What do all these terms mean? Getting started in crypto can be so confusing. Blockchains, blocks, defi, proof of stake, proof of work, cold wallets, hot wallets, exchanges and coins. And we are just beginning!

I briefly cover a number of common terms in crypto so that you don't have to feel like you are uneducated.

Hey, everyone. No one on this podcast is financial advisor and

all information presented on this podcast is for informational

purposes only. Now that we have the legal stuff out of the way,

let's jump on in. Welcome to the generational wealth with

cryptocurrency podcast. I'm your host McIntosh. And today, we're

going to be talking about crypto terminology 101. So I think one

of the things that kind of scares people from learning

about cryptocurrency in general is that a lot of the terminology

is kind of weird. It comes from a computer background. And so we

computer people tend to use funny words sometimes. So I

thought I'd take about 10 minutes and cover some of the

terminology that we use when discussing cryptocurrency. And

we're going to begin with what's called the blockchain. So the

blockchain is actually, it's the foundational part of a

cryptocurrency. A blockchain is simply a digital form that's

used for record keeping, you could think of it as a accounting

ledger. When you're doing accounting, at least they used

to know it's all computerized, but they would write things into

a ledger. And that ledger was the record of the financial

transactions. Well, a blockchain is the same idea. It's a series

of blocks, what they call blocks, that record the

transactions that take place. These transactions are the, you

know, if I give you a Bitcoin, and you give me a half a Bitcoin

back or, or whatever, these are all recorded into the blockchain.

And the blockchain is this unchangeable ledger of these

transactions. What's a block? I mentioned a block just a minute

ago as part of the blockchain. And of course, just the name

blockchain alone makes you ask what's a block, right? A block

is simply a group of data on a blockchain. Blocks are made up

of transaction records that as that record the users buying,

selling or transferring coins. And they can in each block can

only hold a certain amount of information. When it hits the

limit of that information, it makes a new block. What's a

coin, a representative store of digital value that lives on a

given blockchain, some block chains have the same name for

both the network and the coin. An example of that would simply

be the Bitcoin network and the Bitcoin. Others can have

different names. So now we're going to talk about how you

store your coins, how you store your digital value. We can do

that a couple of ways we can do it in what's called a cold

wallet or cold storage. We can also do it in and what's called

a hot wallet or frequently just a wallet. A cold wallet or cold

storage is is a super secure way. A cold wallet or cold

storage is a super secure way of storing your cryptocurrency.

It's done offline. It's not on the internet. It could be a

hardware wallet, what they call a hardware wallet. It's a

physical device looks kind of like a USB drive. That's going

to help you from being hacked or from theft. Although there are

downsides to it, you could lose it. Like if you lost your

hardware wallet, you can kind of think of it as a bank vault

that's underground heavily protected. But at the same time,

it's small enough, you could lose the thing, right? So you do

need to be aware of that. A hot wallet is some type of software

based crypto wallet that is connected to the internet. Now,

that does allow you to access your crypto for trading, or for

sending to somebody, it does make it more susceptible to

being hacked. Because your files are always online. Now, my

recommendation would be, depending on your circumstances,

you may want to have a mix of this, you may want to keep the

majority of your currency offline, you may want to keep

some of it online. Or you may just want to keep all of it

offline. But these hot wallets, cold wallets, there are trade

offs, just like I was describing. So one of the things

that you'll hear people talk about, when you're listening to

podcasts, a lot of times they talk about market capitalization.

And for crypto, that's actually really easy. It's the value of

all of the crypto that's been mined for that currency. For

example, currently, right now, the middle of August 2021, the

Bitcoin market capitalization is somewhere around a trillion

dollars. Meaning if you added up the value of all those coins

that have been mined, whatever that number is, that it would be

a trillion dollars worth. So it's an easy value to figure out.

And it's also a way of comparing coins, right? So if you have a

coin who has a much smaller market capitalization, certainly

means it's not being utilized as much. And that may mean that

that coin has a lot of room for growth, or it may mean it could

be on the way out. You don't know without background, right?

One of the funny things that's come along, they call it HODL.

You'll hear the Bitcoin people say this a lot. HODL, HODL,

HODL. The apocryphal story is it actually came from a typo.

Somebody was supposed to be typing HOLD and they superimposed

the last two letters and came up and they typed HODL. And it

kind of took on a life of its own. So now it's like a meme.

They're like, it means hold on for dear life. You don't, you

know, you never sell your Bitcoin, you never sell whatever

your coin is. Altcoin, another word that gets tossed around a

lot is simply means it's not a Bitcoin. Bitcoin was, as I

mentioned on the last podcast, Bitcoin is the original modern

cryptocurrency. And there have been a number certainly that

that have come along since then. They're all considered altcoins.

