Cryptocurrency Terms You Need to Know: Expand Your Blockchain-Related Vocabulary
List Of Terms
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What is yield farming
A strategy to maximize returns on crypto investments by leveraging different DeFi protocols. Users earn returns by lending or providing liquidity.
What is a white paper?
A document detailing the specifics and philosophy of a cryptocurrency or blockchain project. Satoshi Nakamoto’s Bitcoin white paper is a notable example.
What is staking?
In proof-of-stake systems, staking involves locking up a certain amount of cryptocurrency to support network operations, earning rewards in return.
If you don’t read this article as a crypto enthusiast your learning will be much more painful and lengthy. Therefore take some time and read this cryptocurrency glossary. When you read this list you will easily understand anything from the cryptocurrency transactions, bitcoin blockchain and distributed ledger all the way to the digital signature data, crypto projects, crypto wallet and many more!
List of most common crypto terms
51% Attack
In the world of cryptocurrencies, imagine a scenario where one person or a group gets too much power. If they control over half of the network’s mining capacity, they could potentially manipulate and influence transaction processes. This is known as a 51% Attack. The attackers might even double-spend coins, which undermines the trust and decentralized nature of the system.
Address
Picture an address as a mailbox for your digital coins. In the cryptocurrency world the cryptocurrency address is a unique code, somewhat like an intricate account number, where your cryptocurrency is sent to or received from. This makes transactions secure and ensures the right person gets the funds.
Airdrop
Imagine if, one day, you found extra coins in your digital cryptocurrency wallet for free. That’s essentially an airdrop. It’s a promotional strategy where new cryptocurrency tokens are “dropped” into the wallets of existing cryptocurrency holders, usually without any action required by the recipients.
Altcoin
While Bitcoin was the pioneer, there are now thousands of other digital currencies out there. These successors to Bitcoin are collectively referred to as “altcoins.” The “Alt” in altcoin stands for alternative, suggesting that they provide different versions or features than Bitcoin.
Application-specific integrated circuit (ASIC)
Think of ASIC as a master chef who only cooks one specific dish but does it incredibly fast and efficiently. In the crypto world, an ASIC is a chip tailored for a single task. It’s commonly used in the speedy and effective mining of certain cryptocurrencies.
Atomic swap
Imagine exchanging currencies without a bank in the middle, directly from one person to another. Atomic swaps do something similar for cryptocurrencies, allowing two parties to exchange different cryptocurrencies directly and securely without a centralized exchange acting as an intermediary.
Bear market
Ever seen a bear slowly lumbering along? In financial terms, a bear market is when the prices of assets, like cryptocurrencies, are trudging along in a downward trend. It’s a time of pessimism and caution for investors, as consistent price declines are observed.
BEP-2 (Binance Chain Evolution Proposal)
Binance, a major player in the crypto world, has its own chain with specific standards for tokens. BEP-2 is one such standard ensuring that tokens on the Binance Chain behave consistently, making it easier for developers and users to know what to expect.
Binance
Imagine a bustling marketplace where people from all over the world come to trade a vast array of digital coins. That’s Binance in the digital realm. As one of the globe’s top cryptocurrency exchanges, Binance offers a platform to buy, sell, and store numerous cryptocurrencies.
Bitcoin
Envision a new form of money, free from banks or governments, introduced to the world in 2009. This is Bitcoin (blockchain), the pioneering decentralized cryptocurrency. It was invented by an anonymous person or group known as Satoshi Nakamoto and has since laid the foundation for many other digital currencies.
Bitcoin Cash
Imagine if a group within a large family decided to branch out and start their own separate family unit. Bitcoin Cash is somewhat like that in the crypto world. It’s a spin-off or “fork” from the original Bitcoin, created in 2017 with modifications, such as a bigger block size, to handle more transactions at once.
Bitcoin SV
Another branch from the Bitcoin network family tree is Bitcoin SV, with “SV” signifying Satoshi’s Vision. Advocates believe it brings Bitcoin closer to its original intentions, focusing on stability and restoring certain protocol features of the original Bitcoin.
Block
Every time you transact with someone, a record is made. In cryptocurrency, these records are bundled together in what’s called a “block”. Once finalized, this block is added to a chain of previous transactions, creating a digital ledger of every transaction ever made on that network.
