27 Jan 2017

30 Bitcoin Terms You Must Understand for Profitable Trading

Every field of endeavour has its own jargons which may repel new entrants. The world of digital currencies is not an exception.  It is replete with terminologies that can be confusing. For you to enjoy trading in Bitcoin, this blogs attempts to simplify the 30 commonest of those terms so that you can make a 100% sense of all you have been reading about Bitcoin.

1.    Bitcoin Address: This is the cyber designation of the destination of the Bitcoin payment. It functions like payee’s particulars in hard currencies’ deal. A Bitcoin address is the only information needed to receive payment in Bitcoin. The usual practice is to use each address once for a single transaction.

Read Also: How to Secure, Back Up&Recover Your Wallet

2.    Bit:  This is the common unit used to calculate the fractions of Bitcoin. Units of Bitcoin are given in bits. For instance, 1,000,000 bits is equal to 1 Bitcoin.

3.    Block: This works like a ledger that contains a permanent record of data in the blockchain. Each block has in it pending transactions. Every 10 minutes or thereabout, a new block is added to the blockchain together with its transactions.

4.    Blockchain: It is the transparent public record of all confirmed Bitcoin transactions and it is visible to all Bitcoin miners. This provides a verification of all authenticity and permanence of all Bitcoin transaction. It, in effect, makes double spending impossible.

5.    Double spending: This is a fraudulent act of spending a Bitcoin twice. One of the essences of the blockchain and Bitcoin mining is to confirm all transactions and prevent double spending. Double spending is only possible at the instance of users who accept zero confirmation.

6.    BTC: This is the official abbreviation of the digital currency, Bitcoin.

7.    Altcoin: Other cryptocurrencies that are not as popular as Bitcoin are called Altcoin.

8.    Cryptocurrency: 
This is the general name for non-tangible currencies produced by solving mathematical problems based on cryptology.

9.  Cryptography:   This is the branch of mathematics upon which cryptocurrencies are based. For the sake of high level of security, it employs mathematical proof. That is why cryptography ensures that users of Bitcoin will not be able to spend funds belonging to other users, and no user will be able to corrupt the blockchain.

10.    Liquidity: This describes to the market’s rate of buying and selling of assets in relation to the rate of market price stability and consistency between transactions.

11.    Volatility: Market volatility indicates the price movement measurement during a particular trading period of traded financial assets, including Bitcoin. The market is said to be volatile when the price moves haphazardly during a particular period.

12.    Mining:
This is the process of generating new Bitcoins by using a mathematical process to solve each new cryptographic problem with a computer programme designed for the purpose.

13.    Hash rate:
This is the number of Hashes that a Bitcoin miner can create in a set within given a measuring period, which is usually a second.

14.    Hash: This is the mathematics of algorithm that picks a variable amount of data and changes or converts it into a shorter, fixed length and a fixed piece of data.

15.    KYC: This abbreviation stands for Know Your Client or Know Your Customer. KYC contains a set of guidelines that all financial institutions need to vet their current and potential clients in a bid to ensure that they are legitimate customers whose identities can be verified.
16.    Exchange: This is a central platform where different forms of currencies and assets are traded or exchanged.  Bitcoin exchanges are usually the platform for exchanging cryptocurrency for conventional currency units.

17.    Wallet: This is a safe in the Bitcoin network. It is an idea of a place where Bitcoin is kept. In concept, it is a cyber equivalent of a physical wallet. It contains the private keys to access private the Bitcoin addresses.

18.    Private key: This refers to your cryptographic signature that makes it possible for you to have access to your Bitcoins and move them from one wallet to another.

19.    Paper wallet: It is the paper copy or the hard copy in which the information regarding a Bitcoin wallet is kept. Paper wallet usually holds Bitcoin addresses and their private keys. The essence of a paper wallet is to securely store Bitcoins in a non-software capacity, in the case of any unknown electronic tragedy or loss.

20.    Wire transfer:
This is the process of electronic transfer of funds from user to user on Bitcoin network. It is used to send or receive funds called ‘fiat currency’ to and from Bitcoin exchanges.

Read Also: How to Trade Safely With Bitcoin

21.    Fiat currency: In Latin etymology, ‘Fiat’ means ‘Let it be done’. This treatment describes a currency that has no intrinsic value but can anyway be said to have some worth because a government wants to ‘Let it be done’ or has declared it to have some worth.

22.    Transaction block: This is a compilation of all Bitcoin transactions that are stored into a block and to be hashed and added to the blockchain.

23.    Transaction fee: This is the fee that is charged and added onto some transactions. Transaction fees are paid to the Bitcoin miners that hash the blocks where the transactions are contained.

24.    Signature: A proof is required to determine that a Bitcoin transaction actually originated from a particular address. This proof is called signature which is a mathematical sequence that is formulated by the process of hashing the private and public keys together.

25.    PSP:
This stands for Payment Service Provider. The PSPs are the agents in that facilitate the use and acceptance of Bitcoin for online payments.

26.    P2P:
This means Peer-to-peer (P2P). It is the process of making a direct, decentralized cryptocurrency interaction between two parties or more. P2P has bypassed third parties like banks and other financial institutions.

 Public key: This is the publicly known alphanumeric string serving as the Bitcoin address when hashed with a private key to endorse a digital communication. If you want other people to receive Bitcoins, you can share this key with them.

28.    QR code:
Also known as a Quick Response code or scanned code, it is two-dimensional block image with a black-and-white pattern that stands for a sequence of data. The image can be scanned and be used to encode bitcoin addresses.

29.    ASIC:
This refers to Acronym for Application Specific Integrated Circuit. It is a single-task designed silicon chips that process SHA-256 hashing problems so as to validate transactions and mine new Bitcoins.

30.    ASIC miner: It is the hardware housing Application Specific Integrated Circuit chips and is used to mine Bitcoins.

Read Also: How Bitcoin Investment Works+Automated Bitcoin Trading

Your being familiar with these terms will aid your decisions while trading with Bitcoin because you will be able to pay attention to the minutest details. You are therefore urged to read again and again keep referring to this post as soon as you come across any of them until they become second nature to you.

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