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Understanding Important Cryptocurrency terms and definitions

 

 

         A

  • Addresses – The location where the coins’ ownership data is stored. Usually containing more than 30 characters.
  • Airdrop – Expedited distribution of a cryptocurrency through population of people. By doing simple task on the internet to earn free coins’, in order to build their use and popularity.
  • Algorithm – Mathematics instructions coded into and implemented by computer software in order to produce a desired outcome.
  • All time high – The highest price ever achieved by crypto
  • All time low – The lowest price ever achieved by crypto
  • Altcoins – Bitcoin, the most successful cryptocurrency today. Coins grouped together. Ethereum and Ripple are also examples of altcoins.
  • AML – Acronym for “anti-money laundering.”
  • Anti money laundering – A set of international laws hoping to prevent criminal individuals or organizations form laundering money through crypto into cash.
  • Application specific integrated circuit – A piece of computer hardware. Similar to a graphics card or a CPU. That’s been designed specifically to solve hashing problems efficiently. 
  • Arbitrage – The act of buying from one exchange, then selling it to another exchange with a different rate. If a margin occurs between the two, a profit is made.
  • ASIC – Acronym for “Application specific integrated circuit.”
  • ATH – Acronym for “All time high.”
  • ATL – Acronym for “All time low.”
  • Atomic swap – A way of letting people directly and cost effectively exchange one type of crypto for another. At current rates, without needing to buy or sell. 
  • Bear/ Bearish – The price of a cryptocurrency has a negative. 

  • Bitcoin – The 1st cryptocurrency, created in 2008 by an individual or group of individuals operating under the name Satoshi Nakamoto. Intended to be a peer-to-peer, decentralized electronic cash system.

  •  
  • Block – The blockchain is made up of blocks. Blocks hold a historical database of cryptocurrency transactions, made until the block is full and makes a permanent record. 
  • Block Height – The number of blocks connected in the blockchain. Example: Height 0 would be the 1st block, also known as the genesis block.
  • Block Reward – A form of incentive for the miner who successfully calculates the hash (verification) in a block. Verifying transactions on the blockchain generates new coins’, which some are rewarded to the miners’.
  • Blockchain – A digital ledger of all the transactions ever made.
  • Bull/ Bullish – If the market price of a cryptocurrency has a positive movement.
  • Burned – A coin in a particular cryptocurrency has been deemed or made unspendable, it is said to be burned.
  • Buy Wall – Placing a large limit order to buy when a cryptocurrency reaches a set value.
  • C
  • CAP – Shorthand for market capitalization.
  • Central Ledger – A single entity has control of all financial records, similar to how banks operate.
  • Chain Linking– Each cryptocurrency has its own blockchain. Chain linking is the process that occurs if you transfer one cryptocurrency to another. Which requires the transaction to be lodged in two separate blockchains, and must link together to achieve the goal.
  • Cipher – A name given to the algorithm that encrypts and decrypts information.
  • Circulating Supply – The total number of coins’ in a cryptocurrency that are in the publicly tradable space is considered the circulating supply. 
     
    Cold Storage– Another term used for a paper wallet.
  • Confirmed – When a transaction has been confirmed, it means it has been approved by the network and permanently appended to the blockchain.
  • Consensus – When a transaction is made, all nodes on the network verify that it is valid on the blockchain, and if so, they have a consensus.
  • Consensus Process – Refers to those nodes that are responsible for maintaining the blockchain ledger so that a consensus can be reached when a transaction is made.
  • Consortium Blockchain – A privately owned and operated, yet publicly transparent, blockchain.
  • Cryptocurrency – A form of money that exist as encrypted information. Operating independently of any banks. A cryptocurrency uses sophisticated mathematics to regulate the creation and transfer of funds between entities.
  • Cryptographic Hash Function – This process happens on a node and involves converting an input- such as a transaction- into a fixed, encrypted alphanumeric string that registers its place in the blockchain. This conversion is controlled by a hashing algorithm, which is different for each currency.
  • Cryptography – The process of encrypting and decrypting information.
  • D
  • Decryption – Turning encrypted cipher text back into plain text.
  • Deflation – When the demand for a particular cryptocurrency decreases bringing down the price of its economy.
  • Deterministic Wallet – This type of wallet is created by producing multiple keys from a seed. If you loose this wallet, your wallet key can be recovered from the seed. When a transaction is made, you use variations from the seed instead of producing new keys each time making it easier to store.
  • Digital Commodity – An intangible, hard-to-get asset that’s transferred electronically and has a certain value.
  • Digital Currency – Another term for digital commodity.
  • Double Spend – This occurs when someone tries to send a cryptocurrency to two different wallets or locations at the same time.
  • Dump – A term used to describe selling all (or a lot) of your cryptocurrency.
  • Dumping – When a lot of people dump at one time, causing a sharp download movement in cryptocurrency’s price.   
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E

