The modern journey of cryptocurrency has been very fascinating so far. The way it was introduced to the world and came into existence is quite interesting. Unlike other currencies, it is a virtual currency and only requires making an entry in the online virtual ledger in order to use it. The data of this ledger is saved in computers all around the world, so it is decentralized and openly transparant.
The ledger is visible to everyone who is using the cryptocurrencies and the software that enables all the procedures of transactions, as well as websites and trackers made for just that purpose. While cryptocurrency is the most transparent and open form of currency available today, it is also one of the most anonymously kept form of money transactions. Crypyocurrencies are currently above the reach of the governments or any other official organization and cannot be completely influenced by them.
Investing or earning cryptocurrency today is at an all time high, and for good reason! It is something that can easily take you from rags to riches just by making few intelligent investments. However, you must be very careful in this process and analyze the market trends. You can lose your shirt just as easily! The whole procedure of investing into cryptocurrencies is typical of the investment industry, and may seem somewhat hard to understand for many people. Doing extensive research on the markets and the industry itself is recommended before risking any money at all.
First and foremost, it is important to understand the concept of cryptocurrency and the fundamentals. It is also of foundational importance that you get familiar with some of the jargon that you will come across while learning.
Here are some of the most common and basic terms that are used in the world of cryptocurrency:
- Encryption: is the basis of all blockchain technology and cryptocurrencies (hence the term “crypto” in the currency). This refers to the process of turning data into a coded new form of data that can only be read by the creator of the encryption. Whenever you encrypt something, you generate a private unlocking “key”, and that key (in the form of a string of letters and numbers) is what is used to then decrypt the data later. This is basically how cryptocurrency works, but with a lot more complexity of course!
- Blockchain: is a virtual and electronic ledger that can be decentralized among a cloud of computers, much like the internet. It is the basis for all cryptocurrency technology.
- Fiat Money: refers to any of the legal tenders that involve the use of any kind of currency and is backed up by the government but not by any physical commodity. This makes the value of the currency easily controllable and is prone to inflation, because it has no finite supply limitation.
- Bitcoin: is the most commonly used form of cryptocurrency and widely used all around the world. This cryptocurrency was found back in 2009 and is used on a wide scale now. It is also currently the most expensive form of cryptocurrency as well. (as of Q4 2018)
- Altcoin: refers to all the rest of the cryptocurrencytypes, other than bitcoin, currently in existence. These are used by people wishing to make profits and work on the same procedure as bitcoin, at a lower entry cost. There is only a slight change in the coding of these currencies, upgrades and new technology developments. Aside from those factors, there is nothing else that makes them different from traditional bitcoin.
- Miners: are the people who work in solving for the digital currency using their own resources (utilizing computing power, electricity etc). Cryptocurrency miners use special computers that continously work towards processing transactions on the blockchain ledger, thus earning them proof-of-stake in the form of coins or precentages of coins. (based on their participation)
- Wallets: These are the small files or documents that can help you to store your cryptocurrencies. These come in the form of programs, apps, hardware, and even paper. Wallets contain your public and private encryption keys, the public keys are used to receive money anonymously from others, and the private keys are used to decrypt your own transactions and manage your cryptocurrency finances.
In Closing
There are just a few of the basic terms and concepts you should be familiar with when learning about cryptocurrency. I am sure that the information is useful, but it probably creates even more questions. That is a good thing! Learning about cryptocurrency is fun, and it can even be highly profitable if you are sharp. I hope you continue to study and learn about cryptocurrency, and that you get a lot of your information from this blog, stay tuned!