Technology has changed the way people work, communicate, shop and even pay for goods. Companies and consumers don't always prefer cash anymore, and this behaviour is giving way to contactless payments like Apple Pay.

Between January and July 2021, 60% or 6.6 billion of debit and credit card transactions in the UK were contactless, according to Trade Association UK Finance.

Now, a new payment system is emerging: cryptocurrency. Probably everyone has heard about Bitcoin by now. It was the first cryptocurrency to go mainstream, but others are growing in popularity. There are more than 2,000 different types of cryptocurrencies, and more are being developed every day.

Research suggests most people have heard of cryptocurrency but don't fully understand what it is. So, here are some of the terms and phrases that will help you better understand the world of crypto investing.

Blockchain

A blockchain is a record-keeping technology behind the Bitcoin network. Each block in the chain contains a number of transactions, and every time a new transaction occurs on the blockchain, a record of that transaction is added.

It was designed so that no one is in charge of the database rather, all users collectively retain control.

Cryptocurrency

This is a type of electronic cash. According to the Bank of England: The first part of the word, ‘crypto’, means ‘hidden’ or ‘secret’ reflecting the secure technology used to record who owns what, and for making payments between users. The second part of the word, ‘currency,’ tells us the reason cryptocurrencies were designed in the first place: to be used as money.

However, cryptocurrencies are not like the coins or notes we carry. They exist electronically and use a peer-to-peer system. Cryptocurrency is 'decentralised' meaning that there is no central bank or government to manage the system or step in if something goes wrong.

Ethereum

Ethereum is the world’s second-largest cryptocurrency behind Bitcoin and its native cryptocurrency is called Ether. Ethereum is a crypto network and software platform that developers can use to create new applications.

Non-Fungible Tokens (NFTs)

A "Non-fungible” token more or less means that it’s unique and can’t be replaced with something else. For example, a bitcoin is fungible — trade one for another bitcoin, and you’ll have exactly the same thing.

Think of it as a one-of-a-kind trading card, however, it is non-fungible. If you traded it for a different card, you’d have something completely different. NFTs can really be anything digital such as drawings, music or art.

Hot/Cold Wallet

These are a place to store your cryptocurrency holdings. Many exchanges offer digital wallets. Wallets may be hot (online, software-based) or cold (offline, usually on a device).

This is just the tip of the very large and at-times confusing iceberg that is cryptocurrency. Hopefully, this list has helped you to give some clarity while providing some starting points for those looking to delve further. The crypto world is volatile, and you should never risk money that you aren’t comfortable losing.

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