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Exchanging cryptocurrencies has picked up steam recently, with some market participants reducing exposure as prices are falling, while others are being attracted by cheaper valuations. Bitcoin is down 56% from the all-time highs and other altcoins are posting even larger losses, so those who have not already started their venture in the crypto space, now have the chance to get in and benefit from lower prices.
Since investors and traders are preparing for a rocky period, if you are a beginner learning to exchange crypto it would be better to start off by understanding the key terminology in the industry. This article talks about 6 of the terms you will be stumbling upon when using an exchange platform to either buy or sell crypto.
Altcoin
Bitcoin was the first cryptocurrency ever created and all the other projects, that emerged after it, are being called “altcoins”. Ethereum, XRP, Dash, Cardano, and Neo are just some of the examples. Because Bitcoin still is the market leader, experts in the industry are still closely monitoring the differences between BTC and the altcoins market.
Blockchain
At its core, a blockchain is actually a decentralized system used to record information, which in the case of cryptocurrencies is represented by financial transactions. This is a digital ledger of transactions that are being verified by participants (miners or stakers) contributing to the well-functioning of the system in exchange for a reward.
Cold storage
When you are using an exchange platform such as Bitnomics, once you buy crypto, it would be necessary to hold a wallet. For digital assets, there are two types of wallets, using hot or cold storage mechanisms. A hot wallet stores information on a server, but a cold wallet is a more secure option.
Most of the time, this will be a physical device, like a USB drive, which you can connect to a PC or laptop and gain access to your cryptocurrency holdings, without having to worry about hacking attempts. According to experts working with Bitnomics, any person that is seriously considering exchanging crypto, especially if large amounts of capital are involved, should have a cold wallet.
Private key
Also linked to cryptocurrency storage, you need to understand what is a private key because this can have high security implications. A private key is just like a password and represents a large string of letters and numbers, that will allow you to access and manage your crypto funds. Any time to want to conduct any type of financial transaction with crypto, the private key will be demanded.
Smart contract
A smart contract represents a program running on the blockchain, running when predetermined conditions are being met. They are used to automate the execution of an agreement, removing intermediaries and reducing costs drastically. Ethereum, Neo, NEM, and Avalanche, are a few platforms supporting smart contracts.
Staking
Staking is a process based on which investors can lock cryptocurrency on a blockchain and use it to verify transactions that are occurring in exchange for rewards. This emerged as an alternative to mining, which is energy-intensive and redundant.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.