Inspite of the rapid rise of the cryptocurrency industry, it has still miles to go to reach most investors. So far, a majority of crypto users are people who have some understanding of the technology or know about a few of the many jargons that are used. While most of us have heard about Bitcoin, Ethereum and Dogecoin, not many are familiar with terms like blockchain, hash etc. Understanding these terms and concepts is crucial for making crypto mainstream and expanding its reach to those who are interested in it but are put off by the complexity of a new technology.
Here’s a beginner’s guide to those jargons.
It’s a digital-only currency in the sense that it cannot be printed, folded and kept in a wallet. The main principle that makes it different from the fiat money is that it is decentralised, meaning no single authority has control over it. Cryptocurrency can be used to buy and sell things or can be used as a store of value, like gold.
It is the underlying technology that powers the industry. When an investor makes a transaction, the data has to be stored somewhere so that each transaction is recorded. It is an online ledger that allows everyone to see the details of each transaction anytime, anywhere. The decentralised ledger technology is built in a way that it makes it difficult to hack or cheat the system.
Mining, Miners and Hash
Every time a transaction takes place, it has to be verified. Only after the details are verified, the transaction is added to the blockchain. Miners are deployed to verify the transactions and they are paid a fee to complete the process. This mining process generates new coins. During the process, the details of the transaction are put through a hash algorithm which converts the data into a set of unique numbers and letters.
The two transaction hashes are combined and again put through the hash algorithm. This process continues until there remains just one hash – the ‘root’ hash of several transactions. Hash is a key security feature as it’s irreversible. While the process creates new sets of data, it cannot be reversed to know the details of each hash.
It’s a place to keep your cryptocurrency holdings digitally. They are protected and secure. They hold your private keys – passwords that give you access to your cryptocurrencies like Bitcoin and Ethereum. There are mainly two types of wallets: hot and cold. Hot wallets are connected to the Internet and Cold wallets are stored offline.
Bitcoin And Others
Bitcoin is the oldest cryptocurrency and it is also the largest in terms of market capitalisation. It was released in 2009 by a person or persons under the pseudonym Satoshi Nakamoto. The real identity remains a mystery. After Bitcoin, many other crypto coins came into existence like Ethereum, Ripple, Dogecoin, and Cadence. Each of these coins have a symbol assigned to them like Bitcoin has BTC, Ethereum has ETH and so on.