Understanding Cryptocurrency - Part I - Basic Terminology

We all have heard about the currencies of different countries. But with digitization, people have now become used to utilizing things that are not physical but virtual. One of the best examples of this is the ever-growing buzzword Cryptocurrency. This subject has been a trendsetter since the year 2009. The identity of Satoshi Nakamoto, the developer of Cryptocurrency, has not been publicly revealed, but he has changed the way people used to think about digital money. 

We all have bought goods and services in exchange for money. That is how this works. You buy something, give the exact amount of value it costs, and get the product. This is not the case with Cryptocurrency. Though many people might take Cryptocurrency as actual currency, but is it really? Let’s find out!

says Wikipedia, but let us understand it better and realistically. Just like other currencies have a regulating body, Cryptocurrency or Crypto has none. They are instead decentralized and controlled by people, lots of people. It is a form of currency that lives digitally or virtually and does not rely on banks for the verification of their transactions.

You do not need to carry Cryptocurrency in your wallet to make transactions; instead, they exist as digital entities in an online database that records and describes various transactions performed. The transactions of transferring Cryptocurrency are recorded in a public ledger. And the wallets that you can store Cryptocurrency in are called digital wallets. 

There’s a common question that pops into a lot of minds, why the name Cryptocurrency? This is because the transactions are verified through encryption which provides safety and security. The transmission and storing of Cryptocurrency data from digital wallets to public ledgers are done when massive coding is involved. 

Now, this is a basic understanding of the term Cryptocurrency. It is a very deep and large-scale topic. There are numerous coins that you can look up to on various platforms like Market Cap, Nomics, Binance, etc.

The first ever Cryptocurrency was Bitcoin which is the most well-known coin. Though this does not clear your doubts and confusion about Cryptocurrency. So, let us have a look at the few terminologies that will make you understand better Cryptocurrency and what it is. 

Bitcoin is the first and most famous Cryptocurrency among the others. People who are not very well versed in the subject of Cryptocurrency often mislead Bitcoin with the only Cryptocurrency that exists. This is not true. So, the term Altcoin refers to all the other coins except for Bitcoin. 

The process of tracking assets and recording transactions in a defined business network is done through a ledger called the blockchain. Assets are both tangible and intangible. We all know that business runs on verifiable information. The faster we receive, the more precise it is. Through a blockchain network, you can track orders, accounts, payments, and a lot more. 

Just like to access our Debit card, we need a PIN; in the same way, a private key is what permits the Crypto user to be the owner of the digital currency at a particular address. The blockchain wallet accordingly generates and keeps the private keys stored for you safely. A private key is a 12-word long password that lets you access your Cryptocurrency funds and should never be shared with anyone under any condition. 

Just like you have various IDs on payment methods, the public key is somewhat related to it. While a private key is not to be shared with anyone, a public key can be shared with others. The public key is a code that is linked with the private key.

Anyone can send transactions to the public key, but you need to access the private key first to unlock them. This is just to prove your identity first to avoid unforeseen situations.

No, this is no other gas we are talking about. This is completely related to Cryptocurrency. Now, when we shop online, we often bear an amount by the name of the delivery charge for the service we get. To complete a transaction on the blockchain, you need to make a payment. This payment individuals make is known as Gas. This fee, in turn, is used to compensate the miners for the computing power they have to make use of to confirm blockchain transactions. 

This term has nothing to do with the animal bull. But the one thing that bull and bull markets have in common is they keep their head up high when it’s show time. In a bull market, the demand for Cryptocurrency is more and the supply less. Various investors are willing to buy Crypto, but many less are willing to part with them. This leads to a hike in the price as investors fight to purchase what’s still available.

There are often times when the supply is greater than the demand. This is what is defined as a bear market where the prices are falling, and the confidence is low. Cynical investors who believe that the prices will keep falling are referred to as bears. One thing to note is that it is difficult to trade in bear markets. 

It is well understood that the prices of various Crypto coins are not the same, and they change over time depending on the supply and demand. Volatility is the measure of how much the price of a particular coin has gone up or down. The more volatile an asset is, the riskier it is to invest. Comparatively, it also has more potential to offer either higher losses or higher returns over a short span of time. 

Out of the many, these are just a few terminologies we read about. I hope you now have clarity in your thoughts and a better understanding of what Cryptocurrencies are.

I would not say you have become well versed with the subject after this article, but in the coming articles, I will be explaining more about the terms related to Cryptocurrency that can help you become the subject expert. 

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Happy Reading! :)