Six Essential Cryptocurrency Terms and Definitions
Are you confused about cryptocurrencies and all the new words that surround their existence, production and pricing? By now, the average person has at least heard of Bitcoin, but few understand how it is produced, traded, or acquired. Here are a few essential terms and definitions to get your started. There are many Bitcoin and cryptocurrency posts to help you understand the world of cryptocurrenices.
- Bitcoin – Bitcoin, started in 2009 is by far the most widely recognized cryptocurrency. Bitcoin is the byproduct of another invention by founder Satoshi Nakamoto who is thought to be the single largest Bitcoin holder. There will be a maximum of 21 million Bitcoin mined.
- Blockchain – Blockchain is a programming methodology used to verify the production of a cryptocurrency. A blockchain works on peer-t-peer network and is not owned or centralized. The blockchain ledger is a growing list of records composed of smaller blocks. The ledger records the production of the coins and to which wallet ID the coins belong to, but never who owns the coins or the wallets. The blocks cannot be changed once added and the ledger is encrypted. Everyone working on the block chain has a copy to ensure data integrity.
- Cryptocurrency – A cryptocurrency is a digital asset or investment that uses cryptography for security. that is used to purchase goods, invest in, or barter. Cryptocurrencies are not backed by commodities, not regulated or insured by any government, and most are not associated with any countries. Ownership is anonymous. Cryptocurrencies are anti-traditional currencies like the United States dollar, the British Pound, or the Euro.
- Cryptocurrency wallet – Wallets are how Bitcoins and other cryptocurrencies are stored. A wallet is digital storage online or on a user’s computer. Wallets keep track of and hold a user’s cryptocurrencies such as Bitcoin, Ethereum, Litecoin, Ripple, etc.… Cryptocurrency wallets are locked with multiple passwords or keys that no one can unlock if the keys are misplaced or forgotten.
- Exchanges – Cryptocurrency exchanges are marketplaces where people and businesses can buy and sell cryptocurrencies. Not all exchanges handle all digital or traditional currencies. For example, an exchange might only work with Bitcoin and Ethereum but not Ripple. Or an exchange may accept US Dollars in exchange for Bitcoin, but not credit cards or Euros for example. Exchanges charge a fee for their services.
- Mining – Mining is the prices by which a cryptocurrency is produced. Computers are used to solve puzzles with miners competing against each other to solve the puzzle first. The winner is rewarded with a number of coins.
Michelle writes about cyber security as well as how to protect your data online. She has worked in internet technology for over 20 years Michelle earned a B.S. in Engineering from Rensselaer Polytechnic Institute. She conducts workshops focused on web technologies and enjoys public speaking along with her connected rescue mutt.