Block explorer
Imagine having a powerful magnifying glass that lets you closely examine every transaction on a blockchain. A block explorer serves this purpose online, acting as a search tool for people to verify and explore transactions and other data on a blockchain.
Block reward
In the world of cryptocurrency mining, think of block rewards as treasures miners get after solving a complex puzzle. When they successfully validate and add a new block of transactions to the blockchain, they’re rewarded with freshly minted cryptocurrency coins as compensation for their efforts.
Blockchain ledger
Imagine a massive book where every transaction ever made is noted down and multiple copies of this book are spread across the world to ensure its authenticity. That’s the blockchain ledger, a decentralized record-keeping system ensuring data transparency and tamper-resistance.
Blockchain network
Consider a huge team of computers, spread globally, all working together for a common goal. In the world of cryptocurrencies, this team forms the blockchain network. These computers, or nodes, collaboratively validate and record transactions on the blockchain.
Blockchain technology
At its core, blockchain is like a series of unchangeable digital blocks, all linked together. This technology uses a decentralized system to record data across multiple locations. Its design ensures that once something is added, it’s nearly impossible to change without altering every subsequent block.
Bored Ape Yacht Club
Picture a virtual club of unique, hand-drawn cartoon apes, each one representing a special membership. The Bored Ape Yacht Club is an exclusive NFT collection, and owning one of these apes grants access to virtual events and spaces, blurring the line between digital art and experiential ownership.
Buidl
In the crypto world, there’s a playful twist on the word “build” called “buidl.” It emphasizes the idea of building and creating technology and solutions in the blockchain space, rather than merely speculating on cryptocurrency prices.
Bull market
Picture a charging bull, full of energy and moving forward with force. That’s a reflection of a bull market in finance, where optimism and confidence reign supreme. Prices of assets, like cryptocurrencies, are on an upward climb, attracting more investors and excitement.
Byzantine Fault Tolerance
Imagine a group trying to reach an agreement, but some members might be deceptive or make errors. Byzantine Fault Tolerance (BFT) is a system’s ability to function reliably and reach a consensus even when some participants aren’t trustworthy. It’s inspired by a theoretical problem involving Byzantine generals needing to coordinate an attack, despite some generals possibly being traitors.
Central Bank
Think of a central bank as the big financial boss of a country. It manages the nation’s currency, interest rates, and money supply. Recently, some central banks are exploring the idea of creating their own digital currencies, therefore a central bank digital currency is a very probable thing in near future.
Centralized exchange (CEX)
Picture a traditional marketplace managed by a company. In the crypto realm, a CEX is an online platform where users can trade cryptocurrencies. However, the platform itself oversees the transactions, making it centralized.
Chainlink
Imagine a bridge that connects different information sources to smart contracts on blockchains. Chainlink is that bridge. It’s a decentralized oracle network allowing blockchains to securely interact with external data sources.
Circulating supply
Think of circulating supply as the number of coins or tokens currently available and in active use. It’s different from the total supply because some coins might not have been released yet or are held back for various reasons.
Ciphertext
Imagine sending a secret message, but before sending, you scramble it to keep prying eyes away. The scrambled version is ciphertext – the encrypted form of a given text, only readable by those with the key.
Coinjoin
Consider pooling your money with friends and then receiving an equal amount back from the pool to ensure privacy. Coinjoin is a method for combining multiple Bitcoin transactions into one, enhancing privacy by making individual transactions harder to trace.
Cold storage
Imagine keeping your precious belongings in a high-security vault. Cold storage is like this for cryptocurrencies. It’s a way of keeping them offline, away from hackers. Popular methods include hardware wallets or paper wallets.
Confirmations
When you send a postcard, you feel relieved when the recipient confirms its arrival. Similarly, in crypto, confirmations are the number of times a transaction is validated by the network, assuring its legitimacy.
Consensus mechanism
Picture a group needing to agree on something, and they have a set way of reaching that agreement. In crypto, the consensus mechanism is that method, ensuring all participants in a network agree on the validity of transactions.
