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A growing number of readers have downloaded a digital wallet on to their mobile phone and are paying for a morning coffee with it but are at a loss when it comes to the frequently exchanged ‘buzz words’ of the FinTech world.
A digital wallet is simply software that allows users to make electronic payments, purchases and store their account credits and rewards online.
There are several in the marketplace growing in popularity and as financial technology increasingly enters our daily lives in Bahrain, some of its more technical terminology remains obscure.
No more. Here is a simple guide so GulfWeekly’s FinTech Focus readers can impress their friends …
CRYPTOCURRENCY: A digital currency that relies on cryptography to validate and secure transactions. There are different types of cryptocurrencies - bitcoin and ethereum are among the best known.
BITCOIN: A digital - or crypto - currency that enables payment in a decentralised peer-to-peer (P2P) network not governed by any central authority or middleman.
BLOCKCHAIN: Software that first emerged as the system underpinning bitcoin. Also known as distributed ledger technology (DLT), it is a shared record of information that is maintained and updated by a network of computers. It is protected and secured by advanced cryptography.
DISTRIBUTED LEDGER TECHNOLOGY: A term often used interchangeably with ‘blockchain’, even though, technically, blockchain describes the public ledger powering bitcoin.
MINING: The process through which transactions are verified and added to the blockchain and new bitcoins are created.
MINERS: Term used to describe the devices or the people that own the devices that validate transactions. They get rewarded for the computing power consumed during mining with the bitcoins created in the process.
PUBLIC LEDGER: A distributed ledger that is open to everyone on the internet.
PERMISSIONED LEDGER: A distributed ledger that requires permission in order to be accessed. The ledger is maintained only by a limited number of parties. This is the kind of blockchain technology that large corporations, such as banks, are more likely to use because of data privacy needs.
ALTCOIN: A cryptocurrency different, or alternative, to Bitcoin.
ETHEREUM: A type of blockchain network. The bitcoin and Ethereum blockchains differ primarily in purpose and capability. While the bitcoin blockchain is used to track ownership of the digital currency bitcoin, the Ethereum blockchain can be used to build decentralised applications. The virtual currency associated with Ethereum is called Ether.
HARD FORK: When a blockchain splits into two ledgers creating a new digital currency.
BLOCK: A part of the blockchain where a number of transactions are recorded. It’s like a page in a ledger book. Unlike a page on a ledger book, however, once completed a block cannot be modified.
GENESIS BLOCK: The first block in a new blockchain.
HASH RATE: The speed of a bitcoin transaction.
ICO: Initial Coin Offering, or a token sale. The process or event in which funds are raised for a new cryptocurrency venture and contributors receive tokens in return.
PRIVATE KEYS: A form of cryptography that allows users to access their cryptocurrency and is essential part of its security.
HARDWARE SECURITY MODULES: Or HSM. It is a device that secures data such as digital private keys in a very secure fashion.