Let’s Talk About Key Crypto Terminology
In a previous blog post, we introduced you to the basics of cryptocurrency and walked you through some of the reasons why it’s a good idea to start familiarizing yourself with this trending topic. As a lodging industry professional, cryptocurrency is on the horizon as something that will soon become a very important addition to your payment processing toolbox.
After being introduced to cryptocurrency and having a basic understanding of what it is, why it’s exploding in popularity right now, and what makes it so appealing to business owners, it’s time to get down to basics. Mainly, the general vocabulary of cryptocurrency and some important terms to master as you move forward in your crypto journey.
Here are some key cryptocurrency terms— broken down into easy-to-comprehend definitions.
Bitcoin (BTC)
The cryptocurrency that currently holds the most value, Bitcoin was also the first of its kind. There are now over 10,000 different types of cryptocurrencies available, including others you may recognize like Ethereum (ETH) and Dogecoin (DOGE). Although Bitcoin can be a popular catch-all term for cryptocurrencies in general, it is only one type of crypto and should not be confused with the whole asset class of cryptocurrencies.
Block
A group of data within a blockchain consisting of crypto transactions and records. Each block can only hold a certain amount of data, including the actions required to be performed in order to process transactions within the block. Once a block is full, a new block begins and forms a chain with the previous block.
Blockchain
A sequence of blocks (groups of crypto transactions) providing a permanent digital form of recordkeeping. A blockchain operates much like a bank’s accounting ledger and holds shared digital records of historical transactional data. It is secured by encryption and then distributed to many computer systems that must solve complex mathematical equations in order to validate each transaction.
Cryptocurrency
A specific type of currency that is digital and decentralized. Cryptocurrency transactions are secured and authenticated by complex encryption via a blockchain. There are over 10,000 types of cryptocurrencies available today, each with its own founder, value, volatility, etc. Cryptocurrencies are used today to buy luxury and consumer goods, as a donation tool, to complete real estate and rental transactions, and have become a part of many people’s investment strategies. Examples of common cryptocurrencies include Bitcoin, Ethereum, Litecoin, and XRP.
Crypto Exchange
A platform that enables the trading of different assets for cryptocurrencies, such as trading US Dollars (fiat) for Ethereum (crypto).
Fiat
From a Latin term meaning an official decree, fiat currency is a form of payment that has value because it is backed by a government resolution. Fiat refers to money that is mainstream, legal tender, of any denomination, and issued and backed by a federal government. Examples of fiat is money in denominations of US Dollars (USD), Euros (EUR), Canadian Dollars (CAD), British Pounds (GBP), Australian Dollars (AUD), Yuan, etc.
Gateway
A cryptocurrency gateway allows your business to accept crypto payments for bookings online. While some gateways handle only cryptocurrency transactions, more robust gateways are capable of processing all kinds of payments – credit, debit, ACH, echeck, BNPL, and cryptocurrencies, smoothly and securely. When a guest chooses to pay by crypto, the gateway allows the processor access to the transaction, where the crypto payment is exchanged for fiat (conventional) money and deposited into your standard bank account.
Mining
The process of maintaining and growing the blockchain ledger. Using powerful computers, miners can earn cryptocurrency in exchange for helping to verify transactions and further develop the network.
Stablecoin
A cryptocurrency whose value is directly tied to the value of another asset class, most often a classical fiat currency such as the US Dollar. In this scenario, 1 stablecoin is always worth $1.00 USD.
Wallet
Like a traditional wallet you keep in your pocket or purse, a crypto wallet is a place where your cryptocurrency is stored. Crypto wallets can either be cold, with data stored offline in a small piece of hardware similar to a USB drive, or hot, with data stored online with a crypto exchange or other digital repository.
Ascent is Here to Help
As with all our educational articles, we hope that this info has shed some light on the topic of cryptocurrency, and has helped you gain more of an understanding of why this new way of processing payments will be so important to your vacation rental business in the very near future. Moving forward, we plan on sharing much more valuable info with you in our trademark easy-to-understand format.
If you have any questions or just want to chat further about cryptocurrency or payment processing in general, the experts at Ascent are always here for you. Reach out and connect with us at info@ascentpaymentsolutions.com.
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