35 Basic Crypto-related Terms Every Newbie Should Know

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If you are now entering in the crypto sphere and you feel a bit confused about all the terminology and culture others talk about, then you came to the right place.

In this article, we will try to explain in simple terms, 35 basic stuff that you need to know in order to be able to understand better what the industry’s ”veterans” are talking about.

No more nudging without understanding the full picture and no more ”not-understand errors” in your head.

Enjoy.

BITCOIN

Bitcoin is the eponymous cryptocurrency that most users are familiar with. This cryptocurrency functions as a decentralized, global network of peer nodes, in which there is no publishing authority and no buyer.

This means that nobody can control it, as long as the central authority is bypassed. The currency is open, i.e. it is certified for wallet and transaction certification. But the best part is this: anyone can use Bitcoin via smartphone or computer.

Bitcoin was created by Satoshi Nakamoto in 2008 and is the first application of blockchain technology and the first cryptocurrency. It remains the most widespread cryptocurrency to this day. The global stock in bitcoin is set at 21 million – that’s the stock market value of all bitcoins.

BLOCKCHAIN

Blockchain is a distributed ledger, which records all transactions and smart contracts for a cryptocurrency or platform. The blockchain is reproduced in many thousands of nodes worldwide. The block chain is a public Bitcoin trading file in chronological order. The chain of blocks is shared among all Bitcoin users. It is used to verify the permanence of Bitcoin transactions and to prevent double spending.

DISTRIBUTED LEDGER

This is a match that is often made on blockchain. Instead of a central ledger, the blockchain promises to distribute the rest through a network of servers.

SMART CONTRACTS

In addition to cryptocurrencies, some blockchains also support smart contracts. The predominant form of smart contract network is Ethereum. Some contracts allow non-foreign exchange investment goods to change hands in the chain without the use of intermediaries. These goods may include subscription records, insurance or even real estate.

ETHEREUM

Ethereum is a decentralized platform for applications running “smart contracts”, which is based on blockchain technology and aims to solve problems related to censorship, fraud and third-party intervention.

BLOCK

Blocks are synonymous with the digital pages of a ledger. This is where the unchanged data related to the network is kept. A block is a file in the blockchain that contains and validates multiple transactions on hold. About every 10 minutes, on average, a new block that includes transactions is attached to the chain of blocks through mining.

BLOCK HEIGHT

The height of the blocks is the sum of the individual blocks in each chain. The first block has a zero height and is also known as the first transaction (genesis block).

GENESIS BLOCK 

This is the first array/block of a blockchain.

CRYPTOCURRENCY

A cryptocurrency is a decentralised digital currency, which can be used for goods, services and transport of investment goods. The first cryptocurrency was Bitcoin. It was first released on the market in January 2009.

FIAT MONEY

Fiat money is the means of payment associated with the national currency, such as the US dollar, the British pound or the euro. It is considered legal tender by a government, but its value is not justified by natural resources, such as gold.

CRYPTOCURRENCY EXCHANGE

Cryptocurrency exchanges are websites or services that allow the exchange of digital crypto-goods with cryptocurrencies and vice versa, or the exchange of money documents (e.g. United-States dollars) with crypto-investment goods). Two of the most typical examples of such exchanges are Coinbase and Binance.

CRYPTOCURRENCY WALLETS

A Cryptocurrency wallet is a way of storing private and public keys for investment goods. Each wallet is safe where one can resort to locating keys.

A Bitcoin wallet is generally the equivalent of a physical wallet on the Bitcoin network. In fact, the wallet contains your own private key(s) that allow you to spend the bitcoins distributed in this blockchain.

Each Bitcoin wallet can show you the total balance of all bitcoins it controls and lets you pay a certain amount to a specific person, as is the case with a real wallet. This differs from the credit cards where you are charged by the merchant.

RELATED: Top 10 Cryptocurrency Wallets + My Personal Favourite

PUBLIC/PRIVATE KEYS

Keys are the tools to access exchange rates and to receive/send value or data to the cryptocurrency. The public key is equivalent to the e-mail address. It’s what allows funds to be sent to third parties. You can share your public key with a general audience.

DECENTRALIZATION 

Decentralisation is a criterion by which it is assessed how much power a key beneficiary has. One can argue that blockchains are certainly much more decentralised than other methods of data sharing, as (at least in public chains) there is no watchdog to control who can participate: whoever owns the computing power can become part of the blockchain.

FORK 

The fork is an operating system operation that creates an alternative version of the blockchain, allowing two chains to run parallel to different areas of the network.

HODL

Hodl is a cryptocurrency meme for saving, and not for selling investment goods. The meme was created in December 2013, when a user who had downloaded a few glasses fingered something wrong in a popular Bitcoin forum. You can find the relevant original thread on the bitcointalk.org page.

ICO

As cryptocurrencies become more and more popular, the number of first currencies is increasing. Each of them promises to correct, highlight or improve a specific aspect of the cryptocurrency landscape. These new currencies are available through ICO. In other words, it is the crypto-variant of a stock exchange offering new securities with public registration.

MINING

Due to the encrypted nature of cryptocurrencies, transaction verification requires a huge amount of computing power and specialized hardware. In exchange for computing power, people who solve (and therefore approve) a transaction) are paid in cryptocurrencies.

This process is called mining. Mining is the process that creates computer hardware to make mathematical calculations so that the Bitcoin network can confirm transactions and increase security.

As a fee for their services, mining people can collect transaction fees for the transactions they confirm, along with newly created bitcoins. Mining is a niche and competitive market where fees are divided according to how much calculation has been made. Not all Bitcoin users do mining and it’s not an easy way to make money.

