When it was first introduced in 2009, nobody expected Bitcoin to have the level of impact it has had. Essentially, this digital coin’s existence has changed traditional finance as we know it. As the first-ever cryptocurrency, Bitcoin became very popular and in high demand due to its market value. For this reason, millions of people want to partake in what this digital coin has to offer. If you are a novice interested in learning about Bitcoin and the crypto market in general, a good place to start is by getting a grasp of the basic terminologies involved. This article discusses the top 10 Bitcoin terms you should know to make it easier for you to understand how Bitcoin and the whole crypto industry works.
10 Bitcoin terms you should know
These are the top 10 Bitcoin terms you should know if you want to learn the fundamentals of cryptocurrency:
Cryptocurrency is a general term for digital or virtual money. Essentially, this kind of currency exists exclusively in virtual form and cannot be held or carried around like a regular currency that you are used to.
Like the regular money we’re familiar with, cryptocurrency can be used to pay for goods and services. However, one major difference between both currencies is that cryptocurrencies are encrypted to guarantee that each transaction is secure. Popular examples of cryptocurrency include:
Instead of being managed centrally, cryptocurrency is decentralized, which means that it is regulated by a global peer-to-peer network called the blockchain. Blockchain is simply the digital ledger that is used to hold all cryptocurrency transactions.
All cryptocurrency transactions that occur on the blockchain are shared and constantly reconciled. That implies that all records are public and there is no single centralized database that a hacker can hack into and corrupt.
An address is a precise destination on the blockchain network where a cryptocurrency is sent. Crypto addresses are just like a bank account that keeps only cryptocurrency tokens. Each address can be used once and is hoped to provide a unique, highly secure location to hold crypto assets.
Each address is made up of a distinctive set of alphanumeric characters. Once crypto tokens have been sent from one individual to another, the recipient utilizes that specific set of alphanumeric characters to affirm that they own the cryptocurrency and accept the transaction.
The most valuable cryptocurrency addresses in the world are called “whales.” Basically, a whale is an investor (or group of investors) who is influential enough to affect the value of a coin. For instance, if a group of whales come together and decide to sell their Bitcoin at once, the value of the tokens would naturally plunge immediately conforming to the mass sell-off. The whales would then take their gains and purchase more Bitcoins at a bargain basement price. Anybody can be a whale, although whales are typically large hedge and investment funds.
Bitcoin is a virtual payment system that permits secure peer-to-peer transactions. Unlike other electronic payment systems (like CashApp or PayPal) that depend on traditional banking procedures, Bitcoin is decentralized.
Essentially, this means that any two people based anywhere in the globe can seamlessly exchange digital funds. Also, this implies that each transaction executed is registered on a blockchain (just like a bank ledger) and distributed across the whole network of cryptocurrency users.
Basically, that distribution helps to protect transactions by making each of them transparent. Also, it eliminates the need for third parties, such as banks, financial companies, or even countries. No one person regulates the Bitcoin network other than all the participants involved. And since it isn’t feasible to buy the entire Bitcoin, anybody can become a part of the network by purchasing a fraction of a coin.
In simple terms, a cryptocurrency wallet is a physical storage device or an app that lets you keep and recover your digital currency anytime. Wallets can keep multiple cryptocurrencies, so you’re not restricted to only Bitcoin.
The purpose of a crypto wallet is to protect your tokens. Hence, the security access to wallets is so tight that you can lose all access to your digital coins if you ever forget or misplace your password.
There are two major kinds of crypto wallets – hot and cold wallets. A hot crypto wallet is linked to the internet, which makes it more convenient for online trades but is less safe than a cold wallet. As for cold wallets, they are more like a safe, held offline in a safe spot that you can access. Although cold wallets are less convenient to operate than hot wallet since it is not connected to the internet, they are definitely more secure.
Fiat currency is a currency that is government-backed but not supported by an asset (like gold). They are the regular currencies that we are all familiar with. The value of fiat currency is based just upon our conviction that the government can back them.
Mining is simply the process utilized when new Bitcoins come into circulation. Essentially, this process needs powerful computers that can work out mathematical puzzles and are competent enough to develop a new block on the blockchain. Also, mining involves adding different safety measures to safeguard the transaction.
The gas price refers to the fee you pay to execute a transaction on the blockchain. It is simply the cost of paying a Bitcoin “miner” to find and receive a token on your behalf. The amount of the fee depends on how fast you want the transaction to be finished off.
10. Satoshi Nakamoto
Satoshi Nakamoto is simply the pseudonym that is used to refer to the inventor of Bitcoin. Nobody, outside the inventor or inventors themselves, knows who is the real Satoshi Nakamoto.
Now that we are done with the top 10 Bitcoin terms you should know, there are still a lot of things you must learn if you want to invest in Bitcoin. It is basic knowledge to understand that the world of crypto is extremely volatile, and you must never risk cash you aren’t okay to lose.
Also, before you start trading or investing in Bitcoin, we encourage you to seek advice on how to go about it from expert cryptocurrency traders. This article is a good place to start – How to start Crypto Trading | Beginner’s Guide.