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2020-05-04 18:38:58

TOP-25 Crypto Terms You Should Know

The dictionary of a person who deals with cryptocurrencies consists of a large number of specific vocabulary. But mastering it at a time is very difficult. For beginners, we advise you to get started with these 25 most popular terms, many of which you probably already heard and know.

1. Bitcoin

Bitcoin is the first and most famous decentralized digital currency created in 2009 by an unknown person or organization under the pseudonym Satoshi Nakamoto. The main goal is to create a currency that does not depend on the central authority or government, since this function should give it many advantages, including lower transaction costs. When it was launched, the cost of one Bitcoin was only a couple of cents, and at the end of 2017, the price of one Bitcoin soared to almost $ 20,000, and after a couple of months fell to $ 7,000. This rapid rise and fall have contributed to the growth of interest in this cryptocurrency around the world.

2. BTC

Each cryptocurrency has a three-letter symbol, which is used to indicate it on trading platforms. This is similar to the symbols used on exchanges to refer to specific companies and stocks. BTC is a symbol of bitcoins.

3. Blockchain

This is the main technology of Bitcoin and most other cryptocurrencies. Some people claim that this innovation is more valuable than Bitcoin itself because it can be used in countless projects of the future. The main idea is to organize all system transactions into blocks, and then connect these blocks into a chain, encrypted cryptographically. Cryptographic functions ensure that all transactions on the blockchain are valid, and anyone can verify this information because it is publicly available. Also, it is not possible to delete or modify past transactions, which makes the system secure. An alternative way to see the blockchain is with an open distributed digital book.

4. Cryptocurrency

A digital currency relies on cryptography to validate transactions, removing the need to have a trusted central authority reporting which transaction is valid and which is not. Bitcoin is the most popular one but today we have over 1000 cryptocurrency projects on the market.

5. Altcoin

An alias is given to all cryptocurrencies except Bitcoin, obtained from an “alternative coin”. Bitcoin was the only cryptocurrency on the market for many years, and therefore, when new ones appeared, they received this nickname.

6. ICO

Acronym for initial coin offer. This event occurs when a crypto project launches its currency or tokens in the market, which allows first investors to purchase them. The process is similar to an IPO, where a company first offers its shares to the public. Please note that when you invest in an ICO, you are not buying shares in this project. Instead, you buy coins or tokens of such a project, and investors do this, hoping that the value of such coins will increase over time.

7. Ethereum

Ethereum is currently the second-largest cryptocurrency by market capitalization. The goal of this project is to allow programmers to easily create smart contracts (see below) as if they were writing simple computer software.

8. Decentralization

This is perhaps the most important characteristic of Bitcoin and other cryptocurrency projects. The lack of central authority (i.e., decentralization) of cryptocurrencies has advantages over federal currencies and other payment methods. These benefits include limited money supply (which can lead to an increase in the value of cryptocurrency over time) and, theoretically, lower transaction costs.

9. Wallet

Software that allows you to store cryptocurrency, as well as send and receive payments. There are hot and cold. Hot connected to the internet. It can be a web application or a mobile application. A hot wallet gives you more convenience because you can instantly send and receive payments using it. However, they are less protected, since hackers may try to access via the Internet. Cold on the contrary, not connected. For example, you can install such software on a USB drive. Cold wallets are not convenient to use, but they are much safer because a hacker will need physical access to try to crack the wallet.

10. Private key

A private key (i.e. a sequence of randomly generated characters) is what allows you to spend money on cryptocurrency in your wallet. This is like the password you need to make payments and send funds from your wallet. If you lose it, you will not be able to access your funds, and there is no way to restore them.

11. Network Verification

Remember that bitcoin is a decentralized digital currency, so no company or central authority can confirm whether this transaction is valid or not. The Bitcoin network itself will confirm every transaction. Each node (see below) will check each transaction and confirm or reject its validity. The more confirmations a transaction has, the higher the likelihood that it is valid. Currently, with six confirmations, you have 99.9% confidence that the transaction is valid.

12. Node

A computer that is connected to the Internet and uses the software of this cryptocurrency. Nodes are responsible for verifying transactions and packaging these transactions in new blocks in the blockchain. In other words, it is the network of nodes that supports the operation of cryptocurrency.

