Are you interested in investing in the crypto business? To help you get started, here’s a quick guide to cryptocurrencies and the terms that you need to know about them.
1. Cryptocurrency
Cryptocurrency, abbreviated as Crypto, is a digital currency or virtual asset designed to work as an alternative currency, that is secured by cryptography. It’s the most popular alternate currency which best works on decentralized networks based on blockchain technology with no central authority, such as banks or governments in control of it. Since the underlying technologies are distributed, it is not governed by traditional financial authorities and regulations.
2. Block
A block is a computer file that keeps a record, or ledger, of cryptocurrency transactions completed during a given period and is worth a specified number of coins. For example, one block in the Bitcoin blockchain is worth 6.25 Bitcoins, a number that will halve every four years until 2140 when the last block is created. Blocksize varies between blockchains. Bitcoin’s theoretical limit is 4MB, while Bitcoin Cash allows anything from 8MB to 32MB.
3. Blockchain
Blockchain is a decentralized public register system that doesn’t need any central authority or third party to operate on behalf of all parties which take part in the global network. Blockchain technology enables users to share information within various networks with maximum security provided by encryption techniques. This means that none of the structures in a Bitcoin transaction can be altered once they have been made known to peers on the network through their peer-to-peer nodes or consensus group.
4. Block Header
A list of data showing the time/timestamp, size, and hash of each block in the blockchain. It uses a tree structure so that every block has its parent node (also called a Merkle root).
5. Mining
Mining is a process done by which transactions are verified and added to the existing ledger. This enables the network users to determine who owns what coins on that yields them some portion of bitcoins with every verification, adding new units onto the blockchain or record-keeping system. Miners provide processing power to validate transactions of cryptocurrency, thus securing it against tampering and theft.
6. Bitcoin
Bitcoin is regarded as the most popular and decentralized digital currency that was introduced in 2009 when its implementation was released as open-source software. It is not controlled by any bank or government and uses peer-to-peer technology to operate with no central authority. Bitcoin as a cryptocurrency was actually invented in 2008 by an unknown person or group of people using the name Satoshi Nakamoto. The technology that drives bitcoin is called blockchain, which enables online transactions to be verified with absolute certainty. The bitcoin value depends on supply and demand and other factors that can change constantly, like the popularity of bitcoins.
7. Altcoin
An altcoin is a cryptocurrency other than bitcoin. The origins of altcoins range from early experiments in Bitcoin to attempts by thousands of independent developers working on new technologies that use blockchain technology. This means anyone can create an alternative digital currency for free, with no central authority or de-centralized model governing it unless there is some type of central agreement made between the different communities developing multiple currencies within this global marketplace
8. Ethereum
Founded around 2013 by a 19-year-old Australian college dropout named Vitalik Buterin. Many companies have started to build applications on top of the Ethereum blockchain including exchanges, smart contracts, and many more like file storage services or computer servers that can be rented out at cryptocurrency prices.
9. Wallet
A file in the blockchain that stores and receives your cryptocurrency, just like your email inbox receives and stores emails. It is operated by both a Public Key and a Private Key.
10. Exchanges
Bitcoin exchange companies are those who deal with cryptocurrencies using fiat currency (the local currency). These organizations either swap bitcoin for traditional currencies, credit card payments, wire transfers, or other methods. Some also trade a variety of virtual coins and tokens like litecoin, dogecoin, namecoin, etc on their site to serve those who wish to buy the digital asset with fiat currency.
11. Bull Market
A “bull” market is when Bitcoin is rising fast, going up rapidly and for a longer length of time as opposed to referring to price trending that can be short-term spikes or drops.
12. Bear Market
As a bull market, a “bear” is when Bitcoin’s value is declining. Bear markets are generally measured in weeks or months but the length of time they last can vary anywhere from days to years.
13. White Paper
A “white paper” is a piece of writing explaining the mechanics or conventions behind any given cryptocurrency. A white paper precedes the launch of a blockchain.
