Theres a new language developing around the world of cryptocurrency, and many people are already confused. If youre not well-versed in this brave new world, you are not alone. Hopefully, this article will answer your questions and help you build your cryptocurrency vocabulary.

What is cryptocurrency?

Cryptocurrency consists of web-based digital assets that use cryptographic functions to conduct financial transactions. Digital assets typically utilize blockchain technology to gain transparency and decentralization to varying degrees. Digital assets include Bitcoin, other cryptocurrencies, stablecoins, which are backed by fiat for lower fluctuation, and tokens, which can sometimes be representative of units used within an organization to move currency around the globe or for gaming purposes.

What are the different types of cryptocurrency?

Bitcoin is the most widely used cryptocurrency. Other cryptocurrencies, also known as altcoins (which refers to any currency that is not Bitcoin or Ethereum), include Stellar, Tron, Salt and OmiseGo.

Facebook, in conjunction with a set of partners, is introducing the Libra coin, which is different from other cryptocurrencies because it is governed by said partners and is tied to the fiat currency of government bonds and fiat currencies (including the U.S. dollar, euro and yen).

What is an ICO?

An initial coin offering (ICO) is similar to an initial public offering (IPO) of stocks, but tokens are being offered rather than stocks in the ICO. The public exchanges money for tokens, which are an acknowledgment that the contract between buyer and issuer has been fulfilled. The buyer then owns coins, or tokens, representative of a value tied to the entity with price fluctuations to varying degrees, usually depending on the state of the organization.

Are cryptocurrencies securities?

That depends. Digital assets may or may not be securities. Securities are negotiable financial instruments issued by a company or government that give ownership rights, debt rights or rights to buy, sell or trade an option. Bitcoin, for example, is typically not defended as a security since it has no centralized governance and the price fluctuations are mostly from supply and demand, not tied to the success of a company or centralized organization. However, some digital assets can be seen as securities under various frameworks and therefore are subject to various SEC regulations.

What is the difference between bitcoin and blockchain?

Bitcoin is a decentralized digital asset arguably, the most popular and typically takes up half of all digital asset trading volume on most given days. Bitcoin utilizes blockchain technology. Blockchain is not a cryptocurrency. It is the ledger that records all the cryptocurrency transactions that are verified by cryptography and is open, secure and accessible by all.

Anyone can make a transaction and sign it with a private key. It will be broadcasted to the unconfirmed transactions pool and be verified by miners who will get the fee from it as a reward. Each new block with transactions is approved by a consensus mechanism and cannot be reverted after a certain amount of time (six blocks for Bitcoin). The main difference is that Bitcoin has proof of work (POW) consensus and also uses a specific model of transactions. Blockchain technology does not have any strict restrictions on consensus, transaction model and data that will be transferred in it. For example, enterprise blockchain systems are used to build the supply chain without any financial data in it.

Once Libra is created, will Bitcoin disappear?

Not at all. While Facebook is touting Libra as cryptocurrency, it is more of a stablecoin. Its expected to have low volatility since its value is tied to currency such as the U.S. dollar or to gold. As the saying goes, A rising tide elevates all boats, and Libra will be the rising tide that brings crypto into the mainstream so even your grandmother will be talking about it.

Facebook, along with its partners, has greater visibility than Bitcoin and this brings attention. Will your grandma become a Bitcoin miner? No; shell just buy Libra because its from institutions she understands. Unlike the 1849 Gold Rush, Bitcoin mining is done by high-powered computers solving complex mathematical equations that result in the creation of new coins. Bitcoin will remain the asset of choice for those who want cryptocurrency thats first-to-market, decentralized and determined by the people. The lack of governance, though scary to some, is exactly what appeals to others. Bitcoin and Libra will continue to have different purposes.

Space is not the final frontier, as cryptocurrency has created a new frontier. It is a combination of banking, currency trading and international commerce. In the increasingly global world of business, the ability to transfer funds securely and quickly around the world makes the need to explore this frontier all the more important.

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The Most Common Crypto Questions And Why You Should Care - Forbes