The world has been swooning over the concept of cryptocurrency for the last few years. It has immense potential to alter the scenario of monetary transactions across countries. A popular form of cryptocurrency is what we know as Bitcoins.
Although this form of monetary transaction is not widely accepted, it is gaining popularity with every passing day. It has appeared in the stock markets and is doing very well.
In this article, we shall discuss a few important terms and concepts that one needs to know regarding cryptocurrency and Bitcoins. But before going into that section, let us see what Bitcoins actually are:
What is the concept behind Bitcoin?
Bitcoins are gaining critical acclaim and popularity as a medium of monetary transactions. It is a form of cryptocurrency that offers a reduced amount of risk if money transfers. Very recently, bitcoins are making their way into the stock market. Their market value increased gradually.
There is no regulation or rule regarding Bitcoins. But, being entirely an online feature, it is susceptible to fraud or theft. Its usage is limited, accepted as an exchange currency by few places like Overstock and Newegg. It is still in its initial years and is expected to either develop for the better or perish forever.
Hence, there are little or no regulations regarding this form of monetary exchange. No government accepts or acknowledges cryptocurrency as a viable option yet.
Important terms related to Bitcoin:
Bitcoins and cryptocurrency function differently. It is nothing compared to what we generally know regarding monetary exchanges. Bitcoin transactions require a new kind of understanding of money.
Let us look at some related terms related to Bitcoins-
Blockchains are digital ledgers that comprise the transactions being made. These cryptocurrency transactions are composed of ‘blocks’. After a block is full, a new block gets created and then linked to the previous block. Blockchains might have a limited number of blocks that can be created, or some might offer infinite blocks.
There is no particular location for the ledger to be stored. In fact, it can be copied and viewed in computers across the world. Hence, blockchains work in a decentralized manner, so that all users have equal access. To know more, you can have a look at various price drop in crypto.
Making a transaction with blockchains, one needs to pay a certain fee. It is known as the gas price. It is like paying a miner to receive crypto for you, as a third party.
The amount of charge depends upon the speed of the transactions. Higher prices are for faster transactions and lower prices for slower transactions. This is one of the inconveniences of using cryptocurrency.
Mining is known as the process of checking and verifying monetary transactions on a blockchain. Paying a miner to complete a transaction by offering online computer power fetches cryptocurrency as rewards.
4. Private Key:
The private key is the most important set of numbers and letters required to practice the exchange of cryptocurrency and Bitcoins. This key must not be shared with anyone.
If someone else gets access to the private key, there is a huge possibility of theft. This key is mandatory for verifying all transactions that take place.
5. Proof of Authority and Proof of Work:
Blockchains operate under the Proof of Authority (PoA). Selected nodes are granted the authority to allow a miner to create a block. This method is more centralized, and faster.
Proof of Work is an old way to facilitate miners. It needs miners to show their effort while attaching a variable to the blocks while hashing a monetary exchange. This requires a lot of computer power to execute.
There are many such technical terms related to Bitcoin and cryptocurrency as a whole. The above-mentioned terms are some of the basic concepts one needs to know about cryptocurrency. Hopefully, this article helps in increasing your understanding regarding the same!