Cryptocurrency has become very popular recently for investment. Here are 20 cryptocurrency terms you must know before investing or considering to invest.
Cryptocurrency
It is derived from two words – cryptology & currency. Cryptology is a science of computer coding language. The code does developed can only be understood between sender and receiver. No third party. The code itself is a store of value. Its value changes as per market demand and supply. So cryptocurrency is nothing but coded digital currency. It does not have a physical presence. The owners are not identifiable, but all transactions are publicly available.
Block
A block is a store of buy and sell transaction record. It has a limitation about how much such transaction it can hold. Once it reaches the limit a new block is formed. All these blocks are digitally encrypted.
Blockchain
It is one of the most common cryptocurrency terms. A blockchain is a sequentially linked blocks. When a block is complete with transactions as per the limit, the next block is created having a link with the earlier block. Likewise, the process continues to form a blockchain. It is permanent and unchangeable.
Network
A network is a technical platform in which the cryptocurrencies exist and moves from one owner to another. Ideally, transaction happens within the network. But at time it can be between networks.
Ledger
Ledger is another cryptocurrency terms which refers to record-keeping system of all the transactions. Unlike other systems, in cryptocurrency the ledger is public. It can be viewed by anybody. However, the participants are not identifiable by name, photo or location.
Decentralization
This is the second most common cryptocurrency terms. The money that we currently handle is controlled by a centralized system, which is the Central bank of the country. In case cryptocurrency, it is not controlled by any centralized system. It is available in the cryptocurrency network and accessible to all. Therefore its known as decentralization. The entire record keeping system of cryptocurrency is called distributed-ledger.
Coin
A coin is a unit of the cryptocurrency. It will have encrypted digital code along with a public and a private key as per computer coding language. To transfer a coin from one owner to another the keys have to match. Its value varies as per the demand in the market.
Mining
The programmers after developing the crypto code releases them as mathematical puzzle. These puzzles are decoded by a group of peoples or companies known as miner. The process is known as mining. Cryptocurrency mining, or cryptomining, is a process in which transactions for various forms of cryptocurrency are verified and added to the blockchain. It requires high end computers with specialized hardware and software. Miners are rewarded with new Cryptocurrencies.
Timestamping
It is a cryptocurrency terms refers to validation of a transaction before adding to the blockchain. It helps to identify the exact date, time and location from where transaction carried out.
Proof-of-work
It is an important cryptocurrency terms. It is a process by which the cryptocurrency networks verify the accuracy of the transaction that being added to the blockchain. It is an extension of timestamping process. The most widely used proof-of-work schemes are based on SHA-256 and scrypt novel hash functions computing. Some other hashing algorithms that are used for proof-of-work include CryptoNight, Blake, SHA-3, and X11. It is also known as proof-of-stake.
Halving or burn
Development of cryptocurrency requires a high programming work. It is time consuming as well as power consuming. Further, unlimited release of coins by a platform will reduce its market value and viability. Therefore, coin developers reduces supply of coin through buyback and destroy. Halving or burn is a cryptocurrency term refers to limiting the availability of the coin in circulation.
Initial Coin Offering (ICO)
The cryptocurrency developers raise funds for their project by offering coins for money. This is known as ICO. Once, coins are developed and released in the market, the investors gets ownership as per their invested amount. It is similar to Initial Public Offer (IPO) in share market.
Market Capitalization
The market capitalization represent the current value of all the coins of a particular network as on date. It is obtained by multiplying number of coins in circulation by current value of each coin in the market. It indicates the popularity and worth of the coin.
Wallet
It is a place where one store cryptocurrency he/she owns. Since it is a digital code only, it has to be stored digitally with the help of a software. It is called hot wallet. Sometime the code is allowed to store or carry in a device like USB. Then it is called cold wallet.
Keys
The crypto wallet carries a code to identify. It is known as public key. It is similar to bank account number. It can be shared with others for doing transaction. There will be a code to access cryptocurrency that you own. This is known as private key. It is similar to password to your bank account. This should not be shared with anybody.
Exchange
It is a website or app wherein one can buy or sell cryptocurrency. The cryptocurrency is stored in a wallet where it either get transferred out or in through the exchange. Any actual money payment or receipt will be credited or debited to the linked bank account or wallet. Its functioning is similar to stock exchange in share market.
Stablecoin
A stablecoin is a digital coin whose value is pegged to a currency of a country like US Dollar. Therefore it price moves as the currency value moves. Further these kind of coins are backed by real asset like gold, Dollar etc. Therefore these are known as stablecoin.
Node
It is a computer address or IP which is connected to a network of blockchain.
Whale
It represents most valuable Bitcoin addresses. It means these addresses are holding large number of Bitcoins.
Seed
It represents the foundation of public key for your crypto wallet. If this seed is lost than to recover one has to use a series of 12 to 16 words. Messing with these may lead to loss of the wallet as well as the currencies.
Do write about more cryptocurrency terms that you know in comment section.