Cryptocurrency is one of the hottest topics these days, particularly for tycoons and entrepreneurs. If you want to keep yourself updated about the current topics, you have landed on the right page. The article identifies some important Bitcoin’s future related terminologies that can help you enhance your knowledge about the digital world and technology. It will also help beginners who want to invest their money in digital money. Let’s reveal some must-know terminologies in the easiest possible ways.
- Fiat currency
The money that exists in physical form and is generally used in the traditional market is known as fiat currency. It is regulated by central authorities and is considered a commodity-backed by precious things. It can be used for trade in the traditional market. Some examples include American dollars, euros, Japanese yen, etc. It is denoted by a short form , such as USD for US dollar.
- Virtual money/Digital currency
It is the opposite of fiat money. It does not have a physical form. Instead, it exists virtually in software form. It is not controlled by a central power and currently operates without regulations. The transactions in this money do not involve any intermediary, and only the owners know about their financial assets. Some examples are Bitcoin, Ether, Litecoin, etc.
- Blockchain network
A network of computers, or nodes, attached peer-t-peer to maintain a link of operators. The linkage of these nodes is known as a blockchain network.
- Decentralized market
As the name implies, a decentralized market refers to the marketplace that operates without the involvement of a central authority. The trade in this market is carried out directly between two parties without any intermediaries.
- Centralized market
It is the opposite of a decentralized market, which operates with the involvement of central authority. The primary central authorities are banks that govern our fiat money. It is a regulated marketplace and legal all around the globe.
- DeFi (Decentralized Finance)
All the financial activities, including trade, exchange, transactions, that are executed solely between two parties are termed decentralized finance.
- Distributed Ledger Technology (DLT)
Distributed Ledger Technology refers to the distribution of accounts in all the operators. In a distributed ledger technology, the financial activities are governed and validated by all the operators, thereby enhancing the transparency of the system.
- Initial Coin Offerings (ICOs)
Just like the traditional market’s IPO, Initial Coin Offerings is a fundraising program and an opportunity to invest in a new currency. These are not regulated and sometimes can be a source of fraudulent activities.
Mining is defined as the method of verifying transactions in the blockchain network. Miners validate the transactions with specific consensus mechanisms that are aligned with the currency. For instance, Bitcoin miners validate transactions by proof of work mechanism. In return, the miners are incentivized with that cryptocurrency.
- Non-fungible tokens ((NFTs)
If you are in the digital world, you must be familiar with NFTs. Non-fungible tokens are referred to as digital assets that can be found in the form of artwork, music, game, or graphics. NFT must be unique. They are operated on a blockchain network and can be traded at high rates to gain potential benefits.
- Crypto wallets (Cold and Hot)
As the name suggests, Crypto wallets are virtual wallets used to store digital cash. It exists in the form of software or hardware. Paper wallets are also found in the digital market. A hot wallet is operated online only, while cold wallets are operated offline. Crypto wallets use public and private keys for transactions.
- Public and Private Keys
Public keys are shared with everyone to receive transactions, while private keys are kept secret and used to send money.
A person holding a large sum of digital money is known as a whale. Whales influence the market and are responsible for volatility and inflation.
- Smart Contracts
These are your legal contracts stored on a block before a transaction. A smart contract, once created, is nearly impossible to change. It keeps all the information about the fund transfer.
Decentralized applications are software based on a blockchain network. No single user can control it, instead, all the users operate the system by a peer-to-peer network. One example of dApps is Ethereum.