Contract address
Imagine an office dedicated to a specific task. In Ethereum, when a smart contract is created, it’s assigned a unique address. This contract address is where users can send transactions to interact with the smart contract.
Cross-chain
Picture multiple islands connected by bridges. Cross-chain refers to the ability to move and interact with multiple blockchains seamlessly, expanding the utility and interoperability of different crypto assets.
Cryptanalysis
Think of cryptanalysis as puzzle-solving for secret codes. It’s the art of deciphering encrypted data (ciphertext) without having access to the original key, mostly used in cybersecurity to test encryption strength.
Crypto assets
Broadly, imagine digital valuables. Crypto assets are digital or virtual assets that use cryptography for security, including but not limited to cryptocurrencies.
Cryptocurrency
Picture money, but purely digital and secured with complex codes. Cryptocurrency is a type of digital currency that uses cryptography for security and operates independently of a central bank.
Cryptocurrency markets
Envision bustling marketplaces where traders buy and sell digital coins. Cryptocurrency markets refer to the platforms and spaces where these digital assets’ values fluctuate based on supply, demand, and other factors.
DAO (Decentralized Autonomous Organization)
Imagine a company run by rules written in code rather than people. A Decentralized autonomous organization operates transparently, and decisions are made by member consensus, not by a centralized authority.
Dapp (Decentralized Application)
Think of a mobile app, but instead of running on a central server, it’s on a blockchain. Dapps are open-source applications that run on peer-to-peer networks, ensuring they aren’t controlled by a single entity.
Decentraland
Picture a virtual world where you can buy, develop, and sell parcels of land. Decentraland is this digital universe, an Ethereum-based virtual reality platform where users can acquire and develop virtual real estate.
Decentralized exchange (DEX)
Imagine trading goods directly with a friend without a middleman. DEXs allow for direct peer-to-peer cryptocurrency trades online, ensuring more privacy and fewer fees compared to centralized exchanges.
Decentralized finance (DeFi)
Think of traditional financial services but without banks or intermediaries. This is what decentralized finance stands for. DeFi uses blockchain technology to offer financial services, from lending to borrowing to trading, in a decentralized manner.
Digital asset
Envision something valuable in digital form. Digital assets can be anything from digital art, music, or documents to cryptocurrencies, representing ownership through a digital medium.
Digital currency
Imagine money, but instead of paper or coins, it’s electronic. Digital currency represents value electronically and can either be centralized (like digital money banks use) or decentralized (like Bitcoin). Decentralized finance is formed from numerous of the latter ones alikes together.
Digital ledger
Think of a giant digital book that records transactions. A digital ledger is a database that tracks and documents every transaction in a system.
Digital signature
Imagine signing a document, but digitally. It’s a cryptographic way to prove one’s identity electronically, ensuring the authenticity and integrity of a message or document.
Distributed ledger technology
Picture a ledger, but instead of one central copy, it’s duplicated across a network of computers. Each participates in recording and verifying entries, making it secure and transparent.
Double spend
Imagine trying to spend the same bill twice. In the digital realm, double spend refers to the risk of a digital currency being spent more than once, which blockchain technology seeks to prevent.
Dusting attack
Think of someone throwing a tiny bit of dust on your belongings to track your movements. In crypto, it’s when attackers send small amounts of coins to a personal cryptocurrency wallet, then track the transactional activity to identify the person behind a wallet.
Elliptic Curve Digital Signature Algorithm (ECDSA)
Picture a high-tech padlock for crypto. ECDSA is a cryptographic scheme used to ensure data security and verify the authenticity of digital assets, especially in Bitcoin.
ERC-20
Imagine a standard set for making paper airplanes, ensuring they all look and fly similarly. In Ethereum, ERC-20 is a widely-accepted cryptocurrency token standard, ensuring compatibility between different tokens.
ERC-721
Think of collectible toys where each one is unique. ERC-721 is a standard for tokens on the Ethereum blockchain, representing unique digital items and collectibles.
Ethereum blockchain
Picture a vast digital canvas, not just for currency but also for running applications. Ethereum is a blockchain platform allowing developers to build and deploy decentralized applications.
Exchange
Imagine a digital marketplace where people trade cryptocurrencies. An exchange is a platform where users can buy, sell, or trade one digital asset for another or for fiat currency.