Encryption – Converting plain text into unintelligible text with the use of a cipher.
ERC-20 – The standard to which each ethereum token complies. It defines how each token behaves so transactions are predictable. Other cryptocurrency’s use ERC-20 standard, piggybacking on the Ethereum network in the process.
Ethereum – One of the top 3 cryptocurrency’s in the world based on its market capitalization. Even though it’s open source and based on blockchain technology it differs from bitcoin in two key ways. It allows developers to create dApps and it writes smart contracts.
Exchange – A platform where cryptocurrency’s are exchanged with each other, with fiat currency’s and between entities.

F

Faucet – If you find a website that offers to give you free cryptocurrency for connecting with them, it is termed a faucet.
Fiat – Refers to money recognized as legal tender by governments, such as the U.S. dollar, British pound, Euro, and Australian dollar.
Fork – When a new version of a blockchain is created, resulting in 2 versions of the blockchain running side by side, it is termed a fork.
Full Node – In order to enforce its rules, some nodes download a blockchains entire history.
Futures Contract – A contract between two entities in order to fulfill a transaction. When the value of cryptocurrency hits a certain price, the contract becomes relevant.

G

Genesis Block – The 1st or first few blocks on the blockchain.
Group Mining – A term used to describe a mining pool.

H

Halving – As transactions are made, miners’ approve these transactions on the bitcoin blockchain in order to receive a reward. Each block on the blockchain fills up with transactions, a certain amount of bitcoins enter the marketplace. However, the number of bitcoin to ever exist is locked in at 21 million. To ensure this cap is kept, the amount of bitcoin earned by miners’ for fulfilling one block, is halved when completed.
Hard Cap – The creators of each cryptocurrency can set a hard cap. Meaning this is the maximum amount planned to raise, and will stop offering coins’ at this figure.
Hard Fork – A fork in a blockchain converts transactions previously labeled invalid to valid and vice versa. For the fork to work, all nodes on the network must upgrade to the newest protocol.
Hardware Wallet – A physical device, similar to a USB stick. It’s used to store cryptocurrency in its encrypted form. It’s considered the most secure way to hold crypto.
Hash – The shorthand for cryptographic hash function.
Hash Rate – The measurement for performance that reveals how many hashes per second your is capable of producing. Each hash is considered an attempt to find a block, by creating a unique block candidate and testing its network.
Hash Power – The hash rate of a computer, measured in kH/s, MH/s, GH/s, Th/s, PH/s, or EH/s depending on the hashes per second being produced.
HODL – Acronym for “holding on for dear life.”

I

ICO – Acronym for “initial coin offering.”
Initial Coin Offering– Practiced by the raise of funds. The creator of a cryptocurrency, will put an initial batch of its coins’ up for purchase. Also, known as an initial coin offering.

