10 Crypto Terms You Have to Know as a Bitcoin Beginner
It can be a bit confusing as a bitcoin newb, but learn a few basics to help find your feet.
Bitcoin is arguably one of the most enticing assets to invest in. It’s not difficult to get a hold of, nearly anyone can buy it, and frankly- you don’t need to know much about it to start investing. With adoption on the rise, there are also exchange platforms like Bitvavo– where you can not only buy yourself some bitcoin, but also learn how to invest it wisely.
While market volatility, or the sometimes-wild swings seen in price, still exists, this actually offers an excellent investment opportunity, especially for new buyers, but in order to know when to buy, when to sell, and how to get a bit more comfortable speculating on future prices, you’re going to need to get comfortable with some basics. Here are 10 of bitcoins favorite terms, and the important fundamentals they represent.
Blockchain Blockchain is a type of distributed ledger technology (DLT)- which is basically an online ledger that can be accessed by anyone who is a part of the bitcoin network. This type of technology is one of the many that not only has applications in bitcoin, but could also be used in other financial arenas as well. Every time a bitcoin transaction is verified, it is then time-stamped and added to this ledger. Making it possible for anyone to see where bitcoins
are going, or coming from. Once a transaction has been added to the ledger it is irreversible, immutable, and non-duplicable. Keeping the bitcoin network safe, without the need for a centralized authority.
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Nodes are the computers that are connected to the bitcoin network. These computers lend their computing power to the network, and compete against other nodes to solve the complex cryptographic equations that are used to verify any transaction made on the bitcoin network.
Hashrate is a metric used to measure the amount of shared computing power that is operating on the bitcoin network at any given time. Hashrate can also give an idea of how many nodes are operating at any given time, and how many transactions can be processed in a given amount of time. The higher the hashrate, the more secure the network is. As a high hashrate means that more nodes are present, showing in real time the dissemination of mining power.
Mining is the process of solving the complex mathematical algorithms that verify transactions. Each node on the network works to find a solution to the cryptographic equations that are generated by transactions. These equations are made in such a way that there can only ever be one answer to each unique algorithm. Should a node be the first to find the answer, the transaction has been “mined” and it’s added to the block chain. The nodes owner or user will then receive an award of freshly minted bitcoins for their efforts. Transaction fees are also awarded to successful miners.
Possibly a person, possibly a group of people, Satoshi Nakamoto is the pseudonym taken by the creator(s) of bitcoin. No one knows who Nakamoto is, even though there are many theories out there. Nakamoto was also the very first miner, who mined the very first block in the blockchain. This is often referred to as the “genesis block”. The entity also holds more bitcoins than anyone else on earth, but they are rarely used.
A whitepaper is essentially a business manifesto that explains the background, functionality, and possible applications of any given cryptocurrency. Perhaps the most famous whitepaper, written by Satoshi Nakamoto was bitcoin’s, entitled Bitcoin: A Peer-to-Peer Electronic Cash System. Familiarizing yourself with the whitepaper of any given cryptocurrency you plan on investing in is a good idea, although some can be fairly complicated.
An Altcoin is any ALTernative cryptocurrency. This usually describes any crypto that isn’t bitcoin, but there are further distinctive names when compared to altcoins, ones that help to describe the token’s functionality: like stablecoins, or security tokens, and utility tokens.
Fear Of Missing Out is a casual reference to crypto traders who buy, sell, or trade cryptocurrencies without due diligence- usually because they are worried about missing out on something big. This emotional form of investing usually ends up with those investors still missing out… so always make sure you’ve got a solid trading plan in place and never invest emotionally.
Address refers to the complex and unique signifier or a given bitcoin wallet. Instead of using personally identifying information to transact bitcoin- like your name or bank account number, bitcoin wallets generate an anonymous string of letters and numbers that are used to identify wallets. This address is added into the blockchain each time a transaction is made with it. Keeping investors safe from identity fraud.
Another goofy acronym, Hold On for Dear Life actually came from a poorly spelled and supposedly drunken rant on an original bitcoin forum, has now been adopted as the go to investment advice for many bitcoin users. Suggesting that holding onto your coins, even in market strife can offer some pretty big rewards to those who are patient enough