Faucet
Picture a tap dripping coins. In crypto, a faucet is a website or app that rewards users with small amounts of cryptocurrency, often for completing simple tasks or captcha.
Fiat currency
Think of the everyday money in your wallet, like dollars or euros. Fiat currency is traditional government-issued money, not backed by a physical commodity but by the government’s word.
Fiat-to-crypto
Imagine exchanging your regular cash (fiat currencies) for digital coins. Fiat-to-crypto refers to the transition or exchange between fiat currencies and cryptocurrencies.
FOMO (Fear of Missing Out)
FOMO captures the anxious feeling that emerges when one believes they’re being left out of a potential beneficial or profitable event. Within cryptocurrency, this often pertains to surges in asset prices, leading investors to hurriedly purchase out of fear they’ll miss big gains. It can influence impulsive decisions, which may not always be in the investor’s best interest.
Fork
A fork in the world of blockchain represents a split in the blockchain into two distinct paths. This can be due to a deliberate change in the underlying protocol or unintentional divergences in participants’ versions of the software. It’s a way to update or modify the existing chain or sometimes to create a new coin altogether.
FUD (Fear, Uncertainty, Doubt)
FUD is the intentional spreading of misleading or false information regarding a product or asset. In the realm of crypto, it’s typically done to manipulate market sentiment, driving asset prices down. This misinformation can deter potential investors and cause current ones to doubt their holdings.
Gas
In the Ethereum ecosystem, gas is a unique unit representing the computational effort necessary to conduct various operations, whether it’s making straightforward transactions or executing complex smart contracts. It’s essentially the “fuel” for the Ethereum network’s machinery.
Gas fee
Gas fees are vital charges one incurs when making transactions or executing smart contracts on the Ethereum platform. These fees compensate the miners or validators who process and validate the operations, ensuring the network’s security and functionality.
Genesis block
The genesis block holds special significance in any blockchain protocol as it’s the very foundation, the inaugural block from which all subsequent blocks emerge. It serves as the historical starting point of any blockchain and usually contains a unique message or data.
GWEI
GWEI is a smaller denomination of ether, Ethereum’s primary cryptocurrency. When users conduct operations on the Ethereum platform, gas prices are often quoted in GWEI. It’s akin to cents in the dollar system, offering a more granular cost breakdown for operations.
Halving
Within the Bitcoin ecosystem, halving is an event where the reward miners receive for adding new blocks to the blockchain is sliced in half. This event, happening roughly every four years, reduces the rate of new Bitcoin creation, ultimately capping its supply and potentially influencing its price.
Hard fork
A hard fork denotes a significant shift in a blockchain’s protocol that isn’t backward compatible. Such a change requires all network participants to upgrade to the newer version. This can sometimes result in a split, creating two separate chains, each with its own version of the transaction history.
Hardware wallet
Hardware wallets are tangible devices meticulously designed to safeguard cryptocurrency private keys away from the internet. By keeping keys offline, these devices offer a robust defense against cyber-attacks and unauthorized digital access, making them a preferred choice for many crypto enthusiasts.
Hash
A hash function takes any form of data (input) and converts it into a fixed-length sequence of characters. In crypto, it’s a way to encrypt and uniquely represent data or transactions, ensuring security and consistency across the blockchain.
Hashing algorithm
A hashing algorithm is a specialized cryptographic process, which, when given an input, will produce a fixed-size string of characters. This string appears random, ensuring encrypted data remains confidential and consistent across a blockchain.
Hashrate
The hashrate signifies the cumulative computational power utilized in mining and validating blockchain transactions. A higher hashrate not only amplifies a network’s security but also increases an individual miner’s likelihood of successfully mining a new block and earning rewards.
HODL
Originally stemming from a typo for “hold,” HODL has evolved into a crypto mantra. It signifies the strategy of retaining and not selling one’s cryptocurrency, especially amidst volatile market swings, indicating a long-term faith in the asset’s potential.
Hot wallet
A hot wallet is a digital tool connected to the internet, facilitating the storage and access of cryptocurrency private keys. While they offer convenience for quick transactions, their internet-connected nature also makes them susceptible to hacks.
