Despite the launch of Bitcoin in 2009, it’s only recently that you can’t turn on the news or browse the web without hitting a cryptocurrency mention.
I had so many questions from my readers and listeners to national radio shows that I wrote an eBook on Cryptography to help them. I demystify digital currency, mining, and how to start trading. Tap or click here to get your copy on Amazon.
Unfortunately, I also hear from people who have been fooled by some crypto scam or another. Where there is money, criminals wait. Tap or click for five smart crypto scams going around right now and the steps to stay safe.
Before you begin, know that this is not about financial advice. The world of crypto is volatile and you should never risk money that you are not comfortable losing. Now let’s take a look at some of the more common jargons:
1. Block chain
Each cryptocurrency transaction is processed, verified, and recorded on a virtual ledger called a blockchain. When a person buys or sells using cryptocurrency, another entry is made on this virtual ledger.
Think of the blockchain as a series of boxcars on a train. When a cryptocurrency transaction is made, another boxcar is added to the train.
The blockchain is decentralized. This means that it is not stored on a single machine or even on a single network. Instead, the blockchain exists on computers all over the world that are accessible through the internet.
People and businesses help verify every transaction added to the blockchain using the processing power of their own computer on a decentralized peer-to-peer network. Each transaction is time-stamped, individually encrypted, and cannot be rolled back or changed. Yes, you read that right – crypto transactions cannot be reversed.
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I know what you are thinking: “I thought a Fiat was a car.” Not in the crypto-land. Fiduciary currency is a currency issued by the government. If you are in the United States, it means the US dollar.
Cryptocurrency, on the other hand, is virtual money.
Cryptocurrencies are not backed by governments or any other standard used with traditional currency. Each “token” represents the amount you own.
The value of each token varies based on the current market value. One day it’s over; the next day down. With cryptocurrency, price fluctuations can happen much faster and are more extreme – both positive and negative. CoinMarketCap is a good resource for checking current prices.
Here is an easy one to remember. a altcoin is a digital currency which is not Bitcoin. There are thousands of cryptocurrencies with new ones being added all the time.
At the time of this writing, these are the top five currencies market capitalizations. (This is the total market value of the circulating supply.) Since crypto moves so fast, this list may have already changed by the time you read this.
• Binance coin
To buy cryptocurrency you must start with a to exchange. Think of an exchange as a crypto middleman. It is an online service that allows you to exchange your fiat for crypto or change crypto to fiat.
If you are familiar with traditional investing, a crypto exchange works like a brokerage house. You can deposit money by wire transfer, wire transfer, debit card, and other standard deposit methods. You can expect to pay a fee for most transactions.
You can also buy crypto through apps you may already be using, like Venmo, Robinhood, or Cash App.
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In basic terms, a cryptocurrency wallet is an application or physical storage device that allows you to store and retrieve your digital currency. Wallets can contain multiple cryptocurrencies, so you’re not limited to Bitcoin, for example.
Whether you are using an app or a physical wallet, it is important to note that the currency itself is not stored there. Instead, wallets store the location of your currency on the blockchain.
Wallets are divided into two main categories: hot and cold. A warm wallet is, by definition, connected to the Internet. The safest way to store your cryptocurrency is to use a cold wallet – one that is not connected to the Internet.
Physical wallets come in different types, but are usually specially designed USB drives that directly store your cryptocurrency for later use. Physical wallets give you the best protection against hackers.
Two popular cold wallets are the Ledger Nano X and the Trezor Model One. Of the two, I prefer the Ledger Nano X because it supports 23 different cryptocurrency types and has additional features.
Confidentiality advice: The browser you use is important if you care about privacy. I have filed them for you here. Did your choice make the list?
You’ve probably heard this term associated with Bitcoin, which is created by mining. Computers mine coins by solving complex math problems. The more powerful the computer, the faster it can “think”.
Now, if your computer is the fastest at solving the problem, bingo – you earn one unit of the cryptocurrency you mine.
While there are a few cryptocurrencies with an endless supply, most have a limit. For Bitcoin, this limit is 21 million. The last coin will be mined in 2140 or earlier.
Here is another simple. DeFi is a shortened version of decentralized finance. This term refers to financial transactions that occur without an “intermediary”, such as the government, a bank or other financial institution.
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You’ve heard of it: non-fungible tokens. It’s a fancy way of saying, “This digital item is one of a kind and irreplaceable. It applies to anything you can imagine, from online illustrations to songs, viral videos, articles, text logos and GIFs.
Some people collect vintage cars, wines, famous artwork, and baseball cards. Now any digital item can also be turned into a collector’s item. They also act as online status symbols. Check out Jimmy Fallon’s Twitter profile picture for an example.
The only way to buy an NFT is to use cryptocurrency. You can buy an NFT through an auction platform, secondary market, or by participating in a currency. What is it, you ask?
Cash is how a file, such as a JPEG or GIF, is saved to a blockchain. Once an NFT is issued, it can be sold or traded. If you participate in a mint, it means that you are the first person to buy that artwork from its creator. You can keep it, sell it or trade it.
During the minting process, the creator specifies the royalties he receives from future sales. This acts as a commission if the work changes hands in the future and is a big draw for artists who want to go digital. If you sell an NFT in a secondary market, it also gets a share of the sale.
Here’s a term you might see on social media. HODL stands for ‘hang on for life’. Some say this stems from a typo of the word “hold” on a Bitcoin forum, but now it’s everyday slang.
The idea behind it is simple: if you think a project or currency will gain more value, just “hod” even when the market goes down.
Want to dive even deeper? Get yourself “Cryptocurrency 101”. This is my practical guide to buying, selling and spending digital currency safely.
Bonus tip: how your TV streaming apps pester you
Whether you’re using Netflix, Hulu, Amazon Prime, Disney +, or Apple TV, there’s a good chance your favorite apps will follow you wherever you go. In this episode, you will learn the secret risks you take when cutting the cord.
Check out my “Kim Komando Explains” podcast on Apple, Google Podcasts or your favorite podcast player.
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Check out all the latest tech on the Kim Komando Show, the nation’s biggest weekend radio talk show. Kim takes calls and gives advice on today’s digital lifestyle, from smartphones and tablets to online privacy and data hacking. For his daily tips, free newsletters and more, visit his website at Komando.com.
The views and opinions expressed in this column are those of the author and do not necessarily reflect those of USA TODAY.