L

Ledger – A record of financial transactions, that can’t be changed. Which, can only be appended with new transactions. 
Leverage – A loan of sorts offered by a broker on an exchange, during margin trading.
Lightning Network – A system for cryptocurrency micro payments that’s focused on low latency and instant payments. Which, are peer-to-peer, typically a lower cost, and scalable.
Limit Order/ Limit Buy or Sell – A rule set in order to sell or buy cryptocurrency at a certain price. When trading, orders from buy and sell are recorded in the order books.
Liquidity– The price of a cryptocurrency when defined by how easily it can be bought or sold without impacting the overall market price.
Long – Taking a large amount of cryptocurrency and stockpile it with the anticipation that it’s value will grow.
 

M

Market Capitalization – Defined as the total number of coins’ in supply multiplied by the price. Cap = supply x price.
Margin Trading – Traders risk their existing coins’ to magnify the intensity of their trades. Allowing them to buy more than they can afford to use leverage provided by the exchange.
Market Order – Doesn’t wait for a certain price to buy and sell, it trades whenever the price is at the time the transaction is made.
Mining – A term given to the process of verifying transactions on a blockchain. Solving encryption challenges, the person donating the computer power is granted new fractions of the cryptocurrency.
Mining Contract – An investment in mining hardware for a certain amount of time. The renter don’t pay for the hardware, maintenance or the electricity required to run it.
Mining Pool – Miners combine computing power, to try to complete transactions. Which, then rewarded with a fraction of the based mining pool reward amount.
Multi pool Mining – When a miner moves from one cryptocurrency blockchain to another, depending on the profitability provided by the network at that moment of time.
Multi Signature Wallets – For an order for transactions to go through, more than one user needs to provide their unique code. This system is set up at the creation of the account and provides more security.

N

Network – A network refers to all the nodes that are committed to helping an operation on the blockchain.
Node – A computer connected to a blockchain is considered a node. 

O

Over bought – Cryptocurrency being bought in large quantities. This increases the price for an extended amount of time.
Over sold – When a cryptocurrency has significant time being sold, without any upward movement.
P
Paper Wallet – Storing your crypto code (private key) on a physical document makes it a paper wallet. Also, known as cold storage.
P2P – Also known as meaning Peer-to-Peer.
Peer-to-Peer – Two or more computers networking with each other without a centralized third party, used as an intermediary.
Private Key – A string of numbers and letters randomly generated. It’s the password used when selling or withdrawing crypto, acting as your digital signature.
Proof of stake – This caps the reward given to miners’ when they provide computional power to a network, at the miners’ investment of cryptocurrency.
Proof of Work – To receive the reward for mining, you must show that their computers contributed effort in solving and approving a transaction. Having a hashed block proves the miner did work and deserves a reward.
Protocols – A set of rules that defines how data is exchanged across a network.
Public Blockchain – A blockchain accessed by anyone through a full node on their computer.
Public Key – Your unique wallet address, used to receive cryptocurrency. This key also has a string of letters and numbers.

S

Satoshi Nakamoto – The individual, or group of individuals who created bitcoin. Although, this has never been confirmed.
Seed – The origin point you created your wallet ID. A phrase or series of words that can be used to regenerate your wallet ID.
SHA-256 – A cyptographic hash function (the hashing algorithm) used by bitcoin. Used by a number of altcoins as well.
Smart Contracts – A contract written in computer code, instead of traditional legal language. Which, is set up to execute and carry itself out automatically under specified conditions.
Soft Fork – Backwards compatible, as the old nodes running the old protocol will still consider new transactions valid, rather than disregarding them. For this to work, a majority of miners’ powering the network will need to upgrade to the new protocol.
Software Wallet – Form of wallet where a private key for an individual, is stored within software files on a computer. This is likely the system you will use if you sign up for a wallet online and not located on an exchange.

T

Token – The “coin” of a cryptocurrency is known as a token. It can be owned, bought and sold. It is the digital code defining each fraction.
Transaction – The value of cryptocurrency moved from one entity to another on a blockchain network.

V

Volatility – Crypto prices are notoriously volatile, compared to other assets known for dramatic cost shifts. The fluctuation in the price is measured by its volatility.

W

Wallet – Defined by a unique code that represents its “address” on the blockchain. While a wallet address is public, but within it is a number of private keys. Determining ownership of the balance.
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