ICO (Initial Coin Offering)
Initial coin offering represent a form of crowdfunding for new cryptocurrency ventures. Startups can bypass traditional capital-raising methods by selling a percentage of their initial coin supply to early supporters, often in exchange for fiat currency or other established cryptocurrencies.
IEO (Initial Exchange Offering)
Distinct from ICOs, an IEO is when a cryptocurrency exchange oversees the token sale. This structure adds an extra layer of trust and validation for potential investors, as the exchange vets the projects and ensures some level of authenticity and reliability.
Immutable X
Immutable X emerges as a Layer 2 scaling solution for Ethereum, aiming to provide gas-free, instantaneous transactions without compromising on the network’s decentralized ethos. It’s a testament to the evolving landscape, trying to address Ethereum’s scalability concerns.
Interoperability
In the context of blockchain, interoperability denotes the ability of varied blockchain systems to seamlessly communicate, interact, and share data.
KYC (Know Your Customer)
KYC is a mandatory verification process for businesses to identify and authenticate their clients. In cryptocurrency, especially on exchanges and platforms, KYC protocols are crucial. They help to prevent money laundering and other illicit activities. Users typically submit personal identification documents, sometimes along with proof of residence, to validate their identity. This helps maintain a safe and secure crypto environment and is often a regulatory requirement in many countries.
Layer 1
Layer 1 is the foundational level of any blockchain architecture. Think of it as the bedrock of the blockchain world. Projects like Bitcoin and Ethereum function on this layer, with their inherent mechanisms designed around consensus, security, and basic token transactions. It sets the fundamental rules and is the primary blockchain where assets exist.
Layer 2
Building atop the Layer 1 is Layer 2, a secondary framework designed to scale and improve the primary blockchain’s performance without overhauling its core. Examples such as Plasma for Ethereum or the Lightning Network for Bitcoin come to mind. These solutions boost transaction speeds, reduce costs, and generally alleviate congestion on the base layer.
Ledger
In cryptocurrency, a ledger is more than just a record-keeper. It’s a comprehensive digital chronicle of all network transactions. This digital database is both transparent and permanent, making it almost impossible to alter past entries without raising alarms, ensuring integrity across the network.
Lightning Network
The Lightning Network is Bitcoin’s shot at scalability. An off-chain, Layer 2 solution, it promises quicker and more affordable transactions by managing them away from Bitcoin’s main blockchain. By creating payment channels between parties, it reduces the need for every transaction to be recorded on the main chain, thereby speeding things up and reducing fees.
Liquidity
Liquidity is a hallmark of a healthy financial market, be it traditional or crypto. It signifies how effortlessly an asset, like a cryptocurrency, can be bought or sold without causing a significant price change. On crypto exchanges, substantial liquidity usually points to a robust market presence and tighter spreads between buy and sell prices.
Litecoin
Often dubbed the silver to Bitcoin’s gold, Litecoin is a decentralized cryptocurrency offering faster transaction confirmations compared to Bitcoin. Introduced by Charlie Lee, it employs a different hashing algorithm (Scrypt) and has made a name for itself as one of the leading altcoins in the market.
Mainnet
In the blockchain world, a mainnet is where the action happens. It’s the primary public blockchain of any crypto project, and this is where real transactions get processed, validated, and stored. Opposite to it is the testnet, a sandbox for developers to experiment without affecting the main chain.
Margin trading
For the risk-takers, margin trading in cryptocurrency offers an opportunity to amplify their trading positions by borrowing funds. This promises potentially higher profits due to increased exposure. However, with high rewards come high risks: greater potential for both gains and losses.
Market cap
Market cap, short for market capitalization, represents the combined value of a cryptocurrency. Market cap is a snapshot of a coin’s stature in the market. By multiplying the current price of the cryptocurrency by its total circulating supply, you get a ballpark of its overall market capitalization (market value).
Masternode
Masternodes are like the VIPs of nodes within the network. They’re enhanced nodes that not only validate and relay transactions but might also handle more complex operations like governing voting events. In return for their services and staking a significant amount of coins, they often receive rewards, making them an attractive proposition for crypto investors.
