Blockchain and Cryptocurrency Glossary For Beginners
What is cryptocurrency
Cryptocurrency, simply put is a digital currency that uses encryption technology to secure transactions, control creation, and verify transfers. It is decentralized in the sense that it has not been issued by any government of any country, thus theoretically making it safe from inflation. It is also immediate and enables you to send money anywhere in the world.
However being digital currency it has a lot of terms associated with it that people are finding difficult to understand. Here we have a glossary to help you understand the concepts a little better.
Terms that you need to know
Address – An alphanumeric string that tells where the cryptocurrencies are to be sent and to be received from.
Altcoin – Altcoin is short for Alternative coins, which basically are all other cryptocurrencies that are not bitcoins. They include Etherium, Monero, IOTA, Ripple, Litecoin, Dogecoin etc.
Coinbase – A website and app used to buy and sell cryptocurrencies.
Confirmed – When a transaction is verified by the network it is called as confirmed transaction. The coin in question can now be used for further transactions.
Fiat money – It is basically money that is not backed by gold. All money issued by government is basically fiat money. US dollars, European Euros, Indian Rupees, all are classified as fiat money.
Fork – The instant of two blockchains being created and running simultaneously is called as a fork. Usually a single blockchain forks into two blockchains. There are two kinds of forks, soft fork and hard fork.
Genesis block – the first block in a new chain is called as the genesis block. Its block height is zero.
Hard fork – A fork where invalid transactions are made valid. For it to work, all nodes must upgrade to the newest protocol.
Hash function – A hash function or hashing algorithm is the method by which data is encrypted. For example a number 90 can be encrypted by multiplying by 2 and obtaining 180. For someone who gets the number 180, has no idea what the original number was. Hashing algorithms are more complicated in nature, but basically an extension of the aforementioned logic.
Nodes – Any computer in the blockchain network.
Paper wallet – The act of storing your private key on a physical document. It is also called as cold storage.
PoW – Proof of Work or PoW is the basic concept behind transaction validation, and consequently mining. It is basically multiple computer systems trying to solve a tough mathematical problem. The computer that solves first gets to create new block, record information, and is rewarded by transaction fees.
Private key – A private key is a function that is used to encrypt data, in this case the transaction. It cannot be decrypted by anyone unless they hold the corresponding public key as well. The private key, as the name suggests is kept only with the owner.
Public key – A public key is a function that is used to encrypt data, in this case the transaction. It cannot be decrypted by anyone unless they hold the corresponding private key as well. The public key is given by the owner to general public.