Bitcoin Can Be Intimidating, But Knowledge Is Power
If you’re like most people who are new to the whole cryptocurrency market, bitcoin and other digital currencies may appear intimidating at firs. Look through your social media feeds and you will probably see multiple headlines referring to the topic. You may or may not quickly be able to decipher the meaning behind them or how it might be a good or bad investment. So let’s break some of the buzz terms and jargon down a bit.
What do you think about when you hear the word “forks”? You might immediately see a utensil in your mind’s eye but when talking about cryptocurrencies, a fork is basically a change to cryptocurrency software. When someone owns digital currency like bitcoin, ethereum or the myriad other cryptos out there, what you really hold ownership to is a pair of network password keys. These represent the ability to gain access to a network that keeps an eye on who owns what and how much of that they own.
So when software is changed, it can actually adjust the value of a person’s claims drastically. Looking for an example, keep reading. Let’s look at what’s known as a “hard fork”. This creates a transaction processed on a new software which will then be incompatible with its previous version or versions. If it were a “soft fork” you would be able to switch versions as it would be backwards compatible.
In any case, most cryptocurrency analysts think of forks as events that could threaten the overall value of the currencies in question. So it would make sense to expect prices to increase after one of these events occurs. Every investment has inherent risk but understanding the investing mechanism and the terminology behind it can be a quick upper hand to gaining insight.