Are you new to the world of cryptocurrencies? If yes, chances are you’re trying to fit into its extraordinarily dense ecosystem. Well, for what it’s worth — you’re not alone; we’ve all been there. For the most part, the crypto world is chock full of jargons, most of which may sound pretty strange to you. Trust us, it’s perfectly normal to feel this way — those financial, technical, computing and trading jargons can leave you confused for days!
But of course, there’s good news — you can actually get a grip of these cryptocurrency terms in no time. In this article, we’re going to explore some of the most popular jargons you’ll definitely want to know. And chances are you’re going to catch up and become a pro even much quicker than you expected. Yes, that’s how it works in our world!
Let’s get started!
Secured by cryptography, a blockchain is a database that has the capacity to support the creation of a digital ledger of transactions on a decentralized network. The big highlight here is that the data system is run and controlled by a wider community of users. In essence, there’s no central authority or figurehead whatsoever. This network is basically a collection of records that are controlled by a group of people rather the bank or government. So of course, the data won’t reside on a single centralized server; it’ll rather be copied across an extensive network of computers worldwide.
Blocks are basically files where data associated with the network is permanently stored. For the most part, a block stores some (or even all) of the most recent transactions that haven’t entered previous blocks. That said, a block is pretty similar to a page in a ledger or record keeping book.
- Block Reward
This is the reward that’s awarded to a miner for solving the complex mathematical equation related to a particular block. So of course, it’s basically what cryptocurrency miners get for creating a block on the network. It’s good to point out that the reward per block mined is 25 bitcoins. And essentially, the block reward is bound to halve every 210,000 blocks or every 4 years.
Created in 2009, Bitcoin is a virtual currency that’s not backed by any central authority whatsoever. In essence, it’s not controlled or regulated by the central bank or government of any country. For those who might not be aware, the currency was created by an unknown person using the alias Satoshi Nakamoto. And the biggest highlight is that the currency can be exchanged for goods or services with zero reliance on middlemen or better still, banks!
Altcoin is basically a community term for any cryptocurrency that isn’t Bitcoin and is a combination of two words i.e. “alt” meaning “alternative” and “coin” referring to “cryptocurrency”. As a crypto newbie, there’s a good chance of coming across quite a few including Ethereum, Ripple, Dash, Monero, ZCash and loads more.
Exchanges are websites which provide a platform where anyone can buy and sell cryptocurrencies including Bitcoin, Ethereum, Litecoin, Ripple and more. Some popular exchanges you’re likely to come across include Coinbase, Kraken, Poloniex, Bittrex, Bitfinex, Binance etc.
- Smart Contract
A smart contract is one of the most appealing features of blockchain technology. It’s basically a two-way unalterable agreement that facilitates the exchange of digital currencies or assets in a secure and transparent manner. Perhaps the biggest highlight of this feature is that the entire process is decentralized and of course, free of middlemen. It’s however important to note that a smart contract typically comes with rules and penalties, both of which can be enforced by the system. So yes, it’s pretty similar to a traditional contract in this regard.
A cryptocurrency token is basically the currency of projects that have been successfully built on the Ethereum network. It’s however important to note that this term comes with several different meanings in the real world. But of course, this is just what it is in the crypto world!
Somewhat similar to an IPO in the real world, an ICO (Initial Coin Offering) is a decentralized/unregulated means by which funds are raised for a cryptocurrency startup. Essentially, Initial Coin Offering is a fundraising tool that exchange units of new crypto-token for either cryptocurrencies like Bitcoin or Ethereum or fiat currency.
Mining is simply the process of compiling and solving blocks on the blockchain network. For the most part, anyone with a strong internet connection and suitable hardware can mine. But of course, only the successful participants/miners get rewarded with Bitcoin. See Block Reward.
- Proof of Work
Known as the current consensus algorithm used by Ethereum, PoW is the mining process in which a miner installs a powerful mining rig to solve complex mathematical equations. In this system, the chances of mining a block is dependent on the effort of the miner.
- Proof of Stake
This futuristic concept emphasizes that a user can mine block transactions according to the number of coins he or she holds. In essence, with the proof of stake system, the user is required to declare ownership of the specific number of cryptocurrency units.
This is an intentional misspelling of the word “hold”. It’s simply the act of holding your coins even in the face of unfavorable market conditions.
- Software Wallet
As the name implies, this is a cryptocurrency storage that exists as software files on a computer. The biggest highlight here is that the wallets can be generated from several different sources and it’s entirely free.
- Hardware Wallet
Hardware wallets are devices that boast the capacity to securely store cryptocurrency. They’re basically the safest way to hold your coins in the crypto world. Check out our article on Top 5 hardware wallets to learn more.
And that’s it! 15 of the most popular cryptocurrency terms. At this point, chances are you’re already catching up with the workings of the crypto world. Just so you know, there are still many other terms out there; but trust us, these are sure to be a great start. Good luck!