As a beginner in the cryptocurrency industry, you will come across several terms that may sound familiar, but their meaning is entirely different in context to the blockchain technology. Some of the concepts are closely related, and it is essential to understand the differences to ensure that your digital coins are always kept safe.
Apart from these terms, it’s also wise to use cryptocurrency trading tools to know how the digital currencies will work in the next few hours, days, and weeks. You can also check the latest Bitcoin Profit Review to seek information about the trending currencies that will provide the best returns on your investment.
Crypto terms you should know
With so many cryptocurrency terms, it is easy to confuse one with the other especially during your first few trades. Here are some of the most important terms you need to understand:
Also known as a seed or mnemonic passphrase, it is a sequence of randomly generated words that generates and recovers your crypto wallet. For example, your wallet generation seed is “marine cliff nominee foam mother aim rain school dish spot scrap long”. This is like a unique password that you need to remember and note down to recover your wallet in case you lose it.
The Bitcoin address appears in a random sequence of digits and letters. Just like how email addresses receive emails, crypto addresses receive cryptos. These addresses are often represented as QR codes on your mobile phones. When the QR code converts to an address, it looks like a series of numbers and letters.
• Private key
Private keys are also generated randomly from a passphrase. These keys can generate a single address. If you are using Bitcoin, you can use Electrum to check your address’s private key. It is essential to keep the private key safe as losing it means losing all your cryptos related to that address. It is like the key to your house. The moment you lose it, the house is vulnerable to theft.
• Public key
When a Bitcoin address is generated, it has a specific public key. Unlike private keys, you won’t be able to see the public keys. They are usually used on the blockchain whenever you perform any crypto transaction. Although you can check your public key from your Electrum wallet, it is impossible to view them while performing a trade. Your private key, address, and public key are all visible on your Electrum wallet.
There is a sequence in which these terms operate. The passphrase generates the wallet that may contain many private keys. All your private keys will have corresponding addresses and public keys. But losing the private key comes with higher risks than losing the passphrase because you can revive the passphrase using the unique 12-word phrase. However, if you lose your private key, you lose the corresponding cryptos assigned in that address.
These are some of the basic terms that you need to know when investing in cryptocurrencies. And always remember, your crypto wallet is equally important as your regular wallet. It requires extra steps to protect your digital assets, so familiarize yourself as early as possible to avoid exposing yourself to fraudulent attacks.