For many new and old in the cryptocurrency world, there are terminologies in crypto that sound confusing or ununderstood. This makes their venture into this new kind of money tiring and boring. Just like medical jargon, cryptocurrency also has its jargon that will be explained in simple terms here.
Terminologies Explained :
- Cryptocurrency The world’s newest form of currency, cryptocurrency is any form of digital money that uses cryptography — the science of encoding information to keep it private — to ensure that digital transactions are secure.
- Cryptography The science of encoding information to ensure its integrity and confidentiality. The internet is far from a secure channel for communications and transactions. However, the encryption processes built into cryptocurrencies ensure that only authorized parties are able to transact — and do so securely.
- Blockchain A blockchain is to cryptocurrency what a ledger is to a bank: it records transactions. However, while bank ledgers are maintained privately, a cryptocurrency blockchain is an online, decentralized database maintained publicly by nodes in its network. Transactions are recorded in ‘blocks’ in the database in such a way that they become virtually impossible to alter.
4. Bitcoin Launched in 2009, Bitcoin is the world’s first cryptocurrency. One bitcoin comprises 100,000,000 satoshis (the smallest unit of value).
5. Bitcoin network The decentralized, peer-to-peer computer network responsible for maintaining the Bitcoin blockchain. Consisting of computers running the Bitcoin protocol, the Bitcoin network checks the validity of transactions and then records them in the Bitcoin blockchain.
6. Bitcoin protocol The software, or ‘rules’, that governs the Bitcoin network. All computers forming the Bitcoin network run the same software via the internet, connecting them in a decentralized network.
7. Address When it comes to cryptocurrency transactions, an address is a string of alphanumeric characters representing a possible payment destination. Only someone who knows the address’s corresponding private key can access the cryptocurrency transferred there.
8. Key Every address created to facilitate cryptocurrency transactions comprises a public/private key pair. A public key and address are the same; they are used to receive cryptocurrency. The corresponding private key (mathematically linked to the public key/address) is used to spend/transfer cryptocurrency.
9. Wallet Think of a wallet as you would your Internet banking system. This system stores information about all the accounts you hold with that bank and can also serve as a transaction platform. Similarly, in the world of cryptocurrency, a wallet is used to store information relevant to your dealings, including addresses, balances, transaction histories, and public and private account keys. Offline or ‘cold’ wallets store this information on paper, USB, or a hard drive. Online or ‘hot’ wallets include various apps and software that also facilitate transactions.
10. Mining A far cry from hard labor deep underground, mining refers to the computational process performed by nodes to validate cryptocurrency transactions, record them in ‘blocks’, and then broadcast them to the rest of their network. Dubbed ‘mining’ because of the extensive computational work required to ‘solve’ the maths behind the creation of transaction blocks, miners are rewarded with cryptocurrency for their efforts.
11. Altcoin The term given to all cryptocurrencies developed after Bitcoin. Combining the words ‘alternative’ and ‘coin’, altcoins are alternative cryptocurrencies to Bitcoin — each with its own use, purpose, and market.
This List is not entirely all terminologies in cryptocurrency but it will surely help you get more familiar with and put you on a better path to your cryptocurrency success journey.