Bitcoin is turning into one of the most famous cryptocurrencies available in the market. However, many people do not know about this currency and are yet to perceive its existence.
Bitcoin has it’s set of jargons, that both beginners and experts alike encounter in the crypto market. Even though you do not want to trade bitcoin, you need to know these terms to understand the currency better. And if you want to invest, you can find here, but before that know about the most frequently used terms in bitcoin.
10 Bitcoin terms you need to be aware of before investing
Bitcoin has completed 11 years in the market, initially, it had come with a few jargon of its own, over time it developed some. Let us learn about those jargons, that as an investor you must know of.
Blockchain is the term that frequently appears with bitcoin. Blockchain is a technology, that is a public ledger or network of blocks. This public ledger holds all the transaction details, made by the bitcoin users.
Blockchain is transparent as anyone can see the bitcoin activity and the transactions become easy traceable.
If blockchain is a building the blocks are bricks; every block contains a transaction history. Whenever bitcoin is used a new block is created for storing the transaction data. Every 10 minutes the transactions are verified by the engineers through mining.
Hence, the blocks created forms the network of blockchain. The data in these blocks once entered cannot be altered, making it free form double-spending.
Mining is the process by which engineers check the transaction process as well as develop cryptocurrencies. Mining helps to determine which transactions were authentic and provides allows the transaction. The miners are trained professionals who have special machines for mining. Those who are responsible for this process gets one bitcoin each, to every block they verify.
Cryptography is the technique or process of developing encrypted codes. This technique is the base of bitcoin, hence the name “cryptocurrency”. Cryptography assures that when the bitcoin travels through the network, it is not altered.
The bitcoin is sent as a message that can only be deciphered once it reaches the recipient. It not only makes the transactions anonymous but also secure. Blockchain’s hash function and bitcoin addresses use this technology.
5. Private Key
The private is like your password. This has to be kept safe and never exposed in public. This the key with which you can access your bitcoin library. Just like any other online payment service asks a pin or password for making the transaction. Even bitcoin is entitled to the same process, using a private key allows you to make transactions.
You might have heard this term frequently from the bitcoin users. What they truly mean is bitcoin is not controlled by any central figure or institute such as banks or regulatory bodies. Bitcoins are mined by professionals, who then distribute the output to different exchanges. Or people who have exchanges mine the bitcoins, for distributing it among the users who purchase it. Being decentralized in nature it is also far from the hands of government and banks.
7. Cold Storage
Cold storage is a term that relates to all the cryptocurrencies, as it is considered, one of the safest wallets. There is no doubt that paper wallets are the safest, but cold storages are equally efficient. These are in the form of hard drives that are encrypted and offer you smart contracts on the damage. These drives are password or pin protected and cannot be opened by others.
The change that we receive in return for paying more than the market price, is the same in terms of bitcoins. Say you have 6 BTC left from your previous transactions, and you want to use that for paying something that costs 2.50 BTC. The change that you receive from this will be 3.50 BTC.
Honoring the pseudonymous Satoshi Nakamoto, the founder of bitcoin, the smallest bitcoin value is called Satoshi. The smallest bitcoin fraction i.e. Satoshi is equal to 0.00000001 BTC.
10. Double Spending
When you send the money twice you are double-spending. Since bitcoins are in bits it is possible to spend the same money twice.