Cryptocurrency is one of the latest innovations of financial technology that has created a formidable market with traders, stock exchanges, investors, analysts, and continuously growing competition in the form of newer exchanges and more advanced currencies. Now even central banks around the world are planning their own digital coins. So, it is vital to know some basic terms before taking a plunge into the cryptocurrency market.
Following are the ten important terms one should know in the arena of cryptocurrency:
Cryptocurrency: It is a digital currency that is bought, saved and used electronically. Its authenticity is confirmed by a large decentralised database that is spread across geographies via computers, known as nodes. One of the key features of cryptocurrency (also known as crypto) is that it’s not regulated by any central bank.
Bitcoin: Bitcoin is the first cryptocurrency created in 2009 on blockchain technology.
Ethereum: Ethereum is a decentralised and open-source blockchain which supports its cryptocurrency — Ether. This is the second-most popular digital currency after bitcoin in terms of market capitalisation.
NFT: Non-fungible token is proof of ownership of a digital asset such as picture, video, artwork on blockchain technology. It is not meant to be confused with copyright. The owner of a digital asset can create as many NFTs of the asset as they want to sell.
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Blockchain: It is a record-keeping technology that drives the bitcoin network. Blockchains save data in blocks that are linked with each other. The technology enables access to a database that is spread across thousands of computers, also known as nodes, and any change in the database is confirmed and updated across the network.
Bitcoin wallet: It is a wallet that stores bitcoins electronically, usually outside the exchange from where the trader has purchased the cryptocurrency. The wallet has a secret key that corresponds to the bitcoin address of that particular wallet.
Altcoins: All the cryptocurrencies, and other digital assets apart from bitcoin are collectively referred to as altcoins, or alternative cryptocurrencies, or ‘alternative versions of bitcoin’.
Satoshi (unit): Satoshi is the smallest unit of bitcoin named after its creator. It is one hundred millionth of a single bitcoin.
Nodes: These are the computers that make up bitcoin’s network. Each node in the blockchain has access to the entire data, and any change in the blockchain is cross-checked and later updated on all the nodes.
Mining: It is the process of creating new bitcoins with the help of high computing power. Mining can only be carried out by quite sophisticated computing machines. As more bitcoins are mined, the process of mining continues to become increasingly complex and slow.