Cryptocurrency: Basic Terms 3

We're continuing to explore cryptocurrency terminology and adding some more terms and phrases to help beginners better understand the world of cryptocurrency and crypto investing. Incidentally, experts recommend playing it safe and investing no more than 5% of your investment portfolio in cryptocurrency and digital assets.

More information in our materials:Cryptocurrency: History, Fundamentals, and Basic Terms And Cryptocurrency: Basic Terms 2.

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Bitcoin Cash

Bitcoin Cash –A peer-to-peer electronic cash system formed from a fork of the original Bitcoin. While Bitcoin is considered unstable enough to be used as a currency, Bitcoin Cash is better suited for transactions.

Ethereum

Ethereum (ETH)– the second-largest cryptocurrency by trading volume, after Bitcoin. It is also known as Ether or Ethereum. It is also a platform for creating decentralized online services.DApps- at the baseblockchain, which operate using smart contracts. Developers can use it to create applications and other cryptocurrencies.

Ether can be exchanged for fiat money, Bitcoin or other cryptocurrency on online exchange platforms andcrypto exchangesEthereum's popularity is due to its high transaction confirmation speed. New blocks appear on the Ethereum blockchain approximately every 13 seconds.

Smart contract

Smart contract– an algorithm designed to generate, store, and provide information about ownership of something. These are like regular legal contracts, but written in computer code. They define the responsibilities of each party and provide instructions, which are also written in code.

Coin and token

Units of cryptocurrency that have their own blockchain are calledcoinsBitcoin, Ethereum, Litecoin, and others have their own blockchains. Coins are used as a medium of exchange or as a means of recording the value of a product and are not intended to perform any auxiliary functions. A coin can be sold or exchanged for another coin or token.

TokenIt doesn't have its own blockchain. It's issued on top of the existing network. It's a digital certificate that records the company's commitment to the token holder—analogous to shares in the digital world. Tokens can also represent a future project; when the blockchain is fully deployed, the tokens will be replaced with native coins. This option can be compared to purchasing tokens before the subway is built. Once the subway is built, the tokens can be used.

PoW

PoW (Proof-of-work) – proof of work– a way to reward miners for their efforts. PoW requires miners to demonstrate their effort by assigning a variable to the transaction hashing process. The hashed block proves the work was completed and rewards the miner. Furthermore, PoW protects distributed systems from abuse (DoS attacks, spam, etc.). This process consumes a lot of energy.

Hash

Hash function– converting a large array of input data into a unique set of characters of the required length. This set of characters is calledhash).

PoS

PoS – Proof of Stake– is a security method that allows cryptocurrency to be verified or mined based on the number of coins a participant owns. The idea behind this model is that miners are less likely to attack the network because they are interested in the game.

Public key and private key

Public key– is a set of characters used to send cryptocurrency to a wallet. It is transmitted over an unsecured, open channel. If a content creator, for example, wants to receive cryptocurrency for their content, they disclose their public address – a hashed version of their public key.

Private key– used to verify transactions and confirm ownership of a blockchain address. If someone sends cryptocurrency to your wallet, the private key will be required to unlock the transaction and prove you own the transferred cryptocurrency.

Public Ledger

Public Ledger– This is a link to the public ledger. It's a place where you can view every transaction ever made on the blockchain, given that it's publicly accessible. Every blockchain has one. 

Seed

Seed– a security element of a cryptocurrency wallet. A seed phrase, or mnemonic code, is a sequence of twelve to twenty-four words that can be used to access the wallet if you forget the key. It's like security questions for recovering a forgotten password. But losing your seed phrase can cost you your wallet.

SegWit

SegWit (Segregated Witness)– Separate Witness – a protocol upgrade used to address the transaction malleability issue of the Bitcoin blockchain and increase its throughput. SegWit allows for more transactions to fit into a single block and increases transaction speed.

Whale

Whale– is a term used to describe large crypto investors who hold Bitcoin. According to BitcoinPlay, there are approximately 2,000 Bitcoin whale addresses, and only three of them hold more than 100,000 BTC. The largest crypto whales are considered to be Tim Draper, Barry Silbert, and the Winklevoss twins.

In the near future, we plan to expand the list, add new terms and provide more detailed information on those already listed.

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