Max supply
The concept of scarcity is key in cryptocurrencies. The max supply of a cryptocurrency tells us the maximum number of coins or tokens that will ever exist for that particular asset. This predefined cap ensures scarcity, potentially enhancing its value.
Mempool
Picture a waiting room for unconfirmed transactions, and you’ve got the mempool. Short for ‘Memory Pool’, this temporary storage space holds these pending transactions until miners validate them and add them to a new block in the blockchain.
Memecoin
Memes meet cryptocurrency in memecoins. These are cryptocurrencies that originate from internet memes or jokes. While they often start as fun projects, like the famous Dogecoin, their popularity can explode overnight, leading to significant market movements driven by social media and internet trends.
Merkle tree
The Merkle tree is a fundamental part of blockchain cryptography. It’s a data structure that organizes data into a hierarchy. With each ‘leaf’ being a chunk of data, and higher tiers being a cryptographic hash of their children, Merkle trees help verify large sets of data efficiently, ensuring data consistency across the blockchain.
Metamask
A gateway to Ethereum’s decentralized apps, MetaMask is more than just a browser extension. It’s a bridge linking traditional web browsers and the Ethereum blockchain, making it simpler for users to manage their Ether and ERC-20 tokens, and even interact with various decentralized apps without needing multiple tools.
Metaverse
A fusion of augmented reality, virtual reality, and the web, the Metaverse envisions a shared digital universe or multiple interconnected digital universes. Within the crypto realm, it often pertains to decentralized virtual realms and assets, platforms like Decentraland or virtual real estate, and digital assets owned and traded by users.
Mining
The lifeblood of many cryptocurrencies, mining is the process by which transactions are verified and added to a blockchain. Miners, using powerful computers, solve intricate cryptographic puzzles. When they crack it, they can add a new block to the chain, and as a reward, they receive a certain amount of cryptocurrency.
Mining farm
Imagine a powerhouse of cryptocurrency mining. That’s a mining farm for you. It’s a dedicated facility, equipped with a multitude of mining rigs, optimized for cooling and energy usage. These farms are engineered to maximize the efficiency and profitability of mining activities.
Mining pool
Solo crypto mining is tough. Hence, miners often team up in ‘mining pools’. These are collaborative groups where individual miners combine their computational power to increase their chances of solving the cryptographic puzzle and winning the mining reward. This reward is then divided among pool participants based on their contributed computing power.
Mining rig
A specialized computer system tailored for cryptocurrency mining is called a mining rig. Whether custom-built at home or professionally manufactured, these machines are optimized to maximize the chances of solving blockchain puzzles and earning rewards.
Mint
In the crypto-art and non-fungible token (NFT) space, to ‘mint’ is to create or issue a new digital item on the blockchain. When artists or creators mint an NFT, they’re registering a unique digital asset on a particular blockchain, verifying its authenticity and ownership.
Moon
In the vibrant lingo of the crypto community, if someone says a coin is going to “moon”, they’re expressing belief in its potential to soar in value. It’s a term brimming with optimism, indicating the anticipation of significant price hikes for a particular cryptocurrency.
Multichain
The crypto world isn’t one-dimensional. A multichain environment references multiple blockchain systems that are interconnected, allowing for the smooth transfer and communication of data across different chains, enhancing versatility and interoperability.
Multisignature (Multisig)
Boosting the security game, multisig requires multiple private keys to authorize a cryptocurrency transaction. It’s a digital version of a safety deposit box that needs two or more keys to open. This approach ensures that no single entity has control, providing an additional layer of protection against unauthorized access or transactions.
Node
A node is like a workstation in the vast blockchain network. It’s a computer that plays a role in maintaining the blockchain by validating, relaying, and storing transactions. By holding a full copy of the blockchain and consistently following consensus rules, nodes collectively uphold the integrity and security of the network.
Nonce
In the mining puzzle, the nonce is the wildcard. It’s a random number that miners adjust to find a desired hash output for new block creation. Discovering the right nonce that, when hashed with transaction information (data), meets specific criteria, is central to the mining challenge.
NFT (Nonfungible Token)
NFTs are unique digital assets, often representing art, collectibles, or other digital goods. Unlike cryptocurrencies like Bitcoin or Ethereum, where each unit is identical (or fungible), each NFT has distinct information or attributes making it irreplaceable and impossible to interchange on a one-for-one basis.
