Blockchain and Cryptocurrency Dictionary
Terms , buzz words, and definitions you should know
Address – An address is the public address of a private key.
It is similar to the way a bank account number works. It shows the address of where to send money (cryptocurrencies) to.
Airdrop – This refers to the method used to distribute a token to an a wallet address. Airdrops can also be used to reward people for performing certain tasks like referrals, re-shares, etc.
Altcoin – Any digital currency that is not bitcoin is an altcoin.
ASIC (Application-specific integrated circuit) – An extremely efficient and cost-effective computer processing chip.
Bitcoin (BTC) -The first and most well known decentralised blockchain. It uses proof-of-work and bitcoin cryptocurrency, also known as a satoshi unit token.
Block – A single section of data. Similar to a page of a ledger or record book.
Genesis Block – The original block in a blockchain.
Blockchain – A way to store data on blocks that are linked together.
Block depth – This refers to a blocks position in the blockchain relative to the most recently added block. So, a block that is 7 blocks before the newest block has a block depth of 7.
Block Height – This refers to a blocks position in the blockchain relative to the first (genesis) block. So, a block that is 7th block to be added to a chain has a block height of 7.
Block explorer – This refers to the software that allows users to read and analysis the data on a blockchain.
Block reward – This is the reward that miners who help create new tokens are given. A block reward is in essence the miners compensation for creating new blocks and supporting the network.
Centralised Exchange (CEX) -Similar to a fiat money exchange. A crypto exchange allows you to trade and exchange different tokens for each other and cash out into fiat. Centralised exchange are usually highly regulated in the western world. These are usually the main gateways from fiat to crypto.
Closed source -This means that the software with source code is not accessible to the public.
Coin – A coin or altcoin is a digital asset that is generated via its own blockchain.
Confirmation – A confirmation means there is a consensus on a network that a transaction is valid. Each block validated is another block confirmation.
Consensus – Blockchain networks use consensus algorithms to establish agreements for which node or block is valid.
Crypto Exchange – These are marketplaces where traders can make digital currency transactions, like buying bitcoin.
Cryptocurrency – Digital currency (non-fiat) which is encrypted and runs on a blockchain.
Dapp -Similar to an App, a Dapp is an application which is decentralized. Dapps do not need a web server to function and can operate on the blockchain network it is connected to.
Double spend attack – This is a malicious attempt to try to convince two different parties at the same time that a transaction is valid. The same digital token could be spent twice. Blockchains are used to prevent double-spending. If a double spend were to occur in a Cryptocurrency then the trust would be gone.
All the parties have to do to stop double spending is wait for the confirmations to be validated (on the blockchain) before concluding whatever deal they are doing. You can use an escrow service for this.
Fiat – A national, usually government backed currency like the Euro, dollar, and pound.
Fork – Forks are something that happened a lot over the past few years in crypto. We saw bitcoin cash created as a fork from bitcoin for example. Basically a new network is created using the same protocol or consensus as a previous network.
Gas – Gas is the measure of the computational difficulty needed to process a smart contract function.
Gas price – There is a charge (fee) for a smart contract function and anyone who has used Ethereum will be well aware of the cost of gas.
Hash – Hashes are used to identify data.
Hard fork – Once the fork is created it is permanently incompatible with the original network.
Hashrate – The hash rate is the rate a machine can perform a specific hashing function.
HODL – This is a well known term used in the crypto space for holding onto (not selling) a coin or token.
ICO (Initial coin offering) and ITO (Initial token offering) – An ICO/ITO is very similar to an IPO. A coin or token is given to an investor in return for money being put into the business before it goes live and starts trading on the public crypto exchange.
Long Position – Often referred to as going long. This is the same as when people take out a long position on a stock/cryptocurrency. The investor is betting that the direction of the value of the token is going to go up.
Mainnet – This describes when a blockchain protocol is fully developed and deployed. For investors it signifies that the blockchain company is serious and here to stay.
Miner – A miner creates and submits new blocks to a chain.
Mining – Mining is the process of creating a new block onto a blockchain.
Mining pool – A mining pool is a group of miners that work together to generate a block in a blockchain.
Moon/mooning – This refers to when a cryptocurrency is mooning and rising in value at a dramatic rate.
Node – A participant in a blockchain network that validates and propagates new blocks.
NFT (Non-fungible token) -NFT’s are a single token and can be used for many things including for example a digital art piece.
Open source – The software source code is available and viewable to the public.
Peer-to-peer (P2P) – This involves interactions between one peer to another on a network without the need for a central intermediary.
Private key – This is the private part of a key. It can be used to access your encrypted wallet and decrypt a message.
Public key – This pairs with a private key. The public key is sent to someone and they can use the private key to decrypt the public key encryption.
Proof of work (POW) – This refers to the system of proving that a digital currency’s transaction has been verified.
Proof of stake (POS) -This is a method of confirming a transaction. It works by selecting validators in proportion to how much of a token they have staked.
Pump and dump -This is very common in cryptocurrency. A group of investors get together to inflate the price of a token so they can sell it artificially high to new investors.
Scalability – This is a very important aspect of a blockchain when the blockchain needs to continue functioning as the user base grows.
STO (Security token offering) – STO’s are regulated and registered with the SEC. It is a token offering where the token is classified as a security and sold to accredited investors.
Smart contract – A computer program or a protocol which is self-executing. It often involves a legal document which is tamper-proof and time-stamped.
Short/shorting – This is the same as with stocks. Investors go short (take out a short position) a certain cryptocurrency as they believe the price will go down.
Security token – These are tokens that represent a share of a company or security.
Stable token – These are tokens that are designed to be pegged to a fiat currency like the US dollar. Often investors cash out of another token and into a stable token to protect their profits.
Staking – Some cryptocurrencies can be staked (locked away into a staking wallet) to earn a passive income.
Testnet – Testnets are often used to prove new features before they are used on the main chain.
Token – These are units of a cryptocurrency and can not be divided further.
Tokenisation – This refers to the process of creating a token on a blockchain.
Transaction – This refers to a singular input into a blockchain.
Transaction fee – This is the fee charged for a transaction on a blockchain.
Trustless – Parties can reach a consensus on what the truth is without knowing each other.
Utility token – These are tokens that are issued to help develop and fund a project. Later on they can be used to buy a good or service.
Wallet (digital) – A file or piece of software that contains the private keys and holds different types of cryptocurrency in a secure location.
Whitepaper – A white paper is usually created by the developers of a cryptocurrency. White papers show investors details and information about a project and the token.