The world of cryptocurrency is changing rapidly and to keep up, it is crucial to keep up to date with key terms and concepts. In this article, we discuss 10 crypto terms you need to know by 2023.
Decentralized Autonomous Organizations (DAOs)
DAOs are organizations based on code rather than people. They operate on blockchain platforms via smart contracts and have the potential to change traditional business structures by decentralizing power and control. For example, people can vote on proposals with their wallets and can thus influence the price of a DAO.
Non-fungible Tokens (NFTs)
NFTs are unique digital assets traded on blockchain networks. They have become popular in digital art and other creative industries. An NFT represents ownership of a unique item, such as digital art or a collectible.
Decentralized Finance (DeFi)
DeFi is an umbrella term for financial services based on blockchain technology, such as lending, savings and trading. It aims to create a more open and accessible financial system, in which everyone can participate without relying on traditional financial institutions.
Crypto strike
Crypto staking means locking your cryptocurrency to support a blockchain network in securing the network and processing transactions. In return, strikers receive rewards. It allows users to generate passive income and is an alternative to the energy-intensive Proof of Work (PoW) consensus mechanism.
Layer 2 solutions
Layer 2 solutions are technologies built on top of existing blockchain networks to provide scalability and faster transactions. Examples are the Bitcoin Lightning Network and the Optimism Network for Ethereum.
Proof of Work (PoW) vs. Proof of Stake (PoS)
PoW and PoS are two consensus mechanisms used to ensure the integrity of blockchain networks. PoW requires participants to solve complex math problems with computers, while PoS rewards participants based on their staked crypto via staking. PoS is seen as a more environmentally friendly alternative to PoW, although bitcoin miners also use renewable energy sources these days to support.
Web 3.0
Web 3.0, or web3, refers to a new internet era in which decentralized technologies such as blockchain play a central role. It aims to create a more open and decentralized internet where users have more control over their data and privacy.
Memecoins like Dogecoin and Pepe
Memecoins are cryptocurrencies that originated from internet memes or jokes. They often have no clear use or purpose and can be highly volatile. Well-known examples are Dogecoin, Shiba Inu and Pepe. While some people have had success trading memecoins, there are also dangers, such as the risk of pump-and-dumps.
Self-custody
Self-custody means that you take responsibility for the management and security of your crypto instead of relying on external parties such as crypto exchanges. This can be done using hardware wallets, software wallets or even paper wallets. It is essential to ensure the safety of your digital assets and maintain full control over your money. Among other things, the collapse of exchanges, such as recently FTX and Bit4You, can mean that you have lost your crypto in your exchange account forever.
seed phrases
A seed phrase is a string of words that act as a backup for your crypto wallet. This phrase can be used to easily backup your private key and, if necessary, restore your wallet and associated funds. Loss of your wallet can occur when your hardware wallet is stolen or a computer crashes. It is critical to store your seed phrase securely and offline so no one else can access this information.