Things can be a bit confusing for bitcoin beginners, but here you can learn some basics to get your bearings.
Bitcoin is possibly one of the most attractive assets to invest in. It's not hard to get, almost anyone can buy it, and frankly, you don't need to know much to start investing. With adoption on the rise, there are also exchange platforms like Bitvavo, where you can not only buy bitcoins, but also learn to invest them wisely.
The volatility of the market and the sometimes wild swings you see in price still exist. But in reality, they offer an excellent investment opportunity, especially for new buyers.
To know when to buy, when to sell, and how to get a little more speculating on future prices, you'll need to familiarize yourself with a few basics. Here are 10 of the favorite bitcoin terms and the important fundamentals they represent.
Blockchain is a type of distributed ledger technology (DLT, for its acronym in English). It is basically an online ledger that can be accessed by anyone who is part of the bitcoin network. This type of technology is one of many that not only has applications in bitcoin, but could also be used in other financial areas.
Every time a bitcoin transaction is verified, it is time stamped and added to this ledger. Making it possible for anyone to see where bitcoins are going or coming from. Once a transaction has been added to the ledger, it is irreversible, immutable, and non-duplicable. Keeping the bitcoin network secure, without the need for a centralized authority.
The nodes are the computers that are connected to the bitcoin network. These computers lend their computing power to the network and compete with other nodes to solve complex cryptographic equations, which are used in order to verify any transaction made on the bitcoin network.
Hashrate is a metric that is used to measure the amount of shared computing power that is operating on the bitcoin network at any given time. Hashrate can also give an idea of how many nodes are operating at any given time and how many transactions are processed in a given period of time. The higher the hashrate, the more secure the network will be. As a high hashrate means that there are more nodes present, it can show in real time the spread of mining power.
Mining is the process of solving the complex mathematical algorithms that verify transactions. Each node in the network works to find a solution to the cryptographic equations that generate the transactions. These equations are made in such a way that there can only be one answer for each unique algorithm. If a node is the first to find the answer, the transaction has been "mined" and added to the blockchain. The owner or user of the nodes will receive a prize of newly minted bitcoins for their efforts. Transaction fees are also awarded to successful miners.
Possibly a person, possibly a group of people, Satoshi Nakamoto is the pseudonym adopted by the creator (s) of bitcoin. Nobody knows who Nakamoto is, even though there are many theories. Nakamoto was also the first miner to mine the first block of the blockchain. This is often referred to as the "genesis block." The entity also has more bitcoins than anyone else on earth, but they are rarely used.
The whitepaper (or white paper) is essentially a trade manifesto that explains the background, functionality, and possible applications of any given cryptocurrency. Perhaps the most famous whitepaper, written by Satoshi Nakamoto was the one on bitcoin, titled Bitcoin: A Peer To Peer Electronic Cash System. Familiarizing yourself with the whitepaper for any given cryptocurrency you plan to invest in is a good idea, although some are often quite complicated.
An Altcoin is any ALTERNATIVE cryptocurrency. This generally describes any crypto other than bitcoin, but there are other distinctive names compared to altcoins, which help describe the functionality of the token: like stable coins, security tokens Y utility tokens.
Fear Of Missing Out is a casual reference to crypto traders buying, selling, or trading crypto without due diligence, usually because they are concerned about missing something big. This emotional form of investing generally ends with those investors losing. So always make sure you have a solid business plan and never invest emotionally.
The address refers to the complex and unique number of a given bitcoin wallet. Instead of using personally identifiable information to transact with bitcoin, such as your name or bank account number, bitcoin wallets generate an anonymous string of letters and numbers that are used to identify wallets. This address is added to the blockchain every time a transaction is made with it. Keeping investors safe from identity fraud.
Another ridiculous acronym, Hold On for Dear Life actually stemming from a poorly written and supposedly drunk spiel on an original bitcoin forum, it has now been adopted as the investment advice for many bitcoin users. Suggesting that holding on to your coins, even in market conflicts, can offer great rewards to those who are patient enough.