13. Light node

It is a computer on which a light version of cryptocurrency software is installed that offers a limited set of functions, usually including payment verification. Some cryptocurrency projects allow lightweight nodes to exist & to increase the total number of available nodes, possibly increase network efficiency and reduce the time for checking transactions.

14. Full node

A computer with full cryptocurrency project software that includes all the transactions (and therefore all blocks) ever registered for that particular cryptocurrency. Performing a full node is the only possible way to verify transactions without a third party.

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15. Consensus

Since cryptocurrencies do not have a central authority determining which transactions are valid and which are not, and in what order they took place, a network of nodes, relying solely on software and algorithms, should agree on these factors. Such an agreement is called network consensus.

16. Token

Cryptocurrencies were originally developed for use as electronic money. However, over time, people realized that the same technology (i.e., blockchain) can be used for other purposes, in particular for smart contracts (see below). Units of these crypto projects, the purpose of which is functionality that goes beyond the scope of digital currency, are usually called tokens. Security Token is a subcategory of tokens, which usually represent real assets, such as stocks of companies, real estate, and so on. It is expected that security tokens will make the purchase, sale, and trade of these assets much more effective, even if they are subject to more regulation than other crypto projects.

17. Smart contract

A digital contract that is automatically executed by the software upon completion. Suppose you want to argue with a friend about whether it will rain tomorrow. You can use a smart contract for such a bet. Both you and your friend put money into a temporary Bitcoin wallet, and the software itself checked whether it was raining on that particular day. The software will then transfer money to the winner. As you can see, using a smart contract has several advantages, since it can provide greater security for both parties, as well as impartiality in evaluating the results.

18. Mining

As explained above, network nodes are responsible for verifying individual transactions. As soon as there are enough unfinished transactions, the node can create a new block in the blockchain by solving a cryptographic task. The node that first solves this problem will be rewarded with a certain number of units of this cryptocurrency (for example, in the nodes of the Bitcoin network, bitcoins will be rewarded for adding new blocks). The process of checking transactions and adding new blocks to the blockchain is called mining. This nickname was created because it is thanks to this process that the number of bitcoins in circulation increases, similar to how it happens with precious metals such as gold.

19. Satoshi

Satoshi Nakamoto is the name of the person or organization that originally released bitcoin paper and software. Satoshi is also the name of the smallest unit of bitcoin, representing one-hundredth of a millionth of one bitcoin.

20. Fork

This is a software development term that also applies to cryptocurrency projects. When a fork occurs, the current software source code is copied and used to launch a new independent version of the software. Usually, another team of programmers is responsible for the new version, and they fork because they want to be able to make changes and / or improvements that the previous development team did not agree with. In the world of cryptocurrencies, the most famous case is Bitcoin Cash, which was forked from the original Bitcoin in 2017. Bitcoin Cash developers wanted to increase the block size in the Bitcoin blockchain so that they could contain more transactions. and thus be more effective. Since the Bitcoin development team did not agree with this modification, a split occurred, almost creating a rival to Bitcoin.

21. Exchange

An online platform where users can exchange one cryptocurrency for another. Some exchanges also allow users to exchange cryptocurrencies for paper and vice versa.

22. Stable coin

Cryptocurrency secured by fiat currency (e.g. US dollar) or merchandise (e.g. gold). The idea of ​​stable coins is to provide liquidity and security for users who want to temporarily sell their cryptocurrencies without withdrawing their funds from the exchange.

23. Double spending

A type of financial fraud or attack. It includes spending the same amount of money twice, in the hope that the second organization receiving the payment will not understand or cannot verify that the money has already been spent on the previous transaction. This type of attack occurred with small cryptocurrency projects, however, there is no evidence that this attack occurred with larger projects such as Bitcoin or Ethereum.

24. Tether

The largest stable coin in the market with a market cap of around $2 billion.

25. 51% attack

Since cryptocurrencies such as Bitcoin do not have a central authority, it is the consensus of the network nodes that determines which transactions are valid and which are not. If a malicious user controls 51% of network nodes, he can check his fraudulent transactions. The more nodes in the network, the more difficult it is to carry out this attack, and so far none of the popular crypto projects has suffered from this.

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