Blockchain is a digital currency used by both Bitcoin and other cryptocurrencies and is currently gaining momentum around the world. Investors as well as people in the technology industry are all abuzz about how it will change the way we invest. Blockchain works not only with Bitcoin but also embraces other cryptocurrencies that followed. Although Blockchain has gained momentum since its invention, it’s still a new and inventive technology. To get a better understanding of this technology it is important to understand some key terms. Below is a glossary of terms relevant to the Blockchain world for the beginner.
Blockchain: This is a digital file distributed to everyone that participates in a cryptocurrency network. It basically acts as a digital ledger that keeps track of any transactions that happen within the network. The network cryptographically sealed to prevent anyone from tampering with it.
Bitcoin: One of the forms of digital currency with no central bank, that is distributed directly between individuals. This cryptocurrency is also the most popular of its kind.
Cryptocurrency: This is a term used to describe any digital currency that, just like Bitcoin, is used peer to peer and has no central bank. Cryptocurrency networks keep track of all transactions to ensure individuals and investors don’t renege on a deal.
Peer to Peer: In a normal financial transaction between two individuals, money is typically transferred using a bank as a third party to complete the transaction. In the Blockchain world, there is no middleman, and individuals make direct ‘peer to peer’ transactions using technology, to cut out the need for a bank.
Smart Contract: A contract agreement that, once signed, cannot be altered. Normally a contract would be drafted by a lawyer and the parties involved agree and sign. Smart contracts are programmed and will perform any specified actions or enforce penalties as they arise. This technology allows room for less miscommunication between two parties.