New to Cryptocurrency and blockchain? We have compiled a brief glossary of common cryptocurrency terms to learn as you begin to do your research. We hope this helps you understand the basic terminology if you are looking to get into cryptocurrency investing!
An address is where a user can send or receive cryptocurrency. It usually contains a long chain of numbers and letters.
An abbreviation meaning “alternative coins”. This is an umbrella term for all other cryptocurrencies that aren’t Bitcoin. Many altcoin projects have been launched by groups looking to solve several of Bitcoin’s shortcomings. Although many Altcoins have been established having varying degrees of success, none yet have achieved a popularity in the same vein as Bitcoin.
The very first cryptocurrency released back in 2009 by an unknown individual or group under the pseudonym “Satoshi Nakamoto”. Bitcoin is a cryptocurrency and its sole purpose is to make or receive payments on the blockchain.
A blockchain is a decentralised digital database that can be accessed over a large public network. Programmers have designed blockchains to be resistant to modification as a security measure. For this reason, data on a blockchain is very secure and exceedingly difficult to hack.
A cryptocurrency is a type of digital currency that uses cryptography for security and anti-counterfeiting measures.
A cryptocurrency wallet is a piece of software that stores your public and private keys, handles digital currency transactions, and interacts with various blockchains. Many examples of these wallets exist, but they are ultimately categorised by whether they are considered “hot” or “cold”. Which category you decide to choose ultimately comes down to the user’s use case.
Firstly, cryptocurrency wallets classified as “hot” are all connected to the internet and therefore can be accessed easily at any time. This makes them great for day to day use and include cloud-based wallets, wallets on exchanges, as well as most mobile and software wallets.
“Cold” wallets are hardware wallets not connected to the internet and are therefore great for storing long term investments safely offline. These hardware wallets come in the form of paper, steel wallets, USB and other electronic storage devices kept offline. Sometimes they are even physical coins.
An exchange is institution or organisation where investors can buy or sell cryptocurrency assets. Examples of exchanges include Coinbase, Binance, Changelly and Kraken.
A fork in cryptocurrency is basically a term for a software or protocol update.
An abbreviation meaning “fear, uncertainty and doubt”.
A hard fork is a update to a blockchain resulting in a split of a single cryptocurrency into two. There can be several reasons why a cryptocurrency’s developers would want to implement a hard fork such as to add new functionality or to address security issues. One notable example of a hard fork was the implementation of Ethereum’s Byzantine Hard Fork. Because the Byzantine Hard Fork added new protocols to Ethereum, it meant that older versions of the coin would no longer accepted on the new version of the chain.
An abbreviation meaning “hold on for dear life”. The term originated in December 2013 when a crypto investor named GameKyuubi drunkenly (by their own admission) misspelt holding in the title of a bitcointalk.org post.
Initial Coin Offering (ICO)
An Initial Coin Offering provides an opportunity for a new cryptocurrency to secure funding from investors. Prospective buyers can purchase digital tokens before launch and thus provide the necessary capital for a blockchain project to continue development.
Mining is the process through which a person or organisation helps to create a new unit of cryptocurrency (by providing computing power).
Proof of Stake
Proof of Stake (PoS) is a concept where a person can mine or validate cryptocurrency transactions according to how many coins or tokens they own. This means that the more of a cryptocurrency the owner holds, the more mining power they have.
Proof of Work
Many blockchains utilise Proof of Work (PoW) algorithms to confirm transactions and produce new blocks. PoW forms the basis of how many cryptocurrencies work, including the first, Bitcoin.
Public and Private Keys
A public key is a small piece of code that when coupled with a private key trigger algorithms for text encryption and decryption.
Smart Contracts are self-executing agreements with the terms of a contract written directly into lines of code. The agreements made between buyer and seller are distributed across a decentralized blockchain network. Because these contracts are on a blockchain, transactions are traceable transparent and irreversable.
Cryptocurrency tokens are a special unit of digital currency that represent an asset or a utility. For example, the Brave browser uses a token called the Basic Attention Token (BAT) that aims to improve the efficiency of advertising as well as mitigate the growing threat of malware. The Golem decentralized supercomputer also uses a token where users can rent or buy unused processing power across all computers connected to the network.
Summary: Was this Cryptocurrency Glossary Useful?
We hope this list of common cryptocurrency terms will continue to serve as a useful reference point for you as you start out.
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