14. Volatility
Volatility is defined as how much the price of an asset (either crypto or fiat) varies over a given amount of time, this means that while it may fluctuate up and down, having high volatility does not necessarily mean stability.
15. Peer-To-Peer (P2P) Network
A network of computers (peers) that connect to each other to exchange data and complete tasks without the need for intermediary parties. A peer-to-peer (P2P) network can be used to maintain databases and exchange messages, share files or do online transactions. Each computer connected to the P2P network is referred to as a node in the network. Data stored in ‘blockchains’ are replicated across all nodes so there will never be an issue with inaccurate data being found by any one of these peers because every single peer could have entered that information.
16. Gas
On the Ethereum blockchain, gas refers to the cost necessary to perform a transaction on the network. Miners set the price of gas based on supply and demand for the computational power of the network needed to process smart contracts and other transactions.
17. Merkle Tree
A way to store large batches of transactions in the World Wide Web -like database as an array without having to be wary about the increased risk associated with records stored on one server or even crashed computers that are being used to store data in the blockchain. A Merkle tree structure is basically a hierarchical database that consists of all records with huge numbers being better protected, compared to what traditional databases are capable of providing.
18. Fiat Currency
A currency that is created by a government and circulated via banks. In contrast, cryptocurrencies are invented within computers and are circulated via a peer-to-peer network, i.e., a blockchain.
19. Bitcoin Cash
Bitcoin cash (BCH) is a hard fork of the bitcoin blockchain. The cryptocurrency was produced by the bitcoin cash software project as a result of a “hard-fork,” or major change, to bitcoin’s underlying code.
20. Coin
A term used to designate an object that is based on a particular type of blockchain and serves many functions. It is a file in the blockchain that stores and receives your cryptocurrency, just like your email inbox receives and stores emails. It is operated by both a Public Key and a Private Key.
21. Initial Coin Offering (ICO)
It is the process of raising capital by offering digital coins having significant monetary value to potential investors, which are purchased using currency in the form of fiat. The process usually requires prospective investors to purchase the tokens associated with upcoming cryptocurrencies, so that they can later participate and/or profit from them.
22. Proof-of-Work (PoW)
A mechanism that confirms transactions and adds new blocks to the blockchain. It is a way of contributing resources toward securing the network, in exchange for an expected reward or compensation.
23. Proof-of-Stake (PoS)
A monetary system based on users holding funds “in their wallets” instead of depending upon miners as they do with proof of work systems such as Bitcoin or Ethereum’s Ethash algorithm where rewards are distributed based on proof of work (PoW) and a random factor such as hashing power or dollar value.
24. Decentralized Application (Dapp)
A program designed to perform business tasks through decentralized transactions between blockchain parties which are stored as files on nodes’ hard drives so they can be operated on and run by anyone.
25. Node
A computer of one’s or a collective group that has the capacity to be involved in processing transactions on blockchain networks.
26. Public Key (Pk)
A string of letters and numbers which identifies the address of your wallet in the Blockchain. This information is shareable with others in order to receive cryptocurrency, just like your email address or bank account number.
27. Private Key (Prv)
A string of letters and numbers which unlocks your wallet. This is personal information and must never be shared, just like your password or PIN.
28. Token
A type of cryptocurrency that represents an asset, or has a specific use with a blockchain ecosystem. Some tokens are used for governance, allowing holders to vote on changes to the blockchain.
29. Seed
A string of letters and numbers which provides you access to your wallet. This is personal information, so it must not be shared with others or written down anywhere.
30. Ledger
The ledger is the database of all cryptocurrency transactions that have ever been executed. The ledger uses strong cryptography to validate and timestamp digital signatures making them unalterable. It also manages complex financial obligations between users, helps facilitate peer-to-peer exchanges of coins or tokens, and validates incoming transfer requests in a way so they can be quickly processed.
