Cryptocurrency has, in recent years, gotten a huge surge in popularity. Surveys have shown that, in the United States of America, 17% of the adult population has an investment in bitcoin, with that number expected to rise in the coming future, as younger generations are far more likely to invest in bitcoin, than anything else. The number of investors is even bigger worldwide, as surveys have found that there are millions of investors all over the world.
With the surge in popularity, many new investors are popping up, curious about this exciting new phenomenon, and a lot of these people are not necessarily familiar with the world of cryptocurrency. In this article, we will take a look at the different terminology associated with cryptocurrency, and explain what it means.
The Beginnings of Bitcoin
Bitcoin got its start in 2009, when Satoshi Nakamoto mined the first bitcoin block (now called the genesis block). Later that year, Hal Finney, a friend of Nakamoto’s, and massive supporter of the cypherpunk movement, received the first ever bitcoin transaction from Nakamoto himself. At the time, Bitcoin’s price was barely worth a dollar.
Today a single Bitcoin unit is worth $34.000, and Bitcoin has a market capitalization of $500 Billion. There are many contributing factors to Bitcoin’s surge in popularity. One such factor may just be the appearance of the many crypto trading sites. Nowadays, you will find that the best crypto trading platform are just a click away. These sites make crypto trading easy as can be. Crypto trading sites offer tutorials for investing, are easily accessible, and place heavy emphasis on anonymity and security.
Now that the origins of Bitcoin have been explored, let’s take a look at some of the important terminology that every investor should know.
A blockchain, to put it plainly and simply, is a list of cryptographically linked blocks. The blocks contain transaction data, and timestamps, as well as a cryptographic hash of the block which comes before it. Blockchains work on the base of a peer-to-peer network, nodes working collectively under a given protocol. When the blockchain developers disagree on an update in the protocol, a hard fork may occur.
Hard forks are changes in the protocol that split away from an update. As said, they occur when a developer might disagree with the direction that the blockchain is going, and decides to avoid the update, or make their own.
In the 12 years since it has existed, Bitcoin has seen a number of hard forks, some successful, some not-so-much. The first successful Bitcoin hard fork was Bitcoin XT, which is today defunct. The most successful hard fork, however, is Bitcoin Cash, which is still going strong today, with a price approaching $500, and a market capitalization of $8 Billion.
Bitcoin mining is a process integral to upholding the blockchain, validating Bitcoin transactions, and adding new cryptocurrencies into circulation. The process is notoriously difficult, and often times not rewarding, as a bitcoin miner has to mine the blockchains, but also has to be the first to come to the right conclusion. Mining can take anywhere between a few minutes, and a couple of hours.
The goal of a miner is to verify bitcoin transactions. The practice was concocted by Satoshi Nakamoto himself, and the purpose of it was to combat double-spending. The practice was a massive success, and Bitcoin was the first digital currency in history to successfully overcome double-spending, which is one of the reasons for its success.
Bitcoin Halving occurs roughly every 4 years, and its purpose is to induce synthetic inflation in Bitcoin’s price. What halving is, is reducing the amount of bitcoin awarded to miners by half. Halving will at some point reduce the rewards for bitcoin mining to such a miniscule amount, that miners will no longer be paid in bitcoin, but will instead receive fees based on their work.
Central Bank Digital Currency
Finally, you need to learn the differences between cryptocurrency and central bank digital currency. While on the face of it these two concepts may seem similar, they couldn’t be further from the truth. But first, we must discuss what makes them so similar.
- Both are digital currencies
- They can be used to make transactions
- They can be used for trading or investing
But, here is where the similarities end. You see, CBDC is a digital version of a given country’s fiat currency. In other words, they are issued by the central bank of a country. Meaning that CBDC is in direct opposition to what cryptocurrency stands for. While cryptocurrency’s philosophical origins can be found in libertarianism and the decentralization of currency, central bank digital currency is meant to co-exist with a country’s fiat money and be used interchangeably.
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