Cryptocurrency or digital currency has become quite a popular term; the industry itself has become valuable and attracted the attention of financial institutions and individuals across the globe. Many experts believe cryptocurrency has the potential to change the dynamics of the finance sector in the future.
However, the concept is not as simple as many of us think. If you are a beginner and do not understand how this type of currency works then there is absolutely no way you can benefit from it.
It is highly recommended that you consult an expert before you invest your time and fortune in cryptocurrency trading. But to get you started and have an idea about what digital currency is we have explained some of the most important terms in the simplest of words.
It is a digital ledger that is maintained publically, which means anyone can access it from any device. This ledger keeps a track of all the transactions between cryptocurrency users. This allows you to see how much value has been transferred and from where did it originate. Thanks to the blockchain technology everyone knows about each transaction that takes place, which makes the entire system quite secure.
Information distributed using blockchain technology can be accessed but cannot be copied.
These are websites that allow you to buy and sell cryptocurrency. You must always use a legitimate website for your transactions.
Bearish and Bullish
You will hear these terms quite frequently. When the market trend is favorable and appears to be profitable it is called Bullish. When the market goes down and the trends are not considered favorable it is called Bearish.
Cryptography is the coding and decoding which is used to encrypt all information. Cryptography is the foundation on which the entire system is built.
Since blockchain can be accessed publically, therefore, to ensure security, secret values using a complex algorithm are encrypted and decrypted. Cryptocurrency uses two types of keys; the public key can be used by anyone to encrypt a message, which is then received by you. You then use a private key, which cannot be accessed by anyone but you, to decode that information.
These quite literally are your digital wallets. You can send, store and receive your digital currency using your cryptocurrency wallet. These wallets store your private and public keys. If you lose your digital wallet, you end up losing all your cryptocurrency and information related to it.
You use computing hardware to solve cryptographic problems or puzzles and as a reward, more cryptocurrency is generated. Each solved puzzle adds a transaction to the digital ledger or the blockchain.
We use the term Fork when a single blockchain splits into two different chains. This split usually happens when some new regulations are added to the coding of the blockchain.
You can move your digital currency offline by using a number of methods; this process is called cold storage. It does not mean that you are physically moving your cryptocurrency offline; it only means that you can print out your digital wallet’s QR code or move the files onto some storage hardware such as USB.
These were some of the most commonly used terms and will help you understand the process better.