The cryptocurrency craze had taken over the world back in 2017 when the prices of the cryptocurrency-pioneer, Bitcoin (BTC), skyrocketed to around $20,000. Since that moment, many cryptocurrency enthusiasts have joined the market, and this trend hasn’t stopped.
At the same time, the hype around the blockchain has increased as more and more industries are applying the technology on numerous sectors. It also became known as blockchain projects started crowdfunding using tokens, a non-traditional way to raise money.
For those, who just joined the army of cryptocurrency market admirers, it might be confusing to understand what is happening in the market. If you’re new to the blockchain world, you may still be unsure how it works and how to apply it. We got you covered! We came up with the list of the most useful blockchain and cryptocurrency terms that everyone, from blockchain enthusiast to crypto investor, needs to know.
The first term in our cryptocurrency glossary is a wallet address. It is a string of alphanumeric characters, which is used to send and receive transactions on the Blockchain network.
Altcoin stands for an abbreviation of a “Bitcoin alternative.” It refers to any other cryptocurrency aside from Bitcoin or Ethereum, although some people also believe that Ethereum is not an altcoin. Altcoins run on their own native blockchain and nowadays, most of the altcoins are Bitcoin forks with minor changes. One of the most popular altcoins is Litecoin.
Bitcoin is the very first cryptocurrency. It utilizes specific encryption techniques to manage the generation of coins and verify the origin and movement of funds on the Blockchain network. Satoshi Nakamoto created it with the objective of stopping double spending.
Blockchain refers to the distributed ledger network that is secured by cryptography. Another way to think about it is to imagine a public database that can be accessed by anyone, but the data can only be changed by certain parties with rights to do this. The data is not stored on a centralized server, instead it is copied across thousands of computers around the world. A consecutive string of executed blocks make up a blockchain.
Cryptocurrency is a digital representation of monetary value. It can be used to buy and sell goods and services. Some of the cryptocurrency examples include Bitcoin, Ethereum, and Litecoin.
Dapps is the abbreviation that stands for decentralized applications. These applications often utilize smart contracts in their back-end code.
Distributed ledgers refer to the type of database that is spread across a myriad of computers. Data is stored in a continuous ledger one after another. Distributed ledgers can be “permissioned” or “unpermissioned”.
Exchanges refer to the platforms that allow users to buy and sell cryptocurrency. The most popular are Coinbase, Gemini, Binance and Kraken.
Moving further with our cryptocurrency glossary for beginners, the term “fiat” stands for any government-issued currency – US dollar, Euro, British Pound and the like.
Fork in the crypto world is an event when a blockchain splits into two separate chains. This event results in the creation of an alternative version of the blockchain in question by generating two blocks at the same time on different parts of the network. They usually happen when new governance rules are built into the code, creating two parallel blockchains.
Genesis block is the very first block in the blockchain.
Hardfork in the cryptocurrency world is an event of a change in the Blockchain protocol that makes previously invalid blocks valid. It consequently requires all users in the network to upgrade their clients.
Initial Coin Offering (ICO)
An Initial Coin Offering is very similar to an Initial Public Offering (IPO) of the traditional world. This term refers to a crowdfunding method that is used by start-ups to raise funds for the development of their products and services. This type of funding took the cryptocurrency community by a storm because it allowed blockchain projects to raise money without going through venture capitals. They sell their underlying tokens in exchange for cryptocurrencies, usually bitcoin or ether.
Mining is the process of generating new blocks in the blockchain by trying to “solve” a block. Users can secure the network and verify transactions through solving complex mathematical puzzles, which is “mining”, essentially. There are two ways of validating transactions -Proof-of-Work, which takes an enormous amount of computer processing power, and Proof-of-Stake, which relies more heavily on the betting concept.
A native token is a token that runs on its own blockchain. Native tokens can be used as rewards for block validation and generation within the network. BTC and ETH are some examples of native tokens.
Node is a computer that has a copy of the blockchain and is participating in the maintenance of the network. There are child and parent nodes.
Private blockchains are just like any other normal blockchains, but their genesis blocks are unique.
A private key is a string of data indicating that a user has access to cryptos stored in a wallet. In other words, a private key is a password that enables users to access their crypto funds.
Proof of work is an algorithm that is utilized to confirm transactions in Blockchain. It is also used to generate new blocks on the network through a computational process, which hashes new blocks.
A public key is a string of cryptographic values that can be accessed by anyone to encrypt messages. These messages can be deciphered only by using a private key.
This term refers to the change in size or scale of a particular blockchain network. It is one of the most significant issues in the blockchain world, which requires scalability to process a large number of transactions at a time.
These contracts are essentially computer protocols that are used to facilitate and manage the performance of a deal. They are self-executing contracts that enable contractual clauses to be delivered without the need for an intermediary.
Tokens are the “currency” or the “shares” of the blockchain-based crowdfunding. Tokens represent a utility or an asset, and they can be used to raise money or to tokenize good.
The last on our list of cryptocurrency terms, a cryptocurrency wallet can be seen as an equivalent of a bank account. It enables users to receive cryptocurrency and send funds to others. Users can also use a crypto wallet to store cryptocurrencies. Generally, there are two types of cryptocurrency wallet: hardware and software.
A hardware wallet is used to store private keys on a secure hardware device. This type of cryptocurrency wallets is regarded as the most secure.
A software wallet is an app that is installed on a laptop or mobile device. This wallet has the same function – to store, send, and receive cryptocurrency funds. However, it is known to be prone to hack attacks.
This glossary is being continuously updated. We will be adding more terms along the way, from beginners to intermediate level. If you have any suggestions, let us know!