Off-chain
Off-chain refers to transactions or activities happening outside the main blockchain. They’re beneficial as they can enhance speed and reduce costs, as they aren’t subject to the same consensus protocols. Once finalized, the net result can be added back to the main chain.
On-chain
Contrastingly, on-chain activities occur directly on the blockchain. These transactions, once verified, are permanently recorded and viewable by anyone on the network, adhering to the blockchain’s transparency tenet.
OpenSea
OpenSea is a bustling marketplace for NFTs. It facilitates the buying, selling, and trading of digital collectibles across various categories. Acting like an eBay for digital assets, it’s renowned for its vast range and interoperability across various Ethereum-based projects.
Oracle
In the blockchain realm, oracles are data feed providers. They relay real-world information to smart contracts on blockchains, enabling these contracts to trigger specific actions based on external data, bridging the gap between blockchains and external data sources.
Over the counter (OTC)
OTC trading refers to direct trades between two parties, bypassing traditional exchanges. Especially for large-volume trades, OTC offers a more discreet, efficient, and sometimes less costly transaction avenue without causing abrupt price changes.
P2PKH (Pay To Public Key Hash)
P2PKH is a Bitcoin address format. It stands for “Pay To Public Key Hash”, which means funds are locked and can be unlocked only with a digital signature from the appropriate private key. This format enhances security by using a hash of the recipient’s public key.
P2SH (Pay to Script Hash)
Building on flexibility, P2SH allows funds to be sent to a script hash (address). To spend these funds, the recipient must provide a script matching the hash and fulfill its requirements. It’s a way to enable various transaction conditions.
Paper wallet
In the digital age, paper wallets are a throwback. They’re physical documents containing private and public keys, granting access to a user’s funds. Though offline and secure from hackers, they’re vulnerable to physical damage or loss.
Peer
A peer is a participant in the cryptocurrency network, usually referring to nodes that manage and maintain the distributed ledger. They play an active role in validating and relaying transactions, reinforcing the decentralized nature of the network.
Peer-to-peer
P2P, or peer-to-peer, signifies direct interactions between individuals without middlemen. In crypto, it often describes decentralized exchanges or direct transactions between users, reducing costs and increasing efficiency.
Permissioned blockchain
While most blockchains are open to all, permissioned blockchains are selective. They operate under a governance model where only approved parties can participate in certain network activities, offering more control and privacy.
Play to earn (P2E)
Revolutionizing gaming, P2E models allow gamers to earn rewards in the form of cryptocurrencies or digital assets for their in-game efforts. Games like Axie Infinity exemplify this, where players can earn, trade, and own game assets.
PoET (Proof of Elapsed Time)
PoET is a consensus mechanism where participants prove they’ve waited a random amount of time before adding a new block. It’s energy-efficient and ensures fair participation by giving each node an equal opportunity based on elapsed time.
Private key
A private key is a cryptocurrency user’s secret password. It’s a critical piece of cryptographic data that allows users to access and manage their digital assets. It should be kept secret, as possession of the key grants full control over the associated funds.
Proof of Authority (PoA)
PoA is a consensus mechanism where transactions are validated by approved accounts, known as validators. It’s efficient and scalable but places more trust in these centralized validators.
Proof of burn
This intriguing mechanism has users “burning” or permanently locking up coins to earn the right to validate transactions. It simulates mining without energy consumption, as commitment is proved through the deliberate act of burning coins.
Proof of space
Here, participants prove they’ve allocated a certain amount of storage space for network activities. It’s seen as a more energy-efficient alternative to traditional consensus mechanisms, with users “farming” rather than mining.
Proof of stake (PoS)
Moving away from energy-intensive processes, PoS lets users create new blocks based on the number of coins they hold and are willing to “stake” or lock up as collateral. It promotes energy efficiency and encourages holding.
Proof of work (PoW)
PoW is the pioneering consensus mechanism introduced by Bitcoin. Participants (miners) solve cryptographic puzzles to add blocks. The first to solve gets to add the block and earns a reward. While secure, it’s known for high energy consumption.
