Whether you're new to crypto or you've been in the industry for years, there's always something new to learn. No matter how long you've been around digital currency, there are simply some things you should know.
These are terms that will help you get a better understanding of Bitcoin, the blockchain, and cryptocurrencies as a whole.
What are we waiting for? Let's jump in. Here are our 10 Bitcoin terms you need to know.
To understand Bitcoin, you need to know what a blockchain is. There's a good chance you're heard the term blockchain but don't have a solid understanding of what it is. A blockchain is a distributed ledger in a digital format. These ledgers are composed of transactions made using a specific cryptocurrency.
Transactions are gathered and verified to make up a "block." Upon reaching its capacity, a block is added to the chain, and a new block is formed. A blockchain network like Bitcoin is public, which means anyone who can access it can view all transactions. This is contrary to what many people believe about Bitcoin and anonymity.
As Bitcoin gains more market traction and attention, it becomes easier to trace transactions back to a specific person. This is especially true when using a centralized crypto exchange that requires KYC (Know Your Customer) verification.
Most blockchains - like the Bitcoin network - have their own public digital ledger. If you want to see what one looks like, here's Bitcoin's. The public ledger is where you can see every transaction that takes place on the blockchain associated with a certain digital asset. However, there are some projects which set themselves apart by creating an anonymous ledger, which gives users privacy when performing transactions.
KYC - which we touched on previously - is a term used for compliance. Most of the major crypto exchanges require users to go through KYC when creating an account. Know Your Customer refers to performing the necessary background and identity checks used to evaluate the suitability of creating a business relationship with a particular individual.
With the recent failings of larger exchanges within the crypto world, don't be surprised if you start to see this acronym more often. It's a way for financial services companies to verify the identity of their customers.
Anti-Monday Laundering is important because it requires exchanges and other crypto institutions to monitor and keep an eye out for certain transactions to help detect and report suspicious activity, including money laundering. If these transactions occur, the platform is required to report any suspicious activities to the proper authorities.
Most often, crypto mining is thought of with Bitcoin. However, many digital currencies use mining to secure their crypto network. Mining is the process of validating transactions on the blockchain. This process uses a lot of energy and computing power, as it requires solving complex, encrypted algorithms. The miner who solves the algorithm first earns the awards for that block.
Blockchains use a consensus mechanism to validate blocks. Bitcoin miners are part of the network's Proof of Work consensus process. Miners use computing power to be the first to solve the algorithm. Once the block is solved, the miner who provides their work first gets the rewards.
However, because a lot of computing power is needed with Proof of Work, a lot of energy is consumed in the process, which many within the industry argue is not environmentally friendly.
You know what a wallet is, but do you know about crypto wallets? These digital wallets come with wallet addresses that tell others where to send your crypto. They also show that the crypto you own belongs to you.
Crypto wallets are used to store your digital assets. Wallets have public and private keys (which we'll talk about more in a bit), seeds, and addresses, all used to send and receive crypto assets. There are many different types of wallets, including hot wallets, cold wallets, hardware wallets, software wallets, desktop wallets, and paper wallets.
Some wallets, like hardware wallets, require more technical knowledge to use than software wallets, but they're also more secure since they keep your crypto assets offline. Exchange wallets keep your cryptocurrencies online, which means they're at risk of theft if the platform is hacked or compromised.
Your private key is arguably the most important part of your cryptocurrency wallet. This string of letters and numbers is used to protect your funds. If you share your private key with anyone, they could easily steal your crypto. You need your private key to validate transactions when sending or withdrawing crypto.
Along those same lines, your public key is used to buy or receive crypto. This is a public string of numbers and letters used to tell others where to send your digital assets. For example, if you're running a business and customers want to pay with crypto, you could display your public key, so they know where to send payment.
Many merchants will display a QR code so you can quickly scan the address instead of manually typing in a bunch of numbers and letters.
Last on our list of Bitcoin terms is fiat. Also known as fiat currency, this type of money consists of two primary features. First, fiat money is government-backed, and second, it's not backed by a commodity like gold or silver.
Since the United States no longer uses the gold standard, US dollars are fiat currency. Their value depends entirely on the collective faith that citizens have in the US government.
Now that you're familiar with all these terms, you need to take your fiat currency and head to the nearest Bitcoin Depot BTM. Once you're there, you can create a wallet and use your private and public keys to get your hands on some Bitcoin, a cryptocurrency that was mined at some point using the Proof of Work consensus mechanism.
You get the point. Take your newfound knowledge and put it to good use. There's a Bitcoin Depot BTM waiting for you just around the corner.