Cryptocurrency

Definitions to Understand

Central Bank Digital Currency (CBDC)

CBDCs are NOT cryptocurrencies. They are a digital form of a country’s fiat currency issued by its central bank. Although they are both digital currencies, cryptocurrencies are deregulated, untraceable, and outside of government control, whereas, CBDCs are issued, monitored, and regulated by federal governments. CBDCs claim to help promote financial inclusion, simplify monetary policy implementation, and help explore the potential impacts on economies, however, CBDCs are really a more controllable dollar giving the government the ability to enact policies through your money. This means the governments will have the ability to tell you when and where you can spend your money, and they can turn it off at any time.

Do you want the government to be your bank?

Cold Wallet & Hot Wallet

A cold wallet and a hot wallet are two types of storage systems used to store cryptocurrencies and other digital assets. However, they don’t actually store the asset itself. The digital asset stays stored on the blockchain. Cold wallet or hot wallet refers to how your keys to access the asset will be stored.

A cold wallet (also known as cold storage) refers to a storage system (hardware) that stores your private keys offline. Cold wallets are considered to be more secure than hot wallets because they are not susceptible to hacking or other online threats. However, because they are not connected to the internet, cold wallets may be less convenient for day-to-day transactions.

A hot wallet, on the other hand, refers to a storage system that is connected to the internet, such as a software wallet or an exchange wallet. (The exchange is the platform used to buy, sell, or trade the assets.) Hot wallets are more convenient to use for day-to-day transactions, but they are also considered to be more vulnerable to hacking and other online threats. Some hot wallets are custodial, meaning they do not provide you with your own private keys.

The choice between a cold wallet and a hot wallet depends on an individual's specific needs and priorities. For long-term storage of large amounts of cryptocurrency, a cold wallet is generally considered to be the most secure option, while for more frequent transactions, a hot wallet may be more convenient.

Below are a few videos regarding hardware wallets:

16 Things YOU DON’T KNOW About Hardware Wallets from Adam Venture Crypto

ULTIMATE Comparison: Trezor vs. Ledger Crypto Hardware Wallets from Crypto Tips

Cryptocurrency

Cryptocurrency (also known as crypto) is a digital or virtual currency that can be used as a medium of exchange (like money). Per Investopedia, cryptocurrencies rely on cryptography to secure transactions and control the creation of new units. This helps make it nearly impossible to counterfeit. Most cryptocurrencies exist on decentralized networks using blockchain technology, a distributed ledger enforced by a network of computers. Since this form of currency is decentralized, it is much harder to be regulated or manipulated by a central authority, such as a government or a central bank. Cryptocurrencies are designed to be secure, transparent, immutable (not susceptible to change), and offer benefits such as decentralization, privacy, and fast transactions.

Dollar Cost Average (DCA)

This is an investment strategy intended to minimize the impact of volatility. DCA is investing a fixed amount into a particular stock or fund (or even in the market as a whole) at regular intervals regardless of the market’s ups and downs. The goal of DCA is to reduce the risk of investing a large sum of money in a single transaction and to avoid trying to time the market, which can be difficult and often leads to poor investment decisions. This can help lower the amount paid for investments and minimize risk. DCA can take the emotion out of investing making it easier to deal with uncertain markets by making purchases automatic. This is also called unit cost averaging, incremental averaging, or cost average effect. In the UK, it is referred to as pound cost averaging.

Moon Bags

This is a slang term used by some in the crypto community, but it can be used for other asset categories as well. For this strategy, when an asset you invest in goes up a certain amount, you will then pull out your initial investment and maybe even some of your profits, while still holding some money in the investment. This gives you a “bag” of investments that you own free and clear, like house money. You can then HODL without the risk of losing your initial investment. This strategy can be used to help investors manage their risk by ensuring that they have recouped their initial investment, and they can still potentially benefit from further gains.

HODL

This is a slang term used in the cryptocurrency community that is said to have become popular after a post on the BitcoinTalk forum in 2013 in which the poster misspelled "hold" as "hodl" when they wrote, "I AM HODLING." The post gained traction and became a meme, with the term "hodl" being used as a rallying cry for cryptocurrency investors to hold onto their investments through market ups and downs. It is also sometimes referred to as meaning “hold on for dear life” as a strategy of holding onto a particular asset, regardless of short-term market fluctuations or price declines, with the expectation that the value will increase over the long term. Individuals that HODL are also known as Hodler.

Seed Phrase/Key Phrase/Recovery Phrase

This is a set of words your crypto wallet generates (like a master password) that lets you access your crypto, no matter what happens to the wallet itself. The words in a seed phrase are randomly generated when setting up your wallet. Therefore, this phrase should be written down and kept in a safe place so you can use it when needed. Most importantly, never give out your seed phrase. Phishing scams may try to ask you for your seed phrase, but the only person who should ever have your seed phrase is you. If someone uncovers your seed phrase, they can control all the crypto in your wallet.