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Cryptocurrency Terms You Should Know Before Investing

Cryptocurrencies (also called cryptos) are virtual or digital currencies that are secured by cryptography which makes them almost impossible to counterfeit or double spend. Dozens of cryptocurrencies are decentralized networks that are based on blockchain technology. 

The defining feature of cryptocurrencies is they are not regulated or issued by any authority. No government can interfere with, or manipulate cryptocurrencies. They use a decentralized system to issue new units and record transactions. This post looks at terms you should know before investing in cryptocurrencies. 


Altcoin is formed from two words, alternative and coin. Generally, Altcoins are all cryptocurrencies apart from Bitcoin (BTC). Some crypto investors define Altcoins as all cryptocurrencies other than BTC, and Ethereum (ETH). This is because most cryptos are forked from either BTC or ETH. 

Some Altcoins opt to set themselves apart from BTC and ETH by providing additional or new capabilities or purposes. These Altcoins are designed and released by ambitious developers who have an alternative vision and use for them. 

Bitcoin (BTC)

Bitcoin is a virtual currency that is decentralized and anyone can buy, sell, and exchange it without third-party intermediaries such as banks. BTC is rewarded to miners in blockchain after working and verifying transactions. It can be bought and traded on several exchanges such as Netcoins. You can visit Netcoins to trade over 20 currencies anytime through the web, and mobile apps. 

A developer or developers using the name “Satoshi Nakamoto” introduced Bitcoin to the public in 2009. Today, it is the most known cryptocurrency globally, and has inspired other developers to create multiple cryptos.

Cold Storage/Cold Wallet

A cold storage or wallet is a device similar to a USB drive that is used to store cryptocurrencies. A cold wallet can also be referred to as a hardware wallet. It is a secure way of storing crypto away from hackers and unauthorized access as it is offline. Individual investors can use this type of storage to store their cryptocurrencies. These types of wallets are also used by crypto exchanges and companies which are involved in the crypto business. 

Hot Storage/Hot Wallet

A hot storage is also known as a hot wallet. This type of storage runs on devices connected to the internet such as computers, cell phones, tablets, and laptops. Hot wallets generate private keys to your assets on the internet-connected device. 

They are convenient, you can access your assets and make transactions fast. Hot storage may lack tight security and is vulnerable to attacks from hackers. For that reason, it is not wise to store huge amounts of crypto in hot wallets. 

Private Key

A private key is a string of letters and numbers that should never be shared with another person. This key is used to verify your transactions when you are withdrawing cryptocurrencies  and selling them. If anyone can access your private key, you could lose your assets fast.


A blockchain is a system of storing data in a decentralized way, and does not require an intermediary to function. It is a digital ledger made up of all transactions that were ever done in a particular crypto. The data can be distributed and duplicated across a network of computer systems in the blockchain


Cryptocurrencies such as Ethereum and Bitcoin are powered by open source software which is decentralized and is called blockchain. The open source software code is maintained and  developed by a community. Whenever this community of developers make any change to the blackchain’s protocol, or the set rules, a fork happens. 

Soft Fork

A soft fork happens when the blockchain is upgraded, as in software upgrades. Whenever all the users in the network adapt to the upgrades, it becomes the cryptocurrency’s new set of standards. At the programming level, soft forks have been used to introduce new functions and features to Ethereum and Bitcoin. The end result in a single blockchain, the new changes are backward compatible with the earlier blocks. 

Hard Fork

In hard fork, the changes are so much that the new version isn’t backward compatible with the previous blocks. The blockchain splits in two, the new version that follows new rules and the old blockchain. This is how a new cryptocurrency is formed. Cryptocurrencies such as Bitcoin Gold and Bitcoin Cash were formed from the original Bitcoin blockchain through a hard fork.


When you are thinking about investing and buying cryptocurrencies, the technical jargon might be daunting to understand. Navigating through the crypto space may be confusing especially when it feels like people are speaking a different language. The above are some terms that will get you up to speed whenever you want to invest in cryptocurrencies.

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