Bitcoin Unveiled: Essential Cryptocurrency Jargon Explained for Beginners
The article provides explanations for key terms associated with cryptocurrencies for those who may be unfamiliar or in need of a refresher.
- Bitcoin:
- Bitcoin is a type of digital currency or cryptocurrency.
- It is decentralized, not backed or controlled by centralized financial institutions.
- Its value is volatile, influenced by the buying and selling decisions of Bitcoin users.
- Blockchain:
- Blockchain is the underlying technology for all cryptocurrencies and products, like non-fungible tokens (NFTs).
- It is a virtual spreadsheet recording all cryptocurrency transactions.
- Transactions are organized in blocks linked together in a chain, hence the name.
- Mining is validating transactions and updating the blockchain, with the first person rewarded in Bitcoin.
- Halving:
- The cap for mined Bitcoins is 21 million, and roughly every four years, the reward for creating new blocks is halved.
- The next Bitcoin “halving” event is expected in spring 2024.
- Exchange-traded funds (ETFs):
- ETFs are portfolios that allow investors to bet on multiple assets without directly buying them.
- Traded on stock exchanges like shares, their value depends on the real-time performance of the overall portfolio.
- Spot Bitcoin ETFs buy the cryptocurrency directly at its current price, enabling new investors to enter the Bitcoin market without dealing with digital wallets.
- Crypto Exchange:
- A digital platform where investors can buy, sell, and trade cryptocurrencies.
- Acts as a brokerage, facilitating the transfer of traditional money into cryptocurrencies.
- Transactions often involve fees.
- Crypto Wallet:
- A place where investors store their cryptocurrencies, similar to a traditional wallet holding cash.
- Two types: hot wallets (connected to the internet for quick transfers) and cold wallets (offline devices for safer and longer-term storage).
- Ethereum:
- The second-largest cryptocurrency after the Ether token represents Bitcoin.
- Ethereum also refers to the blockchain supporting it.
- Supports various applications and digital assets, including non-fungible tokens (NFTs).
- In 2022, Ethereum switched to a greener operating system requiring less energy.
The article aims to demystify these terms and provide clarity for individuals navigating the world of cryptocurrencies.