Nothing necessarily inherently wrong with that. We will talk

about the pros and cons of Bitcoin being the first. And we

will talk about kind of these major cryptocurrencies in a

future episode. One of the new things that's come along in the

last couple of years, something called an NFT stands for non

fungible token. That's a fun word. Basically it means that you

can't divide it up. So if it's an NFT, it's something that

you're not going to split up with a Bitcoin. For example,

it's dividable to, if I'm not mistaken, 100 million units.

They're called satoshis. So each Bitcoin is made up of 100

million satoshis. So basically, a Bitcoin is is dividable. It's

certainly fungible. It's the exact opposite of a non

fungible token. So what would you use an NFT for? That's a

really long conversation. Currently, you're seeing it used

for artwork, where people will make a limited edition digital

art. And there's only if you get the NFT of that you have the

only copy of that in the world is the idea. There are other

uses for that. You'll certainly hear a lot if you are involved

in crypto, you'll hear a lot about this digital art NFT

crypto. But we will see and we'll probably talk about this

on future shows. Well, we're going to see other use cases

come out of this. And in fact, frankly, for me, those other

use cases are the most exciting. I'm not really into

crypto kitties or bored apes, I think is one of the new ones,

or whatever. There's a lot of money going on in there.

Arguably, it's a new form of value. It probably is. But the

market at this point is so hyped. I just I'm not going to

get involved myself. Because you may end up getting left behind.

Or with a with a piece of art, that's worth far less than what

you paid for it. Okay, moving on. So like I said, that whole

NFT thing could be a its own show in itself, maybe even a

couple of shows. So we're going to talk about two terms that go

together here a public key and a private key. First of all, with

a public key. This is in regards to your wallet that we were

talking about earlier. We'll talk about a hot wallet, for

example, your wallet is going to have an address on your

wallet, it's going to have an address, this address is like

your bank account. So let's see if I can do this offhand, you

know, maybe my bank account is 1767670. Okay, that, that

actually is one of my bank account numbers. I can give that

to you. It's publicly shareable information, because that's not

the it's not the key to access that. The key to accessing my

account is for me to show my identification, and signs and

paperwork saying that this is me, and withdrawing my money.

Public key is the same thing. You've got a public key, which

you can give to people. Okay, it can be shared with people or

with companies. So they can send you money or that they can take

money from your account when you authorize it. The opposite of

that is what's called a private key. This is a code that does

allow you access to your cryptocurrency. It is like that

key to your bank account is showing your face, proving that

you're you and signing that paper and getting your money

out, or a password on the bank account website. You're never

going to give someone that information. And if someone asks

you for it, do not give it to them. Just a minute ago, I

mentioned Satoshi's in passing talking about Bitcoin. Satoshi

Nakamoto, he was the creator of Bitcoin. Now, he I say he out of

convenience, we don't actually know who that person is, is that

a man is a woman? Could it be a group of people? Nobody has

actually been able to figure that out. So it's a fascinating

little side story and all this. The guy creates Bitcoin and I

again, I say, well, he simply out of convenience, but he

creates Bitcoin kind of shepherded it along for a while

and then just disappeared and nobody knows what happened to

him. I believe personally, I believe he's still around. I

don't know. I think he he created this thing and and set

free so to speak. You'll hear Satoshi Nakamoto in reference

to Bitcoin sometimes. That's who they're talking about. I

did mention a Satoshi, smallest unit of a Bitcoin. There are a

hundred million of those in a single Bitcoin. So even when

Bitcoin let well, if Bitcoin were a million dollars, which

it certainly is nowhere near, that means that one Satoshi

would be like ten cents, I think. I think I dig that

correctly. So it's it's a very, very small unit of value. It's

far less than a cent right now. You'll hear a term called

maximalist. I'm a Bitcoin maximalist. I'm a Ethereum

maximalist. I guess these days you could say I'm a Dogecoin

maximalist. Well, I haven't talked about Dogecoin at all.

We will at some point, but anyways, meaning certainly in

regards to the Bitcoin maximalists, they believe that

Bitcoin is the only thing, the only form of digital currency

we should be using and it's the only thing they hold and

they're very pro Bitcoin. Ethereum, same way, you know,

whatever it is. This is my favorite coin. This is the coin

I believe in to the exclusion of all else. A digital

cryptocurrency exchange. A cryptocurrency exchange is

simply a place where you can buy and sell crypto. Now,

there's two types of crypto exchanges. We'll talk about

the kind of more traditional one. First, a centralized

exchange. That would be a place like Coinbase

where you can log into a website and there's a company behind the

website and you can buy your crypto. You can trade,

whatever, right? And then there's what's called decentralized.

So, there's no single point in a decentralized system. Now,

this is one of these topics that could take up

entire episodes or maybe even multiple episodes,

but there are exchanges which they're not necessarily owned by a company.

They are what they would call decentralized. They operate

on their own by rules that are programmed into by what are called

smart contracts, okay? So, smart contracts operate on the

Ethereum blockchain. It's a way of making, well,

actually, Ethereum is not the only place that they are. It's just the most common.

