Glossary

For those new to cryptocurrency, we’ve outlined some key industry terminology below:

Altcoin
A term used to describe smaller, less well-known cryptocurrencies.

Asset Managers
Facilitators of investment and trading of cryptocurrencies.

Bitcoin
A digital currency created in 2009 by Satoshi Nakamoto, a pseudonym for the developer(s) behind the cryptocurrency, and now one of the largest and most well-known examples of a cryptocurrency.

Blockchain
Blockchain is the underlying digital technology that allows cryptocurrencies to exist. It is a digital and decentralised ledger that records transactions.

Broker
A service by which you can buy and trade crypto assets at a price set by the brokerage.

Coins/Tokens
The individual units of currency that exist within a cryptocurrency.

Cryptocurrency
A cryptocurrency is a digital currency that uses cryptography to generate ‘tokens’ and verify the transfer of these tokens between people. Cryptocurrencies are completely decentralised and operate without a central authority, like a bank.

Comparison site
Websites which provide data to compare the different rates of cryptocurrencies.

Decentralised applications (DAPPs) – these are applications that use blockchain technology to decentralise other aspects of business like supply chain management or company voting rights.

Decentralised ledger
This is a ledger that is held by everyone on the network and records the movement of each token on the network. It is publicly accessible and unchangeable.

Direct trading
These platforms are a type of exchange which allows individuals to trade cryptocurrencies directly with each other, without a fixed market price.

Exchange
A marketplace where traders can buy and sell cryptocurrencies using either fiat or alternative cryptocurrencies.

Fiat currency
The term used for ‘traditional’, centralised currencies like pound Stirling or US Dollars.

Fork
This is when developers of a cryptocurrency disagree on how it should be developed, and so decide to ‘split’ from each other, creating two separate cryptocurrencies.

Initial Coin Offering or ICO
An ICO is when a start-up offers investors the chance to invest in their project by buying ‘tokens’ in exchange for either fiat currency or another digital currency like bitcoin. The start-up will often set out its plan on a ‘white paper’ which states what the project is about, what needs the project will fulfil upon completion, how much money is needed to undertake the venture, how much of the virtual tokens the pioneers of the project will keep for themselves, what type of money is accepted, and how long the ICO campaign will run for.

Intermediaries
A third-party facilitator of payments and transactions.

Merchants
Accept payments in exchange for goods and services.

Mining
The process through which new tokens of cryptocurrency are created. In turn, miners are rewarded with some cryptocurrency for each new token they create.

Private key
These are cryptographically generated strings of characters that are mathematically related to a public address. They allow individuals to access their cryptocurrencies.

Public address
This is a cryptographically generated string of characters that allows individuals to send and receive cryptocurrencies. They are mathematically related to private keys, and when used together they allow individuals to access their funds.

Trading platforms
A service by which you can buy and trade crypto assets at a price set by the brokerage.

Transaction fee
Because cryptocurrencies are decentralised, each transaction must be verified by a third party on the network. This means that each transaction comes with a fee as a reward for the third party that verifies the transaction.

Wallet
A cryptocurrency wallet allows an individual to access their cryptocurrency, as well as allowing them to send and receive cryptocurrency. A wallet doesn’t contain the cryptocurrency as such, instead it holds the users private key, which allows them to access their funds when combined with their public address. These can be classed as hot or cold wallets. A hot wallet is one that is connected to the internet, allowing the holder to easily access their funds. A cold wallet stores the information offline, unconnected to the internet. This makes it harder for an individual to access their funds, but they are considered more secure.

Did you know?

1. All that’s needed to access the cryptocurrency market is an internet connection – allowing access to the financial world from any location.

2. You can store cryptocurrencies on something as small as a memory stick, making them far easier to store securely than the equivalent value in cash or other assets.

3. Cryptocurrencies run on a type of ledger technology called blockchain. Unlike traditional ledgers, this is distributed across a peer-to-peer network – making all transactions incredibly transparent. Anyone within the network can access the history of a chain and trace the movement of a particular block.

4. Transactions carried out through cryptocurrencies can be tied to smart contracts. This compels parties in a transaction to act, speeding up the process by removing the need for a complicated system of lawyers and advisers for deals.

5. The first cryptocurrency to be created was Bitcoin. Its creator operated under the pseudonym of Satoshi Nakamoto and in 2015 was nominated for a Nobel Prize in Economic Sciences.

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