|Words/technical terms used in cryptocurrency | Cryptocurrency|
Cryptocurrency words/technical terminology
There are some things you can know about cryptocurrency, and some things you should know. If you hope to survive Web 3.0, here are 25 cryptocurrency words to add to your vocabulary.
Cryptocurrency coins on the blockchain are identified by unique addresses. You can think of the blockchain as the GPS and your cryptographic address as its target mailing address. Without the address, no coin is deposited; Blockchain cannot confirm or verify its existence. Therefore, without the proper wallet address, you cannot own a coin.
Each time a transaction is confirmed, the value of your wallet is updated based on your address. Addresses can appear in different formats depending on currency, but most look something like this: 17VZNX1SN5NtKa8UQFxwQbFeFc3iqRYhem (this is a fictitious address, I respect your intelligence… but please don’t send crypto here or for any other purpose) Do not use this address for
If you are confused by all this, the answer is yes, you don’t have to be a cash app hot dog stand boy to send bitcoins.
Altcoins = Any crypto coin not named bitcoin. Ok, don’t know much about bitcoin? Here is a good bitcoin introduction and refresher.
Anyway, since the launch of bitcoin in 2011, thousands of altcoins have appeared. Some coins disrupt markets and shape industry trends, while some coins are hot trash filled with financial crime. Most of the popular altcoins perform some real world functions. Sorry, Dogecoin.
Ethereum is currently the largest altcoin in the world, but watch out for these altcoins in 2022.
‘Blockchain’ is one of those buzzwords. I still don’t think half of the people who use it really understand what it is. Back in 2016 when I first learned about cryptocurrency, I associated the term blockchain with some weird blackhat Russian operation. do not ask.
A blockchain is a digital ledger made up of all the transactions made in a particular cryptocurrency. These transactions are made up of ‘blocks’. When a block reaches its capacity, a new block is created, and so on. Some blockchains have a limited number of blocks by design, while others have an infinite market cap.
A blockchain like bitcoin is completely public, so everyone can see every transaction. This is funny because most people associate bitcoin with the early days, where it was a breeding ground for illegal drugs and firearm deals. But the more bitcoin goes mainstream, the easier it will be for a particular individual to trace a transaction. Especially on centralized trading platforms that use KYC measures.
However, a blockchain like Monero is completely private. It is impossible to link the transaction to any address. This is one of its main features, and attracts users interested in conducting completely anonymous transactions.
On a blockchain, there is no central location where the ledger is stored. Rather, it is copied over and over again on different computers and servers around the world. Thus, it is considered decentralized.
4. Decentralized Apps (DApps)
Speaking of decentralized, you should probably know about dApps. These are open-source applications built on a blockchain for real-world use. Ethereum is considered the mother of dApps. Ethereum was founded on the idea of enabling developers to build new applications on top of their blockchain.
There is no one-size-fits-all definition for DAP. But as BlockGeeks says, all dApps have a few things in common: they are open source, decentralized, incentivized (requiring validators to be rewarded with cryptographic tokens) and have a protocol (the community agrees on a cryptographic algorithm). which can be widely spoken sister).
Some ETH-based dApps are now worth millions in market cap, and in theory, one dApp could be as valuable as any other company or product.
5. Decentralized Finance (DeFi)
DeFi is a broad term for decentralized alternatives to traditional (centralized) finance. DeFi covers banking, wealth management, payment processing, insurance, etc. DeFi products and services enable democratic access to a historically exclusive industry.
Start paying attention, and you’ll see this word thrown around on Twitter. You probably should know what that means.
6. Digital Currency
Digital currency… so like cryptocurrency, right? off course not.
Digital currency can also be linked to fiat currency. In fact, most major countries now have a digital currency tied to their fiat currency, including the US and China.
A digital currency relies on trust—you rely on multiple institutions to conduct transactions. Crypto, on the other hand, is trustworthy, you can verify the transaction and the record of the address with which you are transacting in real time.
In other words, when you go to sell a pair of shoes on StockX, you can’t see the transaction history of your counterparty and third-party payment processors. You rely on PayPal (and your bank) to do that transaction safely and securely.
7. Distributed Ledger Technology (DLT)
We touched on the concept behind public ledgers- the place where you go to see all the transactions done on the blockchain. DLT refers to a distributed ledger, which is another term for blockchain technology. When you see DLT, think of blockchain. take care of it.
Fiat currency is 1) government backed and 2) not backed by any commodity (such as gold). Those green US dollars in your wallet? It is fiat currency. The value of the US dollar depends entirely on our collective belief in the institution of the United States government. If America breaks up, so does your right.
When you transact on the blockchain, you have to pay a fee. That fee is called the price of gas. You are basically paying a miner to go out and get the crypto for you. You can choose to pay a higher fee for a faster transaction speed, or a lower fee for a slower transaction fee.
Gas prices are one of the biggest challenges facing the cryptocurrency market. If we find a better way to reduce energy costs for transactions, crypto will become more ubiquitous.
