

10. PoS

It is a different way of confirming transactions compared to PoW, but it is still a mathematical algorithm aimed at network protection. In proof of stake, the creator of a new block gets determined not based on who first establishes the block but on the basis of deterministic variables such as the wealth of an individual user, which is defined as stake. There are no block verification rewards, so miners receive transaction commissions directly.

11. Private key

It is a set and combination of numbers, letters, or characters used as a code in algorithms in order to generate user addresses. Based on the info from PK, we can determine every transaction and the exact amount of money in the account of that key.

12. Wallet

A place to store your coins. There are two types of wallets:

  • Software – where one uses special programs to storage money like various apps, but there is no app in which you can store any cryptocurrency as every single one has their own software wallet.
  • Hardware – A USB-like device specially designed and programmed to store the private key securely. These are often referred to as the safest way to store your digital money.

13. P2P

Transactions done this way are a perfect way to decentralize everything, and that is why P2P has a crucial role in the digital world.

Final thoughts

Of course, there are even more phrases, usually depending on which cryptocurrency we are talking about, but these are some of the most common terms that someone may come across when dealing with cryptos. Today, when there are so many verified websites that can actually help with understanding the crypto world along with some excellent advice for trading and investing, there is no reason not to join the crypto hype. Check for more here,