SATOSHI NAKAMOTO

The name Satoshi Nakamoto is what was used by the anonymous creator (or anonymous creators) who arrested bitcoin, signed the Bitcoin White Paper, but also arrested and developed the first reporting (reference implementation) of bitcoin. As part of the implementation, Satoshi Nakamoto also developed the blockchain’s first database. In this process, they were the first to resolve the issue of double-spending by using a peer-to-peer network. They were active in bitcoin growth until December 2010.

DAVID LEE CHAUM

David Lee Chaum is an American computer scientist and cryptographer. He became famous for developing ecash, an electronic “cash” application, which aims to maintain the anonymity of the user.

He has also invented many cryptographic protocols and founded DigiCash, an electronic money company. His article “Undetectable Email, Sender Address and Digital Aliases” (1981) paved the way for the investigation into anonymous communication.

NICK SZABO

Nick Zambo is one of the pioneers of blockchain and cryptocurrencies. He is widely regarded as the inventor of the concept of smart contracts, which are now a fundamental feature of cryptocurrencies.

Szabo is also the creator of bit gold, a decentralized precursor version of Bitcoin, which laid the groundwork for the initial construction of Bitcoin’s architecture.

CHARLIE LEE

Charlie Lee is the creator of Litecoin and, before that, Coinbase’s chief engineer. Although he is the pioneer of Litecoin, Lee has devoted himself to numerous projects exclusively involving Bitcoin. Prior to his outings in the cryptocurrency world, Lee worked as a computer engineer at many companies, including Google and Guidewire Software.

JAMES DALTON BELL

James Dalton Bell is an American crypto-anarchist who conceived the idea of online paid murders, which he calls a “assassination politics.”

In April 1995, Bell co-wrote the first chapter of a ten-part essay entitled “Murder Policy”, in which he extensively describes a murder market in which anonymous donors can order with confidence the murder of members of the government or other persons who violate citizens’ rights.

In 2001 Wired magazine called Bell “one of the internet’s most famous essayists” and “the world’s most notorious crypto-convict.”

VITALIK BUTERIN

Vitalik Buterin is the creator of Ethereum, the blockchain platform that acts as a global computer for decentralized applications. The cryptocurrency equivalent, Ether, saw its value soar in 2017 (The Ethereum’s capital value is close to $30 million). He is the co-founder of Bitcoin Magazine and is currently running the Ethereum project, working to upgrade his protocol.

TIMOTHY C. MAY

Timothy C. May, known as Tim May (December 21, 1951 – December 13, 2018) was an American writer specializing in technical and political matters, working as a computer engineer and senior scientific staff at Intel in the company’s early years.

May was one of the founding executives and one of the most generous participants on cypherpunk’s email list. He had written extensively about encryption and privacy issues from the 1990s to 2003.

CYPHERPUNK

“Cypherpunk” describes any activist who supports the widespread use of strong encryption and security enhancement (data) technology as a means of achieving social and political change.

These informal activist groups, which were initially communicating through e-mail lists they were compiling themselves, are aimed at protecting privacy and security through the active use of cryptography. Cypherpunks have been organized into an active movement since the late 1980s.

DIGITAL SIGNATURE

A digital (cryptographic) signature is a digital code created by decrypting a public key that is in turn linked to an electronically notified document, which verifies the content of the document and the sender’s identity.

A cryptographic signature is a mathematical mechanism that allows someone to prove ownership. In the case of Bitcoin, a Bitcoin wallet and its own private key(s) are linked to some mathematical magic.

When your Bitcoin software signs a transaction with the appropriate private key, the entire network can see that the signature coincides with the bitcoins spent. However, there is no way, which spoils the world, someone guessing your private key to steal your painstakingly earned bitcoins.

ESCROW

The escrow is a financial agreement whereby a third member saves and regulates the payment of funds required by the two members involved in a particular transaction.

It helps to make transactions more secure by keeping the payment in a secure guarantee account, which is released only when all the terms of the agreement have been complied with, under the supervision of the guarantor company.

MOONING

In 2017, cryptocurrencies were destined to gain multiple value overnight. The entire capital value of the sector increased from $15 billion in January to $600 billion in December of that year.

Ripple was the biggest winner. Its value increased by 28.963% in the 12 months. By comparison, the S&P 500 climbed 19.4%. The phenomenon of multiplying profits with a single coin is known as ‘mooning’.

NODE

The node is a computational device on the blockchain. It is responsible for certifying transactions, but also for maintaining and updating the available ledger.

PEER TO PEER

Peer-to-peer connection or P2P refers to decentralized interactions between two or more members on a strongly interconnected network. Participants of a P2P network deal directly with each other through a single mediation point.

Peer-to-peer refers to systems that function like an organized collective allowing each individual to interact directly with others. In the case of Bitcoin, the network is made in such a way that each user broadcasts other users’ transactions. And, above all, no bank is required as a third party.

PRETTY GOOD PRIVACY

This is an encryption program that provides encryption and verification privacy for data communication. PGP is used to sign, encrypt and decrypt texts, e-mails, folders, directories, and hard disk partitions, as well as to enhance the security of e-mail. Phil Zimmerman developed PGP in 1991.

PROOF-OF-STAKE

Proof of Stake (or ownership) encourages people who own a multitude of blockchain brands to make decisions to validate the chain. In practice, it is noticeably less energy-intensive practice than mining.

PROOF-OF-WORK

It is a system in which blocks of transaction data in the blockchain are mined and validated by specialized computers that are rewarded for solving mathematical equations.

TOKENS

A token is a digital unit that can be programmed, having its own codebase associated with an existing chain. Brands are used to facilitate the creation of decentralized applications.

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