Bitcoin is a commonly used word in today’s world yet, there are thousands of people who are unaware of the cryptocurrency and the terms associated with it. Powered by the complex blockchain technology, Bitcoin can confuse people even with high experience and is highly intimidating for new investors especially without knowing about the cryptocurrency or the important terms. Trading Bitcoin can invite severe risks. Let us discuss in the following article some important terms related to Bitcoin.
IMPORTANT TERMS ASSOCIATED WITH BITCOIN:
These are the primary terms that an investor who is planning to invest in Bitcoin should know about.
1. Blockchain – is the chief term associated with Bitcoin. Blockchain is a digital register that comprises all the monetary exchanges made in any kind of cryptocurrency. Such transactions are composed of ‘blocks’ and when one such block reaches its capability, a new block is created. Few blockchains have a certain number of blocks by design, whereas several others have an infinite market cap.
The Blockchain of Bitcoin is public therefore, the transactions are visible to everyone. The ledger of a blockchain has no central location but it is rather constantly copied on various computer servers present around the globe. Hence, it is also considered decentralized. There are several apps available in the market and check Bitcoin Mining to know more.
2. Cryptography – by a basic definition of cryptography, it can be explained as the process of creating deciphering codes. Cryptography is the foundation of Bitcoin hence, the term ‘cryptocurrency’ is often associated with it.
The anonymous transactions of Bitcoin are possible because of cryptography. The data is sent in an encrypted or coded format and can only be decrypted or decoded by a particular key available to the receiver. This makes the transactions completely safe and secured.
3. Decentralization – this is the chief characteristic of Bitcoin and every other cryptocurrency. The decentralization of Bitcoin has advantages over fiat currencies and other payment methods as well.
Due to decentralization, transactions across the world can be made at a very low cost and sometimes close to zero almost. This is a great advantage for all Bitcoin investors in the market.
4. Mining – there is a constant checking of the Blockchain done every ten minutes to confirm transactions and the entire procedure is carried out with the help of Bitcoin mining. The process of Bitcoin mining requires computers to perform complex mathematical calculations to check the validity of every transaction and only then it is confirmed.
Bitcoin miners have great technological skills for which they can solve such difficult mathematical problems. Miners are rewarded with bitcoins for the verification of every transaction.
5. Private key – while using any online payment method, the users are provided with a private key that is accessible by no one but the users themselves. Similarly in Bitcoin transactions, one such password is provided which ensures security in the entire transaction procedure.
6. ICO – these letters stand for ‘initial coin offering’. This event occurs when a crypto project launches its currency into the crypto market permitting the first investors to buy it. When an investor is purchasing ICO, they are buying tokens of the project with the expectation that its value will increase over time and it can earn them great profits when sold in the future.
7. Crypto wallets – these are digital wallets or software that stores the cryptocurrency of the sender and receiver. A wallet connected to the internet is a hot wallet whereas a wallet disconnected from the internet is known as a cold wallet.
By having a brief knowledge about these terms, one can flourish by trading Bitcoin. With proper techniques and some experience investors at Bitcoin can flourish in the future.