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Bitcoin Terms That Everyone Should Know – Guide
Although bitcoin first appeared on the market in 2009, until recently, you couldn’t turn on the news or browse the web without encountering a mention of the cryptocurrency. I received so many questions from my readers and listeners of national radio shows that I wrote an eBook on cryptography to help. I demystify digital currencies, mining and how to start trading. With so much going on in the world, it’s easy to wonder if cryptocurrencies seem like a very steep learning curve. Much of the confusion with encryption is likely due to the use of words many of us have never heard of it.
Cryptocurrency is not just a new investment option, but in many ways it represents a very different world from traditional stocks and bonds. Among unknown acronyms, emerging technologies and up with memes and tweets, just learning the basics takes time, even for seasoned traditional investors. As with any investment, it’s important to understand exactly what you’re investing in before you start. This is especially true when it comes to a speculative – and still evolving – asset like cryptocurrency.
Bitcoin Terms You Should Know
altcoin
An altcoin is any currency other than Bitcoin. Altcoins can be anything from the second most popular coin, Ethereum, to any one of thousands of coins with a minimum market cap. Experts say that you should largely stick to the biggest and most popular cryptocurrencies as an investment.
Bitcoin
The first and most valuable cryptocurrency, launched on January 3, 2009. Although its value has steadily risen since then, it has seen wild fluctuations. In the last few months alone, the price of Bitcoin has fluctuated from a record high of $60,000 to under $30,000.
Bitcoin Cash
A peer-to-peer electronic cash system that was formed from a fork of the original Bitcoin. Where Bitcoin is widely accepted as too volatile to be useful as a currency, Bitcoin Cash is designed to be better optimized for transactions.
Blockchain
A digital form of registration and the underlying technology behind cryptocurrencies. A blockchain is the result of sequential blocks building on top of each other, creating a permanent, immutable record of transactions (or other data).
Coin
A representative store of digital value that lives on a particular blockchain or cryptocurrency network. Some blockchains have the same name for both the network and the currency, such as Bitcoin. Others may have different names for each, such as the Stellar blockchain, which has a native currency called Lumen.
Cold Wallet/Cold Storage
A secure method of storing your cryptocurrency completely offline. Many cold wallets (also called hardware wallets) are physical devices similar to a USB drive. This type of wallet can help protect your cryptocurrency from hackers and theft, although it also has its own risks – like losing it, along with your cryptocurrency.
decentralization
The principle of distributing power away from a central point. Blockchains are traditionally decentralized because they require majority approval from all users to operate and make changes, rather than a central authority.
digital gold
Experts sometimes compare specific cryptocurrencies to real gold based on how it can store and increase value. Bitcoin is commonly referred to as digital gold.
Ethereum
The second largest cryptocurrency by turnover, Ethereum is a cryptographic network and software platform that developers can use to build new applications and has an associated currency called ether.
Fork
When users of a blockchain make changes to its rules. These changes to the protocol of a blockchain usually result in two new paths – one that follows the old rules and a new blockchain that separates from the old one. (Example: a fork of Bitcoin resulted in Bitcoin Cash).
cryptocurrency
A type of digital and decentralized currency. Cryptocurrency can be used to buy and sell things or as a long-term store of value.
HODL
It stands for “Hold On for Dear Life”, although the term originated from a user typo on a Bitcoin forum in 2013. It refers to a passive investment strategy in which people buy and hold cryptocurrencies – rather than trade them – in the hope that it increases in value.
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