Protocol
A rulebook in the crypto context, protocols define how nodes communicate, ensuring consensus on shared data. Bitcoin’s protocol, for instance, establishes how its transactions are managed and verified.
Public Blockchain
An open network that anyone can join. All transactions on a public blockchain are transparent, meaning anyone can view them, leading to an environment of accountability and security through mass collaboration.
Public Key
A cryptographic string that is shared openly, allowing individuals to receive cryptocurrency. Though public, it’s derived from a private key and must be kept secure.
Pump and Dump
An unethical practice where an asset’s price is artificially raised, luring investors, then rapidly sold for profit by the initiators, often resulting in losses for the newcomers.
Ripple (XRP)
Ripple serves as both a platform and a currency. The Ripple platform has been designed to expedite international money transfers, while XRP is the digital currency facilitating these operations.
Satoshi Nakamoto
The pseudonymous creator or group behind Bitcoin. Though Nakamoto’s identity remains shrouded in mystery, their invention of the blockchain has had revolutionary impacts on the financial world.
Scalability
Refers to a network’s capacity to handle and process an increasing amount of transactions as its user base grows. A major challenge for many blockchains, scalability solutions include layer 2 protocols and sharding.
Seed Phrase
A combination of words that gives users a way to recover their cryptocurrency wallets if lost. Essential to store securely, as anyone with access can control the associated funds.
SegWit (Segregated Witness)
A Bitcoin protocol upgrade that separates signature data from transaction data. This effectively increases block size limits and improves scalability.
Sharding
A method to improve blockchain scalability. It breaks down the database into smaller segments, allowing transactions to be processed in parallel rather than sequentially.
Smart Contract
Automated contracts deployed on blockchains. They execute predefined actions when certain conditions are met, eliminating intermediaries and ensuring trust.
Soft Fork
A backward-compatible upgrade to a blockchain. While it doesn’t require all nodes to update, any new blocks must adhere to the updated protocol rules.
Solidity
A high-level programming language primarily used for creating smart contracts on the Ethereum platform.
Stablecoin
Cryptocurrencies pegged to stable assets like gold or fiat money. They aim to offer the benefits of digital currency without the high volatility.
Staking
In proof-of-stake systems, staking involves locking up a certain amount of cryptocurrency to support network operations, earning rewards in return.
Stellar
A decentralized platform designed to facilitate fast and low-cost cross-border transactions. Lumens (XLM) is its native cryptocurrency.
Testnet
A mock network used by developers to test and experiment without using real cryptocurrencies.
Tokenomics
The study of the economic models behind tokens, focusing on their creation, distribution, and influence on user behavior.
Total Supply
The complete number of a cryptocurrency’s coins or tokens that currently exist or will ever exist.
Transaction Fee
A fee incurred when transferring cryptocurrencies. It compensates miners or validators for securing and maintaining the network.
Transaction Data
Information about a transaction on a blockchain. It can include details like sender, receiver, amount, and timestamp.
Tumbler
A service that mixes potentially identifiable or ‘tainted’ cryptocurrency funds with others, enhancing user privacy.
Validator
In certain blockchain systems, validators replace miners. They are committed for verifying transactions and add them to the blockchain. While verifying transactions, validators mostly require a stake in the cryptocurrency.
Wallet
Crypto wallet are software or hardware tools that store private and public keys. They facilitate receiving and sending cryptocurrencies.
Whale
An individual or organization holding a significant amount of a cryptocurrency. Whales can have a notable impact on market movements.
White Paper
A document detailing the specifics and philosophy of a cryptocurrency or blockchain project. Satoshi Nakamoto’s Bitcoin white paper is a notable example.
Wrapped Tokens
Cryptocurrency token tied to the value of another cryptocurrency. They allow one cryptocurrency to be represented on another blockchain, like wrapping Bitcoin for use on Ethereum.
XRP Ledger
A decentralized cryptographic ledger powered by a network of peer-to-peer servers. It’s the foundation for the digital currency XRP.
Yield Farming
A strategy to maximize returns on crypto investments by leveraging different DeFi protocols. Users earn returns by lending or providing liquidity.
Zero-knowledge proofs
A cryptographic method where one party can prove to another they know a specific piece of information without revealing the information itself.
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