Bitcoin, what? Meanings of key cryptocurrency terminology

Cryptocurrencies returned to the headlines when Bitcoin temporarily reached a record high on 5 March.Many people are unfamiliar with blockchains, wallets, and "spot ETFs" in crypto.

Although many people may not understand crypto, its most well-known product, Bitcoin, is well-known to almost everyone. However, what exactly is it?

One form of digital currency is Bitcoin, which is also known as a cryptocurrency. Bitcoin is decentralised and not backed by any one bank or government, unlike fiat currencies like the dollar or the pound.

The fact that its value can rise and decrease depending on the actions of Bitcoin buyers and sellers makes it very volatile, but it also makes it appealing among those who believe decentralization can lead to financial freedom.

It was fantastic news for Bitcoin holders in February 2024, when the price surged and momentarily hit a new record high. But, as has happened many times since the cryptocurrency's introduction, its value can fall as fast as it rises.

Blockchain powers all cryptocurrencies and associated items like non-fungible tokens. It records all bitcoin purchases and sales on a virtual spreadsheet. They are placed in blocks linked in a large chain, hence the name.

Every blockchain cryptocurrency transaction is documented by a huge network of volunteers and verified by computer systems. This helps Bitcoin's network because the first transaction validater gets Bitcoin. While mining might be profitable, it requires a lot of energy as people struggle to update the blockchain first.

We also reach "halving". Bitcoin mining is limited to 21 million. Most are in circulation. However, every four years, Bitcoins awarded to block creators are halved. The second Bitcoin "halving" is scheduled in spring 2024.

ETFs buy bitcoin "on the spot" at its current price throughout the day. Many spot Bitcoin ETFs were approved by the US in January 2024, however some indirectly incorporated Bitcoin. New investors like Blackrock and Fidelity can dabble in Bitcoin without wallets or exchanges.

A crypto exchange lets investors purchase, sell, and trade cryptocurrencies online. A crypto exchange is a brokerage where customers may convert pounds or dollars from their banks into Bitcoin or Ethereum, similar to traditional investment. The majority of transactions incur costs.

Crypto wallets store investors' cryptocurrency. It saves virtual assets like cash in a wallet. There are hot and cold wallets. Internet-connected hot wallets allow speedy transfers and easy access. Cold wallets, like USBs, store crypto offline for safety and longevity.

Ether, the second-largest cryptocurrency after Bitcoin, and its blockchain are Ethereum. Applications and digital assets like non-fungible tokens are supported. It works like Bitcoin and other cryptocurrencies but switched to a greener OS in 2022 to save energy and computers.

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