Let’s face it; adapting to the world of cryptocurrencies can be overwhelming, especially to beginners. Terms like “DeFi”, “DApps” and so on might seem strange, but they are actually very common terms in the vocabulary of cryptocurrency enthusiasts. That’s why we decided to collect some of the most popular cryptocurrency terms and break them down.
Smarts contracts are small computer programs that help automate the world of crypto and blockchain. The smart contract outlines certain conditions to be met. When the terms of an agreement are met, the contract will automatically execute a response. Smart contracts, like regular legal contracts, hold several parties accountable, but they instruct each party through code rather than spoken words.
A token is a digital crypto asset, based on the blockchain network which can be used to transfer value. Tokens are commonly known as “coins” in crypto and they usually have a unique utility feature that goes beyond just being used to make financial transactions.
NFT is an acronym for “Non-Fungible Tokens” and they represent ownership of unique digital items. Fungibility is the property of an asset that makes it exchangeable with any other asset of similar value like a particular currency note which can be exchanged with any other currency note of the same value.
An asset that is non-fungible has a completely unique value and cannot be exchanged with anything else. In crypto, these assets are digital and they can range from music, art, game items, and even a tweet. The tokens or certificates that represent the ownership of these items is what is known as NFTs
A decentralized autonomous organization (DAO) was created to be a digital, decentralized, and automated decision-making organization. Many different blockchains make use of a DAO to allow for the governing of the network. This is typically done by giving voting power to token holders and the weight of their vote is dependent on how many tokens they hold. These voters can then vote on things such as block difficulty, incentivization rates or “token yields”, and much more. This gifts much of the power back to the blockchain community and moves away from the conventional method of centralized control seen in most companies and countries. Think of it as blockchain’s version of democracy.
DApps, is an acronym for Decentralized apps, these apps are open-source blockchain software designed for real-world use. Ethereum is known as the "mother" of decentralized applications and it was created with the goal of allowing developers to build new applications on top of its blockchain.
Decentralized alternatives to traditional (centralized) finance are referred to as DeFi. Banking, money management, payment processing, insurance, and other services are included in DeFi. DeFi products and services open up a previously inaccessible industry to the general public. Blockchain technology and smart contracts are used to conduct peer-to-peer exchange, lending, borrowing, and trading.
DEX stands for “Decentralized Exchange” and they enable people to trade crypto tokens directly with one another without the need for an intermediary. This is different compared to centralized exchanges like Coinbase, where all trades and transactions go through their own servers. This means that centralized exchanges hold all of the power and can dictate how you can conduct yourself on their exchange.