10. Initial Coin Offering
Compared to the traditional Initial Public Offering (IPO), ICOs are a new way to secure funding for projects and startups. Almost anyone can participate in the ICO. More importantly, according to Jonathan Chester, founder and president of ICO consulting firm Invage, it is all about finding the right fit for investors and founders.
11. Know Your Customer (KYC)
KYC is a compliance term. If you take a more mainstream approach to buying crypto this will probably come to the fore. Major platforms such as eToro and Coinbase require KYC as part of their onboarding process. KYC means “Know Your Customer”. Regulators require identity background checks for new banking customers as a means to prevent money laundering and terrorist funding. Financial regulation of crypto is here to stay, so expect to see more and more of that acronym as governments scramble to connect blockchain transactions to citizens.
Mining is the process of verifying new transactions on a blockchain. When someone donates computer power to a miner to meet an encryption challenge, that donor is awarded crypto.
13. Non-Fungible Tokens (NFTs)
If you’ve been following ONE37PM over the past two months, you’ve probably heard of NFTS. Non-fungible tokens enable virtual transactions between collectibles such as art, music and trading cards using smart contracts. For more information, check out this comprehensive guide on NFTs.
14. Private Key
This is the most important string of numbers and letters that you should not share with anyone. If someone is able to access your private key, you can lose your money in a matter of seconds. This key is required to verify transactions when selling or withdrawing your crypto.
The following terms are a bit technical but are important for those who want to understand how different blockchains work.
15. Proof of Authority (PoA)
In a blockchain operating under a Proof of Authority (PoA), certain specific nodes are granted the authority (or authority) to approve the miner’s ability to create a block. It is a faster alternative to the proof-of-work model, but more centralized.
16. Proof of Work (PoW)
Proof of work is a more traditional way of rewarding miners for their effort. The process of hashing a transaction requires miners to show their effort by binding to a variable. A hashed block proves the job is done and rewards the miner. It takes a lot of energy.
17. Proof of Stake (PoS)
Proof of Stake allows an individual to validate or mine cryptocurrencies based on the number of coins he or she owns. Under this model, the idea is that a miner’s network will be less likely to be attacked if the game is at stake.
18. Public Key
The public key is a string of characters used to purchase cryptocurrency. For example, if a content creator wants to receive cryptocurrency instead of fiat for their content, they can list their public key. Fans can easily send cryptocurrency using the content creator’s public key.
19. Public Ledger
Each blockchain has its own ledger. Here is a link to the public ledger of bitcoin. This is where you can see every transaction made on the blockchain, given that it is public. Some coins differentiate themselves by operating on an anonymous or private ledger.
20. Satoshi Nakamoto
Satoshi Nakamoto is a person or group of individuals credited with founding the world’s first cryptocurrency, bitcoin. The founders of bitcoin are completely anonymous.
If you see the word ‘satoshi’ being thrown around, it refers to a fractional unit of bitcoin. You can transact with Satoshis. I once heard a woman on CNBC being bearish on bitcoin because “the average consumer doesn’t want to buy with 0.0003 of something”. She clearly doesn’t understand how bitcoin works. Face palm.
The seed is the foundation of your wallet’s digital existence. A recovery seed is a series of twelve, sometimes sixteen, words that can be used to access your wallet if something goes wrong and you lose it.
Your recovery seed is the equivalent of asking twelve security questions for a forgotten password. But compromising these security phrases will cost you a lot, much more than losing a Facebook account. Once your wallet is compromised, your money is gone forever. Please do not share this with anyone unless you enjoy losing money.
22. Separate Witness (SEGWIT)
Another technical term, SEGWIT refers to the process that separates digital signature data from transaction data. This allows more transactions to fit on a single block, which increases transaction speed. Simply put, this is a good value addition to the blockchain.
23. Smart Contracts
A core feature of the Ethereum blockchain and NFTs, smart contracts are just your typical boring legal contracts… only they are written in computer code.
Smart contracts hold multiple parties accountable for something, just like a normal legal contract, but it instructs each party through code rather than spoken language. Both parties can view and approve the programming prior to accepting the terms of the contract, making it completely transparent.
Seems simple enough. I know what a wallet is. But understanding digital wallets can be a bit tricky.
A crypto wallet is where your coins are stored. Your wallet must contain seeds, keys and addresses for it to function properly. There are several types of wallets, such as hardware and software. If you use a mobile app to store your crypto, this is an example of a software wallet. I personally use a hardware wallet to store my crypto.
Hardware wallet requires a bit more knowledge but it provides more security for the users as compared to software wallet. Why? Well, if someone hacked into coinbase (they have flaws), I could lose all my crypto. Unless the recovery seed physically stored in my house is compromised in some way by strangers, it’s nearly impossible for someone to hack into my hardware wallet.
Whale is the term used for the most valuable bitcoin addresses. According to Bitcoinplay, there are about 2000 bitcoin whale addresses, and only three have more than 100,000 BTC.
When you think of bitcoin whales, think of people like Tim Draper, Barry Silbert, and the Winklevoss twins. These people have been advocating for bitcoin since the early 2010s.
There you have it, 25 cryptocurrency terms you need to know. In the coming weeks/months, we will be building out this list and adding new terms.