Do you understand Bitcoin?

These terms get you started in the world of Bitcoin and Cryptocurrency.

Photo by Thought Catalog on Unsplash

When embarking on your journey into the realm of Bitcoin, it’s essential to acquaint yourself with the key terminology associated with this decentralised digital currency.

Bitcoin has garnered significant attention in recent years, as it enables users to make transactions globally without relying on traditional intermediaries like banks.

Here are 8 terms to get you started understanding BTC:

Blockchain:

The foundational technology behind Bitcoin, the blockchain is a distributed ledger that securely records all Bitcoin transactions.

It’s maintained by a network of computers, and each block in the chain contains a set of transactions and a unique hash code, making it immutable and transparent.

Bitcoin Wallet:

A digital wallet designed for storing and managing your Bitcoin. It’s a software program that connects to the Bitcoin network, enabling you to send and receive Bitcoin. Wallets come in various types, such as desktop, mobile, and hardware, each offering different levels of security.

Satoshi:

Named after the pseudonymous creator of Bitcoin, Satoshi Nakamoto, a Satoshi is the smallest unit of Bitcoin. There are 100 million Satoshis in one Bitcoin.

Private Key:

A secret code that grants access to your Bitcoin wallet and the ability to send Bitcoin. It’s a lengthy alphanumeric string generated when you create a Bitcoin wallet, and safeguarding it is crucial, as losing it means losing access to your Bitcoin.

Public Key:

A code used for receiving Bitcoin, it’s a shorter version of your Bitcoin address, a unique identifier for your wallet. You can share your public key to receive Bitcoin, but your private key should remain confidential.

Mining:

The process of adding new Bitcoin transactions to the blockchain. Miners use specialized hardware and software to solve complex mathematical problems, validate transactions, and, in return, earn new Bitcoins as a reward. Mining becomes more challenging as more miners join the network.

Halving:

An event that occurs roughly every four years, where the reward for mining new blocks is reduced by half. This is a mechanism designed to limit the supply of Bitcoin and prevent inflation. The most recent halving took place in May 2020, and the next one is expected in 2024.

Confirmation:

Confirmation in the context of Bitcoin refers to the process of verifying and adding a transaction to the blockchain. Transactions are usually considered secure after a certain number of confirmations, as this makes it increasingly difficult to reverse the transaction.