One of the problems most people have as they start learning about cryptocurrencies is that they do not understand terms used. It is really easy to be confused when you see most of the crypto terms listed below. We are looking at new technology so most of the terms are not common in day-to-day use. If you want to learn more about cryptocurrency, going through the glossary below will help you.
- 51% Attack – Happens when one entity or group holds over 50% of the cryptocurrency network’s computing power. When this happen, conflicting transactions can be issued and the network can be harmed when malicious intent is present.
- Alt Coins – Most people consider all other cryptocoins but Bitcoin being alt coins. In some cases people also include Litecoin or ethereum and consider the others as alt coins.
- ASIC (Application Specific Integrated Circuit) – Compared normally with GPUs, the ASIC is a device especially made for cryptocurrency mining, normally offering substantial power savings.
- Block – A data package that carries data that is permanently recorded on a blockchain network.
- Block Explorer – Online tool meant to help view all transactions on a blockchain. This offers important information like transaction growth and network hash rate.
- Block Height – How many blocks are connected on a blockchain.
- Block Reward – An incentive form for miner who manages to successfully calculate hash during mining. Blockchain transaction verification will generate coins and miners receive a part of the coin, the reward.
- Blockchain – A huge information file that includes the full history of all transactions made by a coin. Cryptocurrencies tend to have their unique blockchain but some will use another coin’s blockchain as they exist as tokens.
- Confirmation – Hashing a transaction successfully and then adding it on a blockchain.
- Consensus – This happens on network participants all agree on transaction validity, guaranteeing that ledgers are copies.
- Cryptocurrency – Also referred to as token, the cryptocurrency is a digital asset representation.
- Cryptographic Hash Function – The cryptographic hash produces a unique, fixed-size hash value from the variable-sized transaction input. An example of a commonly used cryptographic hash is SHA-256
- Dapp (Decentralized Application – A software that has standard user interface but utilizes a back-end that is decentralized. It does not run on your PC and normally uses smart contracts and blockchain technology.
- Digital Currency Exchange – A web platform that acts as intermediary to facilitate conversion of one cryptocurrency to another based on exchange rates. Some platforms will also allow you to buy cryptocurrency with fiat currency (see below).
- Digital Wallet Address – A sequence made out of numbers or/and letters, normally between 27 and 34 characters. All addresses are unique
- Digital Wallet – You store your digital coins in a digital wallet, just like you keep cash in your physical wallet. Software to store coins can be installed on secured servers or on your very own computer.
- Distributed Ledger – The ledger that has data stored on a decentralized nodes network. This does not have a currency and can be private or permissioned.
- Distributed Network – A network type that has data and processing power spread over nodes instead of using a centralized data center.
- Difficulty – This means how easy a transaction information data block can be successfully mined.
- Digital Signature – Digital code generated through public key encryption, attached to a document that is electronically transmitted with the purpose of verifying sender identity and contents.
- Double Spending – Happens when a money sum ends up being spent more than one time.
- Fiat Currency – The official definition is legal tender that has a value backed by the issuing government. This practically means that regular currency like EUR or USD is fiat currency.
- Fork – An alternate blockchain version is created by a fork, leading to 2 blockchains that simultaneously run on different network parts.
- Genesis Block – The very first blockchain block or the first few blocks.
- Hard Fork – A fork type that makes previously invalid transactions valid and vice versa. This is a fork type where all users and nodes have to upgrade to a latest protocol software version.
- Hardware Wallet – This is a physical device that keeps digital coins safe, by storing private keys and encrypting them. The wallet is protected by extra means and the digital wallet cannot be accessed without access to the hardware wallet. This is considered to be the safest way to store cryptocurrencies.
- Hash – Performing hash function on output data. This confirms coin transactions.
- Hash Rate – A specific performance measurement for mining rigs, normally expressed as hashes per second.
- ICO (Initial Coin Offering) – A way to crowdfund with the use of cryptocurrency. The startup releases digital currency that investors can buy, usually hoping that value will be much higher at a later point in time.
- Mining – The act that validates transactions on the blockchain. Validation necessity offers miner incentives, normally as coins.
- Multi–Signature – An extra security layer that requires at least 2 keys to authorize transactions.
- Node – A ledger copy operated by a blockchain network participant.
- Open Source – Software with original code being available for free to download with the purpose of modifying, redistricting or auditing.
- Oracle – Works as bridge between blockchain and real world by offering the smart contract’s data.
- Peer To Peer (P2P) – Decentralized interactions happening between at least 2 parties in a network that is highly-interconnected. Participants do not use an intermediary to deal with each other.
- Private Key – Every single digital coin address will have a private key that is unique and that can open the corresponding digital wallet without a password. As the digital wallet is set up, you get a private key that has to be stored safely and never be shared.
- Proof Of Stake – Consensus distribution algorithm rewarding earnings based on how many coins are held or owned. You receive more coins through mining if you invest more coins.
- Proof Of Work – Consensus distribution algorithm requiring active mining data block role, consuming resources, normally electricity. The more mining “work” is done or the more power provided, the more coins are rewarded.
- Public Address – The public key’s cryptographic hash. Basically acts like email address you can publish.
- Scrypt – Cryptographic algorithm used by Litecoin. It is faster than SHA-256 because not much processing time is used up.
- SHA-256 – Cryptographic algorithm used by many cryptocurrencies, including Bitcoin. Its main drawback is that it uses a lot of processing time and computing power. Miners normally have to form mining pools in order to capture larger gains.
- Smart Contract – They help people to exchange property, shares, money and all that has value in a conflict-free, transparent way. Parties see contract code and outcome. The smart contract removes the needs to have a middleman. As an example, when you send money to someone, there is a middleman (usually a bank) that takes a part of the transfer as fee. Smart contracts remove fees.
- Soft Fork – Different than the hard fork as just previous valid transactions become invalid. Old nodes recognize new blocks as being valid so soft forks are backward-compatible. The fork requires having most miners upgrading for enforcement to happen. Hard fork requires absolutely all nodes to agree with the use of the new version.
- Solidity – The programming language used by Ethereum to develop smart contracts.
- Testnet – Blockchain test utilized to prevent assets expending on main blockchain chain.
- Transaction Fee – Cryptocurrency transactions all involve small transaction fees. The fees add up in order to account for block reward received by miner after successfully processing blocks.
- Turing Complete – The ability of the machine to perform calculations that all other programmable computers can perform. Ex: EVM- Ethereum Virtual Machine.
Is there a term that you heard and that you did not find the meaning to? Let us know in the comment box. Also, if you believe a crypto term should be added to the glossary to make it more complete, comment. We always want to make this page as complete as possible, especially for beginners in the cryptocurrency industry.
