Bitcoin is one of the most popular and fastest growing cryptocurrency, by far. But even with its popularity and rapid growth, most people don’t know much about it. Bitcoin has its own set of terms, which can be useful even if you’re not looking to trade it. Beginners and accustomed Bitcoin investors come across these terms every day, and without deep knowledge of them, it can be difficult for the investors to get the hang of the Bitcoin world ultimately. Happily, we’ve listed and explained the most common terms you’ll come across in the Bitcoin ecosystem:
Bitcoin terminology #1: Block
The blockchain is built out of blocks. Every block is a group of new unit Bitcoin transactions that were made recently. For instance, if the blockchain were a book, a single page of the book would be called a block. The block is responsible for recording recent transactions. The transactions are then verified in ten minutes. This verification process is called mining.
Ideally, a block binds all transactions together. When all blocks combine, they form a blockchain. The fact that a written transaction can’t be changed makes double spending mission impossible.
Bitcoin terminology #2: Blockchain
A blockchain is a chain of blocks that contain information. It’s a distributed ledger that’s utterly opened to just about anyone. Once data has been recorded inside the blockchain, it’s impossible to alter. Every block contains some data, the hash of the block and the hash of the previous block. The data kept inside of a block hinges on the kind of blockchain. For instance, the Bitcoin blockchain stores transaction details, such as the sender, recipient and the number of Bitcoins.
Bitcoin terminology #3: Decentralization
When reading the definition of Bitcoin, you’ll come across the word decentralization. Bitcoin is a decentralized currency, meaning no organization or country owns the network. It’s a peer to peer platform, which means transactions happen without a third party.
Bitcoin terminology #4: Change
This is easy to understand because you experience it every day. For example, if you go to your local retail store, buy something and pay with an amount that exceeds the price of the item, you will get back the extra money. This extra money is known as change. The same concept applies to Bitcoin.
Bitcoin terminology #5: Mining
Once a Bitcoin transaction occurs, it’s checked up after ten minutes to verify it. The verification process is called mining and is carried out by miners. Ideally, the miners use computers to carry out mathematical calculations in a bid to find out the authenticity of the transaction and to verify it. The miners are paid according to the number of transactions they have verified.
Bitcoin terminology # 5: Private key
When we are buying things online, say with a third party payment gateway like PayPal, we have a secret password that we enter to be able to effect the payment. No one else has the secret password. The same occurs with Bitcoin transactions. If you want to spend your Bitcoins, you’ll be required to enter a secret code (private key) to effect the transaction. It’s critical that you keep your private key as secure as possible. Otherwise, if a hacker gets it, they can steal your Bitcoins.
Bitcoin terminology # 6: Cold storage
This is where you store your private key using offline techniques, such as hardware wallets or paper wallet. With cold storage, no hacker can get your private key.
Bitcoin has grown rapidly because there is no chance of double spending. This is because all Bitcoin transactions are stored in the blockchain and thoroughly verified by miners. That means Bitcoin might just grow to become the most trusted and used digital currency in the world. This is the right time to get started on Bitcoin, so start by acquainting yourself with these terms.