If you’re new to the world of cryptocurrencies, you may feel a bit overwhelmed by all the new jargon you find yourself learning. Blockchains, smart contracts, oracles and other terms are used all the time in the crypto trading and investing industry, but if you’re just starting to learn about crypto technologies, it’s easy to feel lost.

You’ll learn what you need to in time, but there are two terms every crypto trader and investor needs to know: DeFi and token. These are two terms that are not only used frequently in crypto trading and investing, but they’re also integral to the experience of owning cryptocurrencies.

What is DeFi?

DeFi is an abbreviated way of combining “decentralized” and “finance,” two terms that make up the core of what cryptocurrencies are. The idea behind DeFi is that cryptocurrency processing is not handled at a central place like a bank. Instead, transactions and all the information that makes up the cryptocurrency industry are spread out across a network of computers in a decentralized fashion.

What Are Tokens?

Tokens in cryptocurrency often get confused for coins, which are the actual monetary cryptocurrencies that exist. Tokens are digital assets that exist on a ledger known as a blockchain. DeFi tokens are used to show ownership among investors, but they can also represent physical objects and files.

Tokens are used on their associated blockchains, but they have utility. Although they can be considered a store of value, digital assets that serve as tokens can be things like technologies as well. An example is Filecoin, often abbreviated as FIL, a utility that lets you store information on a blockchain ledger.

Why Are These Terms Important?

Understanding these two terms is important not only because they are central to the crypto industry but also because investors need to understand how their assets operate within the crypto space. Failure to understand the basics behind these technologies can open you up to falling victim to scams and illegal activities, and it can also help you self-direct your investments.

Author Resource:-

Emily Clarke writes about global equities markets, commodities prices, forex rates and more. You can find her thoughts at advanced analytics blog.