31. Decentralized Finance (DeFi)
DeFi is a financial service that is based on blockchains and relies on smart contracts to facilitate access to financial services. It refers to a sub-genre of cryptocurrency that uses blockchain technology for peer-to-peer payments and financial instruments like loans, bonds, and securities trading.
32. Distributed Network (D-Nets)
A distributed network that enables multiple computers within the same geographical area to communicate and share data given they all have updated programming protocols.
33. Distributed Ledger Technology (DLT)
Also referred to as Distributed ledger technologies / distributed ledgers, DLTs are the records of transactions that maintain a clean history without any central authority. Unlike traditional databases where individuals can see certain ones entries and information stored within it, DLT “audits” each network participant’s activity at least once every ten minutes resulting in an open auditable blockchain system that allows for investigating cyber-crime issues through peer-to-peer transactions available anytime and anywhere, unlike regular banks and monetary systems where they only operate during business hours.
34. Non-Fungible Tokens (NFTs)
A file that is stored within a block and which cannot be copied or replaced, meaning each NFT is as unique as a fingerprint. This is why NFTs are attached to digital assets, such as a JPEG picture or a digital painting, to prove ownership of the asset or provide access to the asset.
35. Segregated Witness (SEGWIT)
Segregated Witness, or SegWit, is the process by which the block size limit on a blockchain is increased by removing signature data from transactions that are included in each block. When certain parts of a transaction are removed, this frees up space or capacity to add more transactions to the chain.
36. Know Your Customer (KYC)
The procedures are used to verify the identity of a crypto user and link it to their wallet. KYC procedures are usually done online or over the phone and if a crypto exchange or other platform provider chooses to require KYC before opening an account, they must store all the information permanently with them. In some cases, applications may be required for identity verification such as those requiring photos along with certain documents.
37. Whale
People or entities that hold a huge number of coins of a particular cryptocurrency. In Bitcoin, the minimum number of coins needed to qualify as a Whale is 1,000. Smaller holders are called a Dolphin or a Fish. The understanding behind whales is that they use their influence to manipulate the market for the prices of a particular cryptocurrency.
38. Market Captitalisation
Market capitalization or Market Cap in cryptocurrency business refers to the value that a crypto asset is being traded for on the trading platform. You can always check Coinmarketcap.com of a certain cryptocurrency for the in-depth analysis of daily trading reports
39. Smart Contracts
A digital record that is stored and shared on the blockchain. They are completely self-executing, with no need for a third party such as an arbitrator or notary public to verify management transactions along with processing details.
The most well-known smart contracts in cryptocurrency out of all other algorithms used are Ethereum Smart Contracts which consists of ERC20 Tokens. It allows you to issue your own token by sending its information through the network thus later they will be able to perform certain tasks without any third party participation. However, it is important that you should understand all the risks involved in using these contracts if anything happens, due to bugs and flaws causing irreversible actions at times leaving investors with huge loss of money.
40. FOMO (Fear of Missing Out)
FOMO is an acronym for Fear of missing out on the next big thing, or not having enough financial products to bet on a particular investment opportunity including cryptocurrency as it usually fluctuates heavily in price and is largely speculative with little real value around its technical functions in the crypto world – Blockchain systems other than Ethereum could be used to pursue different innovative solutions on business models that may provide better benefits to investors.
41. Cold Wallet/Cold Storage
A cold wallet, or cryptocurrency hardware wallet, is a physical electronic device that stores cryptographic keys in order to facilitate transactions. They normally connect directly to the Internet and often perform offline entirely outside of any web links. This allows completing transactions without the requirement to connect it with a network, and sometimes allowing user-specific accounts.
Bitcoin can be kept in either an offline or online cold wallet – depending on how secure you would like your Bitcoins to remain. Most hardware wallets are standalone devices that run entirely independent of any operating system (e.g., but not limited to: Windows, Linux) making them very difficult for hackers to access from outside their system. The most common variants are a USB drive or small flash memory cards as both of these can be purchased and printed quickly without the need for expensive 3D printers but this comes at the cost to its capability in protecting digital assets over time.