It's a way of making the blockchain programmable,

of giving it rules and that is actually one of the big differences

between Ethereum and Bitcoin. There's no smart contracts on a Bitcoin

blockchain. You cannot do that kind of thing

on a Bitcoin blockchain. So, anyways, decentralized. So, when we're

talking about exchanges in this specific case or even

there's other things that we'll talk about where we say it's

decentralized and the idea is there's no

company. There's no one place

that it operates out of and that helps keep it.

Well, there's benefits to that. There's drawbacks to that as well.

Let's see. Smart contracts. Well, I actually mentioned that in passing.

It's simply programs that actually operate on the blockchain.

Really, you could think of a smart contract using that word contract.

It is a contract. It is a piece of code that says

if I do this, this is going to happen. There's a lot of variations of that.

There's a lot of very interesting things going on right now in smart

contracts in that development. So, a stable coin. Another item

to wrap this up and with a stable coin. It's kind of a funny term. I don't know.

A stable coin simply means that that token

has its value based on a non-digital currency.

There's a tether. It's a stable coin.

Tether is pegged to the dollar, meaning

it's almost exactly a dollar at any one time. It can still

fluctuate actually a tiny bit, but it's very, very close.

There's a USDC coin, which is another one that's pegged to the dollar.

There's a couple of examples of stable coins.

There's various uses for stable coins.

You'll see those mentioned from time to time. What else? I think that

actually about covers it. Let me go look back through my

list. To wrap things up, I think I actually kind of want to

probably do a separate episode about this, but there's two other

terms that you'll hear and actually these days you'll hear a lot.

Proof of work and proof of stake. The Bitcoin network

operates off of proof of work. It's the way that they mine

the coins, the way that they create new coins.

The alternative to that is what's called proof of stake.

Proof of stake is used by a number of the alt coins.

Currently, Ethereum is actually a proof of work

network. It is moving to what they call it to that proof of stake network.

So that change will be taking place very late this year or early next year.

We will definitely be talking about that in another episode on its own because

that is something I believe that brings

that brings Ethereum a lot of value. So we will

spend some time talking about Ethereum. We're going to spend

maybe the next few episodes actually breaking down the top three or four

cryptocurrencies. We'll probably start with Bitcoin

simply because it's the oldest, the most well known. Everybody knows about Bitcoin.

We'll talk about one called Cardano with the ADA token.

And we may talk about one or two more. I may even throw in a little bit about

Dogecoin because it's one of the hot new things.

So that will be coming up soon, but I hope that this has been helpful

for you. If you have any questions, you can send me an email

bmurphy at paragon-cs.com and that will get to me. Feel free to

shoot me an email, ask me questions. One of the things I want to take a couple of

minutes and this episode's already gone a little

long, but I want to take a couple minutes

and try and describe where we're going to go from here. So my idea is we're

going to spend the first 10-15 episodes

going over what I would consider basics. Some of these things like

these terms, right? And to act as a

library for people if they are jumping into Bitcoin

or cryptocurrency and they don't have an understanding of it. Once we get

through that, we're going to start diving into

some different things and we're going to be discussing continually

over and over. One of the key concepts of generational

wealth is not only that you have assets that grow in value,

take your house for example. In the US for the last 100 years or so

at least, you know, houses have gone up in value.

If you buy a house and then 20 years later you sell it,

in most markets that house is going to have gone up in value. It's going to have

appreciated. I think one of the keys to generational

wealth though is not just to have assets that go up in

value, it's to have assets that create return

for you. I can stick my money in a bank account

and it's going to generate a little return in the form of

interest. Talking about real estate, I may have an

asset, my house, which is appreciating or maybe I

actually may be a better example. I have a rental

property which the rental property itself is going up in value

but at the same time I'm able to generate

income via rent. That's an example of a

revenue stream. I think the key to this generational wealth is

not only are we worried about our assets, our savings, our retirement funds,

that kind of thing, but we're figuring out how to generate

these revenue streams and there are ways of doing that

through crypto. Crypto isn't all about I'm going to buy the coin at five dollars

and it's going to go up to twenty dollars or I'm going to buy it at a

hundred and it's going to go to a thousand.

That's part of it and over the long term I think you will see

a number of these coins continue to grow in value, not all of them certainly.

As I mentioned in the last episode, I think there's around four thousand

coins currently and there's no rational way that all those

coins are going to go up in value. It's just not going to happen. Many of them

are going to just disappear. They'll be worthless.

So the idea is if we can pick some of these that go up in value over the long

run, that's one form of we're increasing our

our wealth and you can make a lot of money that way.

But truly what I want to do is think about you know

20-50 years or longer down the road what can we do to build these income

streams. So we're going to be talking about that

a lot as well. Okay so anyways wrap things up.

Hope you guys like what you're hearing. I'll be setting up some kind of website

soon and doing some other things there in the

background to hopefully make this a better

experience for you. But please like I said got questions

you can send me an email and hope to hear from you