Cryptocurrency Terms to Know Before You Invest

Cryptocurrency can be overwhelming. Terms are thrown back and forth, making it difficult to understand the conversations. Many people invest without taking the time to understand the key terms. You can be more successful with Bitcoin and the entire cryptocurrency market when you’re more familiar with the terms used. We’ve put together a list of important terms.

Cryptocurrency

Cryptocurrency is a term that is thrown around a lot, yet many people aren’t sure of its actual meaning. Cryptography is used on digital assets as a way to create an exchange in financial transactions. A cryptocurrency is a form of currency using cryptography, that it is not owned by the government or any other essential authority. This is why it has such a strong appeal to investors. Cryptocurrency is earned through the process of mining, which will be covered later.

Blockchain

Blockchain is one of the things that every cryptocurrency have in common. It is a distributed ledger technology that helps to power cryptocurrencies. It allows every transaction to be confirmed or validated across the network while serving as a public transaction database. The blockchain serves as a proof of completion while ensuring that every transaction is accurate and true. Essentially, it ensures that the same coin isn’t being spent (or mined) more than once. Blockchain, because of its digital ledger capabilities, can be used in a number of industries beyond cryptocurrency, and many entrepreneurs are just starting to explore the potential.

Mining

Mining is the process responsible for solving complex math problems corresponding with the transactions found in the blockchain. Each block requires solving, which is when high-powered electronic devices, known as miners, will work to make this happen. There is a significant amount of competition amongst miners as the one that solves the problem first is rewarded. The reward is based on the type of cryptocurrency being mined and the time it takes. Those who are the most profitable will know that profitability is based on the reward of the block, the cost of operation, and the power of the mining equipment.

Mining Pool

Mining pools allow miners to work as teams. They combine resources by sharing the processing power over the same network. Since they’re pooling resources, they also split earnings. The payout structure is typically based on the percentage of what they put into the pool. The miners with higher-powered operations contribute more and, therefore, reap more of the reward. Pools can be beneficial to everyone around, especially the small-scale miners. They are able to work more consistently by teaming up, earning more rewards so that they can make greater investments into their equipment.

Altcoin

Bitcoin is the most prominent of cryptocurrencies. The cryptocurrencies that launched afterword in an attempt to replicate success are identified as Altcoins. While they use the same general framework, they advertise that they address the shortcomings of bitcoin as a way to get miners. Some of the most popular altcoins on the market include Ethereum, Litecoin, and ZCash.

Colocation

Colocation is a practice used by facilities that offer high power efficiency and a low cost of operation. They host high-power data initiatives as a way to get multiple miners into position. The hardware used within a colocation facility runs at high speeds while reducing costs and maximizing profits. Investors benefit from high-quality colocation centers because they are efficient, secure, expertly operated, and logistically sound.

Hodling

Hodling is a term all of its own, though its origins are due to a typo of the word “holding.” It’s an investment strategy that involves holding onto a cryptocurrency as opposed to being reactionary. Hodling prevents a person from trading in response to short-term price fluctuation. Instead, it promotes the idea of buying a cryptocurrency and holding it for the long haul. Hodling is beneficial to most investors as it will offer stability. Unless you’re an expert at navigating the cryptocurrency market, becoming a reactionary can end up hurting your portfolio. It’s best to stay the course and hodl.

Halving

There is a concept known as halving. After every 210,000 blocks being mined, the amount of mined bitcoins will be halved. This has happened three times since Bitcoin was first generated in 2009. It is estimated that this will happen every four years. The current miner block reward will be cut by 50 percent each time that this happens. When this happens, it generally sets off a bull market for bitcoin. When Bitcoin halves, it means that less of the currency is generated. It leads to the value increasing because it’s in higher demand. Since the halving recently occurred, it’s important to know how it will impact your portfolio.

Hash Rate

The way to measure the performance of a mining device is by looking at its hash rate. The hash rate is identified by looking at the speed a miner operates at and can solve a block. The hash rate also measures the amount of power being consumed by the network to remain functional. Hash rate is calculated in hashes per second (h/s). If a miner is operating at 120 h/s, they are making 120 guesses per second to solve the block and earn the reward. As a network’s difficulty increases, the hash rate also increases to remain profitable.

VPN

VPN is a common term used in the world of IT. It stands for Virtual Private Network. It allows some anonymity for the miners. The security involves being able to hide their IP address, mask their location, and encrypt all of their data transfers. A VPN also allows miners to be more private. Their identity is concealed while also keeping their trading history from being visible to the public.

GPU

GPU is not specifically for blockchain but for computer users of the world. It’s the technology that miners use for cryptocurrencies that are not exceedingly difficult. It is considered a smaller-scale alternative to ASIC mining. Those who mine out of their homes are typically using GPU mining. They’re using less power and reducing their expenses but they’re also minimizing the profit that they can make at the same time.

ASIC

ASIC is a type of miner that stands for the Application-Specific Integrated Circuit. They have a reputation for being high-powered and are used in large-scale crypto’s, such as Bitcoin. The reason they are so popular is because of their ability to operate at a higher speed and solve complex blocks effectively. ASICs use a significant amount of power, which is why they are most commonly found within Mining colocation centers. It ensures that electricity costs are reduced while profits are maximized. Additionally, ASIC miners are constructed toward a specific cryptocurrency. What this means is that a Bitcoin miner using SHA256 will only have the means to mine Bitcoin.

How D-Central Can Help

D-Central has been around since 2016. We’ve watched what happened when Bitcoin has halved itself. We have supported a number of Bitcoin projects. We know what’s going on within the cryptocurrency industry, ensuring that we’re able to provide you with the comprehensive support you need. We understand that investors may not know all that there is to know about cryptocurrency. Whether you’re an investor or you want to know how to deliver the right information to investors, we can help. We have provided training, we have deployed countless solutions, and we have repaired hardware that ensures that mining is being conducted more effectively.

Cryptocurrency is a unique subsector of the IT world. It’s important to work with a company that understands the nuances of mining to ensure you’re making the right investments. Whether you’re looking to mine blocks or you want to branch out into another project, we have the means to help. We work extensively with the machines used to mine Bitcoin – and while we’re now in the 4^th era of Bitcoin mining, using the best quality machines is more important than ever. Values have been slashed in half, so working toward a better profit is critical to your financial wellbeing. With our competitive hosting prices, our fully managed services, and more, we’re here to support you with all things bitcoin. Should you have questions along the way, we’re here to answer them all.