Education on Cryptocurrencies: Fundamental concepts (Part 3)

PART 1 – PART 2

This glossary is crafted to offer precise and clear definitions within the realm of Blockchain. To grasp the potential and implications of this technology, one must be familiar with a diverse set of terms. That’s why today, we’re excited to introduce a new installment focused on key concepts.

Halving: This term refers to an event that occurs roughly every 4 years within Blockchain networks like Bitcoin and Litecoin. It entails a programmed adjustment in the code aimed at halving the rewards received by miners. In Bitcoin’s case, halving occurs every 210,000 mined blocks. This event is celebrated within the Bitcoin community, as Bitcoin surges to new all-time highs in the subsequent months.

Scalability: It’s defined as the Blockchain’s capacity to efficiently handle transactions. As the network grows, miners process a significantly larger volume of data. Systems must anticipate the increasing demand, and this is closely linked to the consensus algorithm in use. Examples include “Proof of Work (PoW)”, “Proof of Stake (PoS)”, and “Delegated Proof of Stake (DPoS)”.

Lightning Network: It’s a decentralized network where payments don’t require block confirmations but occur instantly. Additionally, it allows for sending incredibly small amounts of money between peers, such as 1 satoshi. How does it work? LN serves as an off-chain solution, wherein users establish a payment channel outside the Blockchain. This channel requires the signatures of both parties to initiate new transactions. The Blockchain only comes into play when setting up and closing the payment channel.

Inflation: It refers to the decrease in purchasing power within an economy, marked by continuous price growth of goods and services. Simply put: it requires more money to purchase the same goods. Inflation is primarily caused by the excessive issuance of currency by some countries… High inflation rates are detrimental to any economy, as they diminish salaries and savings, while poverty levels skyrocket.

Deflation: It’s the opposite of inflation. During deflation, prices of goods and services decrease over time, leading to a boost in the purchasing power of money. Deflation can be triggered by a decline in demand for goods, an oversupply of products, or a reduction in production costs.

Faketoshi: A term used by many online Bitcoin enthusiasts to describe individuals who claim to be Satoshi Nakamoto, the Bitcoin creator, without evidence. One prominent example is Australian Craig Wright (aged 53), who often credits himself with writing the Bitcoin white paper in 2008. However, legal experts assert that Mr. Wright has yet to provide compelling evidence to support his claims.

Flipping: It’s the term used when investors buy altcoins, hoping their prices will skyrocket… then sell them quickly for profit. This strategy often involves shifting investments between different altcoins to capitalize on fast profit opportunities.

FOMO: It stands for “Fear of Missing Out”. In the crypto world, it’s a common phenomenon during periods of high volatility in Bitcoin. When BTC reaches very high values, people buy in anticipation of further price increases, and when the price starts to decline, people sell fearing significant losses. Essentially, FOMO drives decisions made out of anxiety.

Gas: It’s the measure used to calculate the cost of transactions or executing smart contracts on the Ethereum Blockchain. Each operation on the Ethereum network incurs a gas cost, which users must pay for their transactions to be effectively processed by miners.

Bull Market: It’s a prolonged period where cryptocurrency prices experience a significant increase. The launch of highly promising projects typically triggers bull markets, heightened institutional adoption, events like the Bitcoin halving, and geopolitical situations.

Bear Market: It’s the opposite of a bull market, marked by a prolonged period of pessimism and consequent declines in cryptocurrency prices. A bear market often follows very unfavorable macroeconomic or geopolitical events.

Metaverse: A 3D virtual space linked to the Internet, where individuals control avatars and engage in socializing, working, or playing. While still in experimental phase, the metaverse is expected to significantly impact sectors such as education, e-commerce, and entertainment.

ETFs: Investment funds listed on the stock market. Bitcoin ETFs, approved last January, allow investors to gain exposure to BTC’s value without owning the cryptocurrency. It’s important to note that these ETFs are traded on traditional stock exchanges, such as Nasdaq, rather than cryptocurrency exchanges.

Follow us on social media and subscribe to the Purse.io newsletter. You’ll get access to all the content from our wizards and stay updated on the latest news about Hamza.biz, the first Web3-powered e-commerce platform driven by the Loadpipe protocol.