Exchange

An exchange is an online service where you deposit currencies such as dollars or bitcoin (or any other crypto) and you can exchange it for some other currency for a small fee.

Centralised Exchange

This is an exchange where you can do FIAT (dollars) to crypto and vice versa. They require you to "prove your identity" and ask invasive personal questions in a similar way to opening a bank account. 

Examples; Coinbase, Binanace, Kraken.

Decentralised Exchange

This is an exchange running in a smart contract on a crypto platform. You send tokens to the smart contract and can exchange them into other tokens.

Examples; Ethereum, Binance Smart Chain, Solana, Polygon, etc.

Broker

A broker provides an exchange-like service, but they do the actual exchange on your behalf for a bigger fee.

Wallet

A wallet is an app you install on your phone, or program that runs on your computer, or hardware device that allows you to store crypto currencies "in it". The reality is that the wallet stores your access to the crypto, and the crypto stays on it's network. Wallets allow you to send and recieve crypto and also execute smart contracts (explained later on this page)

Self custody wallet

This is a wallet where you actually store access to the crypto yourself and you have full and ultimate control over the crypto. You have to write down your secret words as a backup should you lose or break the wallet or the device running the wallet. Wallets will allow you to send and recieve funds to other wallets, exchanges and brokers.

Custodial Wallet

This is a service where a 3rd party such as a company holds the actual crypto for you and they allow you to have access to the crypto. You normally log in with an email and password to gain access. Exchanges act as custodial wallets when you send your funds to them or buy crypto with them.

Mining

Mining is the name given to the activity done by computers that run using electricity to secure the Bitcoin network and "mint' new Bitcoins. The energy used is converted to heat as the waste product. This is covered in detail in Bitcoin for Beginners Sessions 2 and 3.

Smart Contracts

Smart contracts are programs that execute as part of a decentralised blockchain. You can run the programs by interacting with them using a web browser with an integrated wallet such as Metamask. If you run an Ethereum smart contract you will have to pay for the execution with ETH.

DeFi

Short for Decentralised Finance. Smart contract platforms allow for lending or recieving loans, performing token exchanges and other regular financial services. These happen entirely on the platform or network and as such no centralised entity is required to perform these actions. No identity information should be required and not jurisdictional rules apply. Also no legal comebacks or recourse for issues or problems that might arise.

NFTs

NFT stands for Non-Fungiable Token. This is a token that represents something else. Instead of having a currency with lots of tokens with an NFT there is only one of them. NFTs can currently be linked to images and other digital assets, but in the future land or property titles or car registrations could be NFTs. You can store and transfer NFTs using a wallet. Rules can be inbuilt into the NFT transfer to add a cost sent to the original NFT owner.