A cryptocurrency is a digital asset the ownership and transaction records of which are stored on a blockchain. Not issued by a central authority, cryptocurrencies are classed by HMRC as "Exchange Tokens."
Cryptocurrencies are by definition decentralized. This means that they can be traded between users without an intermediary (P2P). They can also be bought or sold on cryptocurrency exchanges
. Common examples of cryptocurrencies are Bitcoin (BTC), Litecoin (LTC), and Ripple (XRP). Blockchain
The simple way to define blockchain is as a distributed list (ledger) of cryptocurrency transactions. Unlike bank ledgers, which are stored on centralized databases, blockchain records are distributed across, and validated by, large global networks of independent users and "miners" (see below).
Blockchains get their name from the "blocks" that make up their fundamental structure. Each block is composed of transaction data, a timestamp, and a hash of the previous block. New blocks reinforce previous blocks and are confirmed by a consensus of network participants via some pre-established protocol. Token
The term "token" is typically used to refer to digital assets that are developed on top of existing blockchain networks. Unlike cryptocurrencies, tokens may be issued by central authorities, such as companies carrying out fundraising through some form of decentralized finance (DeFi - see below). Tokens can be issued to represent any of a number of things, including discounts on a company's products, shares in a company, or even the whole ownership of some real-world object.Bitcoin
Bitcoin was the first digital asset issued on a blockchain network. As a result, it is the first cryptocurrency. Today, Bitcoin is considered to have two primary use cases: to store value ("digital gold") and to make payments ("means of exchange"). Satoshi(s)
Bitcoin, like other cryptocurrencies, can be divided into smaller units. Each unit, called a Satoshi, is equivalent to a one hundred-millionth (0.00000001) of a single bitcoin. Satoshi (or Satoshis) are named in honor of the mysterious "inventor" of Bitcoin, Satoshi Nakamoto. Altcoin
The term Altcoin is frequently used to refer to any cryptocurrency or token other than Bitcoin. The term is falling out of fashion as new applications of DeFi rise in popularity and as Bitcoin loses its perceived dominance among cryptoassets. Stablecoin
A stablecoin is a token which has a stable value in relation to some other asset. Most well-known stablecoins, like Tether (USDT), are pegged to the value of national currencies. Others are backed by commodities, such as precious metals, or have equal values to other cryptocurrencies..
Most stablecoins are collateralized, which means some financial institution, company, or organization maintains custody of backing assets. Non-collateralized stablecoins, like DAI are a more decentralized option. DAI maintains a stable value not through the purchase and custody of a backing asset, but through algorithms that control the market supply of tokens. Ethereum
Ethereum is a blockchain network which issues the second-most popular cryptocurrency in terms of market cap, Ether (often called Ethereum). Beyond its role as a ledger of transactions, the Ethereum network facilitates the implementation of smart contracts.
Through the smart-contract functionality, Ethereum has become the most popular network on top of which to issue "upper level" tokens.
The developers of these tokens try to comply with ERC token standards, such as ERC-20 (used for most fungible tokens like utility tokens and stablecoins) and ERC-721 for NFTs (non-fungible tokens). Tokens that comply with these standards can be more easily integrated with various crypto tools, such as wallets. Exchange
A cryptocurrency exchange will likely be your gateway into the blockchain world. Exchanges are businesses that allow users to purchase cryptocurrencies or tokens in exchange for fiat currency, to trade these digital assets for other digital assets, or to withdraw funds as fiat currency.
Decentralized exchanges (DEXs) also do exist. These exchanges facilitate the peer-to-peer trading of cryptoassets. Since these organizations only exist on-chain, they can be only be used to trade crypto for crypto, not for fiat. Non-fungible token (NFT)
Mostly simply put, a non-fungible token is a digital representation of a unique asset. The basic technical structure and issuance of an NFT resembles that of other tokens but for certain differences in the code that gives the individual token its identifiability. In other words, while one unit of a cryptocurrency is indistinguishable on a surface level from another unit of the same cryptocurrency, no two NFTs are the same.
Non-fungible tokens are still in their early days, but they are already being used to facilitate the transfer of ownership of things like the rights to art, music, and digital media. New, interesting, applications of this technology are appearing in the media on a nearly daily basis. White paper
When Satoshi Nakamoto first announced Bitcoin, it was through the publication of a white paper. Teams that are launching cryptocurrencies and tokens have followed in this tradition to this day. Initially, white papers were semi-technical ethical manifestos that outlined the infrastructure behind the proposed crypto asset and its idealistic purpose.
Over the last few years, though, white papers have morphed into something more akin to a prospectus, providing information relating to the project's potential profitability and chance for adoption. These documents can be quite useful for investors, even well after the crypto asset's initial issuance (through an ICO, STO, or other event). That said, before token purchase, it is recommended to also extend one's research to less biased information sources. Fiat currency
'Fiat' is the economic term that members of the crypto community generally use to refer to non-blockchain currencies that are issued by national governments. Fiat currencies by definition are not backed by any kind of asset, such as gold or silver. Mining
Mining is the process by which cryptocurrency or token transactions are confirmed by network participants on a blockchain. Consequently, this is also the process by which cryptocurrency is issued ('minted').
Most mining today follows the proof-of-work protocol (defined below) and involves the trading of computing power for coins or tokens. Mining is also the process by which a blockchain network becomes more secure with time. HODL
Now an acronym, HODL came into existence as a misspelling of the word "hold," and has since become a meme. Today, there exists a movement of "Hodlers" who follow the "hold on for dear life" philosophy, never selling assets even in extremely bearish markets.