- Currency – Currency is something you are certain will be accepted in trade for things you want at a later time, for example, dollar bills for food at the grocery store. It was invented to make trading and bartering easier. The word currency comes from current which means to flow [from one person to another]. Before currency, eggs might spoil before they could be traded for clothing or a wagon. The first currency in the Western world was made from coins of gold and silver.
Currency 1) is widely and easily accepted, 2) holds its value, 3) endures over time, 4) can be broken into smaller units and 5) is easily verified.
- Digital Currency – Currency that is represented digitally. Until Bitcoin, digital currency was authorized and controlled by banks, for example credit cards, Paypal or wire transfers. This management led to restrictions and expensive charges. With the invention of Bitcoin, central authorization and control by banks is being eliminated along with inflation. Also interest on deposits, like savings accounts, are increased because the middleman (banks) are eliminated. Central control was replaced by computer-network-verification of a unique, hidden computer code in each digital “coin,” which prevents counterfeits and fraudulent transactions. Because it relies on a hidden code, Bitcoin is referred to as Cryptocurrency. Crypto meaning hidden or secret.
- Bitcoin – The first and most widely known Digital Currency that relied on a secret, hidden code to prevent counterfeits and fraudulent transactions. The first Bitcoin was created in 2009 and now (Feb 2021) numbers roughly 18 million Bitcoins valued at more than one trillion dollars! In addition to being widely and easily accepted, it holds its value over time, even against inflation and Bitcoin is not limited by national borders.
- Cryptocurrency – Because it relies on a hidden code, Bitcoin is referred to as Cryptocurrency. Crypto meaning hidden or secret. Although Bitcoin was the first, there are now more than 8,000 other cryptocurrencies.
- Altcoins – After Bitcoin, thousands more cryptocurrencies have been created. Altcoin refers to any other cryptocurrency.
- Wallet – A software program (app) for computers or phones that fulfills at least 3 functions: Receiving, Storing and Sending digital currency. Some wallets also permit buying, selling and swapping cryptocurrencies. There are also hardware wallets that offer more security.
- Exchange – A website that provides 6 functions: Buying, Selling, Trading as well as Receiving, Storing and Sending digital currency. This is like the New York Stock Exchange except for cryptocurrency.
Popular exchanges include: Coinbase, Kraken and Gemini.
- Bitcoin Address or Wallet Address – The Blockchain doesn’t contain the name of the owner of the Bitcoin. Rather, it contains the public address (used for receiving Bitcoins. Each address is 34 characters: upper or lower case letters and numbers, but no spaces or special characters (!@#$%^&*).
If I want to send you Bitcoin, I will get your receiving address and send my Bitcoin to that address. Since they are long and make no sense, you should always copy and paste these addresses because Bitcoin sent to a wrong address is either lost forever or sent to someone you don’t know and can’t discover who it is!
- Blockchain – A chain of information about all Bitcoins and their transactions from the beginning of Bitcoin to the present. (Remember, each Bitcoin address is unique, but not associated with any person’s name.) Any changes to this data are entered every 10 minutes. Each 10-minute block of data contains a secret hidden code. The next block of data creates its secret code based on the secret code of the block before it. Thus, the blocks are “chained.” In addition to the chain of secret codes, all the computers running Bitcoin software share the same Blockchain data and they continuously compare that data with one another so no one can “counterfeit” a Bitcoin.
- Market Capitalization (Market Cap) – A financial measure of how big a company or digital currency is. For example, Apple Inc. has roughly 16 billion shares. Since each one is worth roughly $130 each, Apple Inc. has a market cap of over two trillion dollars. There are approximately 18 million Bitcoins. Each one is worth about $56,000. So the market cap of Bitcoin is just over one trillion dollars, half the size of Apple which is 45 years old. Bitcoin has only been around since 2009.
- Mining – New Bitcoins are still being made and will be until the maximum number of 21 million is reached in 2140. To create a new Bitcoin, a computer must solve a very complex mathematical problem. Once it finds a solution to that problem, it sends the answer it found to the other computers on the Bitcoin network. If that answer is confirmed by 6 other computers, the computer (owner) that found the answer is rewarded with a certain number of Bitcoins. At this time, the reward is 6.25 Bitcoins.