Understanding Cryptocurrency – Part II – Basic Terminology

Cryptocurrency has different seasons of spring, autumn and summer. Bitcoin season and altcoin season change with demand and supply. Smart contracts are not agreements written on paper, but a technology introduced to the cryptocurrency world by Etherium. Market capitalization is basically the value of your company on a specific date on that very specific date. Bitcoin is the most valuable cryptocurrency because it offers a platform for others to build their own business. For example, Shiba Inu was built on Etherium, making Etherium the second most valuable crypto.

Vaibhav Bhargava

Meditator and nature lover. I’m a morning person who is committed to achieving the goal I set but also enjoying life

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After reading the first article, you might have gained a little knowledge about what cryptocurrency is and what its basic terminologies are. The terminologies we talked about were altcoin, blockchain, private key, public key, gas, bull market, bear market, and volatility.

Understanding these terms may not have made you a subject matter expert yet, but in this article we will discuss some more terminology that may help you. We know how curious you were about crypto after the previous article. ๐Ÿ˜‰ Well, here we will discuss more such terminologies that will help you take a step towards subject matter expert. Ready? Let’s go!

Mining – Did you think of mining as a process that extracts some valuable minerals from the earth? Well, the mining we’re going to talk about is very different. It is a method of protecting the network. With the mining process, the bitcoins are brought into circulation. There are countless miners who use the mining rights to solve the arithmetic puzzles. Once the puzzle is solved, the last block will be mined, bringing more bitcoin into circulation. What makes mining important is security. Now you might be wondering why do we need to be secure if we don’t share our private key with anyone? This is because bitcoins with an equivalent amount of hash power can be hacked against the current hash power. Since the Bitcoin mining network is very extensive, it is almost impossible to hack Bitcoin. Aside from the security of the network, mining is also said to be proof of work as the cryptocurrencies are generated through proof of work. This can be a lot at once, but mining is a very important term to understand.

Bitcoin Season and Altcoin Season โ€“ Just as we have different seasons of spring, fall and summer, cryptocurrency also has bitcoin season and altcoin season that change with demand and supply. Investing money now is not only a difficult decision, but it also requires extensive research to know where the cash flow is going. Since Bitcoin is the first and most well-known cryptocurrency, the flow of money starts from there and then filters down to other cryptocurrencies. So how do you know what time of year it is? There is a chart called Altcoin Season Index to help you understand if it is bitcoin season or altcoin season. Bitcoin must have turned out to be outperforming the rest of the market in bitcoin season. And when it’s altcoin season, altcoins outperform the rest of the market.

Etherium โ€“ We heard about Bitcoin mostly because of its popularity as the first cryptocurrency. What seconds the list is Etherium. Cryptocurrency applications are built with Etherium. Therefore it is an operating system. Just as we have operating systems like Mac OS or Windows for Apple or Microsoft computers, so does Etherium for cryptocurrency. For example, Shiba Inu is a cryptocurrency built on the Etherium blockchain. This makes Etherium the second most valuable crypto after Bitcoin as it offers a platform for others to build their own business.

Smart Contracts โ€“ We’ve all heard about contracts for various offerings. In the same way, we have smart contracts in Cryptocurrency. They’re smart in the sense that they essentially work with two words, “if and then,” followed by when. When a situation is met, the following result will be obtained if we follow the protocols. For example, if you do X, then Y will happen or be the result of X. Smart contracts are not agreements written on paper, but a technology introduced to the cryptocurrency world by Etherium. They are basically a program embedded in logic. To build an application in Crypto, you need a smart contract.

Market Cap – No, we’re not talking a fancy hat here. But cryptocurrency market capitalization refers to the values โ€‹โ€‹of all cryptocurrencies combined or aggregated. Let’s say there are 13,000 cryptocurrencies, so the combined market cap would be $2.9 trillion. You can also calculate the individual market cap for different coins like Bitcoin, Etherium, etc. Now comes the question of the formula that derives the market capitalization. It is calculated by multiplying the total number of coins in circulation by the current market value of a single coin. Let’s understand this with a simple explanation. If you think of cryptocurrency as a business you take on on a platform like Shark Tank, they will ask you about the value of your business before investing. How do you find out this value? It’s easy. Market capitalization is basically the value of your company on that specific date. While price is a way of measuring cryptocurrency value, market cap helps investors delve into their research mode and find out the full history and compare values โ€‹โ€‹of different cryptocurrencies.

Volume – When we talk about the volume of your TV or speakers in general, it is not constant. That means it cycles through the actions you take on the remote or on the device itself. In cryptocurrency, volume is a much more important concept that can also rise and fall for various reasons. It is essentially used to define the possible trajectory of a given coin. Volume in Crypto shows the money going in and out of a coin. In technical analysis, volume is an important factor to keep an eye on as it shows in detail whether people are buying or selling the coin. A few years ago, there was a peak in Bitcoin’s selling value when its value fell from $58,000 to around $27,000. So volume gives us a brief idea of โ€‹โ€‹how much utility and usefulness cryptocurrency offers and how much people are actually investing in it at any given time.

I hope that by reading more about the basic terminologies you have learned a little more about the subject. Cryptocurrency is not a boring topic, but it requires thorough research and knowledge. I suggest you start reading more about cryptocurrencies on authentic platforms if you want to become a crypto investor soon. Besides reading, you can follow Crypto influencers on social media platforms like Twitter or Youtube to keep up to date with the latest trends and news.

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Happy reading! ๐Ÿ™‚

Vaibhav Bhargava HackerNoon profile picture
through Vaibhav Bhargava @vaibhavpr.Meditator and nature lover. I’m a morning person who is committed to achieving the goal I set but also enjoying life

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