42. Solidity
Solidity is a programming language for smart contracts that runs on the Ethereum virtual machine. It encourages developers to write what it calls “deployment and inheritance” which means code can be switched between communicating with an external network (like your bank account), storing encrypted data in whatever application stores them on disk, or creating and enforcing consensus rules among other projects executing logic like queues. This has been known to make complex systems robust even though platforms already exist such as Cryptokitties.
43. HODL
HODL is a misspelling of “hold” and it represents an investor’s willingness to hold onto cryptoassets, regardless of their price fluctuations, without selling or transferring out coins that they have within their possession. HODL proponents will generally cite the long-term prospects of holding as reasons why they believe in cryptocurrencies rather than short-term speculation.
44. SATS
The smallest unit of Bitcoin, equivalent to 0.00000001 BTC. SATS, also known as Satoshi’s, refer to Satoshi Nakamoto, the alleged creator of bitcoin.
45. Hash Rate
Hash Rate generally refers to the speed at which a computer performs processing operations, verifies and submits a transaction, thereby generating a new Hash. It is literally the average speed at which a blockchain creates new Hashes, and is calculated in units of hash/second. Therefore, a hashing algorithm allows only one alteration in each step; hence creating unique fixed-length outputs for every possible input combination
46. 51% Attack
A 51% attack, also known as a majority attack refers to a single person or group of people gaining control of over 50% of a blockchain’s hashing power of the network. It also allows the malicious agents or organizations to essentially rewrite parts of the blockchain and reverse their own transactions, spend coins more than once, and manipulate which blocks are added and which are not, potentially causing network disruption.
47. Address
An address is a string of characters that functions as a place where individuals can receive, store, or send cryptocurrency. Like a telephone number or zip code, every crypto address is unique.
48. Pump and Dump
Pump and Dump is a form of price manipulation where the price of crypto is boosted based on false recommendations (pump) before the assets are sold at a higher price (dump).
49. Rekt
Rekt, or rekted derives from the word “wrecked” and it is used generally to define something that got completely destroyed or a person that experienced a catastrophic failure. In the context of cryptocurrency, this means that the price of cryptoassets are falling rapidly causing massive damages in terms of purchasing and holding power than they provide at present levels.
50. Satoshi Nakamoto
Satoshi Nakamoto is considered by many to be an anonymous person or group. He/they are believed as the creator of Bitcoin, a digital currency and decentralized banking system with no central authorities controlling its transactions.
Satoshi left his identity unknown because of concerns that revealing personal information may have come back to hurt him when the price dropped. This made some people suspect him of being a rogue operator or even an undercover agent. Many people tried to find his real identity but all the hard work was in vain, aside from that this is believed as one of those internet mysteries.
51. Coinbase
This is one of the main exchanges platform used in buying, selling and trading cryptocurrencies like Bitcoin, Ethereum, and more. The company is based in USA and was founded by Brian Armstrong, Fred Ehrsam and Andrew Tan in 2012. The platform function mostly via the liquidity of users and traders having different currencies by virtue of its open-source decentralized P2P nature.
Visit the website www.coinbase.com for details.
52. Binance
This is the world’s largest cryptocurrency exchange platform where you are able to buy and sell different cryptocurrencies – Bitcoin, Ethereum, ZCash, Rippled, Wakanda. The company was founded by Chinese-Canadian business executive Zhao Changpeng in 2017. The company headquarter is based in Cayman Islands Seychelles – www.binance.com
In summary, it is good for a wise investor or newbies to first learn cryptocurrency terminology, engage in research on the different markets that offer excellent returns on investment before jumping into the business. It is also imperative to be guided by experienced investors and traders when starting out.
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