Cryptocurrency Glossary Of Terms & Acronyms – Forbes Advisor UK

Altcoin – Cryptocurrencies other than Bitcoin.

ASIC – Integrated circuit for specific applications. ASICs are powerful and expensive computing devices used for cryptocurrency mining (see Mining).

coin – A colloquial term for cryptocurrencies. See also: altcoin, memecoin.

Cold wallet – Physical storage devices such as flash drives, hard drives and solid state drives used to store cryptocurrencies offline.

Cryptocurrency – A digital currency that can be exchanged for goods, services, or other currencies. Transactions are validated and recorded using encryption by the general public, not by central institutions such as banks.

encryption – A method of computer science that keeps information confidential and secure by scrambling information into undecipherable information. Information can only be decrypted and read using the required keys.

Diffie – Abbreviation for decentralized finance. Finance is traditionally centralized because it relies on intermediaries. For example, if you want to send money to a friend or relative, rely on the bank to send it to the recipient’s bank. Defi does not require an intermediary and participants can send and receive assets directly. In theory, this makes transactions faster and cheaper.

DAO – Decentralized Autonomous Organization. DAO is a group of people who work together towards a common goal and adhere to the rules written in the project’s self-executing computer code... Bitcoin (a project, not a currency) is an example of DAO.

Distributed Ledger – In traditional finance, an organization such as a bank keeps a ledger of transactions for all customers. Defy shares and synchronizes your ledger with users in different locations around the world. Blockchain is an example of a distributed ledger.

Double payment – If you give £ 5 to the sandwich, you will no longer own £ 5 and will not be able to use it again. Also, advanced anti-counterfeiting measures will prevent people from copying physical currency. Even in the case of digital transactions, central authorities such as banks can protect and check ledgers to verify the legitimacy of payments.

However, you can copy digital information. Theoretically, one Bitcoin can be copied 100 times and used 100 times. Distributed ledgers such as blockchain prevent this.

When you send Bitcoin to someone, you destroy your version of it and create a new version for the recipient. Both destruction and creation are recorded in every copy of the ledger, preventing you from claiming to still own used coins and trying to use them again.

Exchange – A website or app that allows users to buy and sell crypto assets.

Fiat – Refers to traditional state-supported currencies such as the pound sterling, the euro and the US dollar.

fork – Forks occur when the community makes changes to the blockchain management protocol. This change marks a branch in a new direction from the previous iteration of the blockchain.

Soft forks contain repetitive changes to blockchain rules that can only be considered as updates. A hard fork is when the new version is incompatible with the old version and sets it apart because the changes are so important.

gas – There is a fee for trading on the Ethereum Network. For each transaction, the user must pay the amount of the native Ethereum currency Ethereum (ETH). This charge is called gas. Gas is used to reward Ethereum’s “miners” (see “Mining”) for the energy used in verification transactions. Gas also acts as a deterrent to malicious users.

Graphics card – Verification of transactions on the blockchain involves solving cryptographic problems. Solving these problems requires a great deal of computational power, which uses a significant amount of energy. High-end graphics cards used in PC games have the kind of processing power needed to validate transactions.

hash – A hash is the result of some of the data being applied to a special algorithm. The hash algorithm basically compresses data of any size into a nearly unique alphanumerical text string.

For example, a hash of the word “Forbes” using SHA-256 (more on this later) reads ADD913C2C3CF3F4A0628B58B505BC09C6C3797F2EE7DEE86AD9F701A191E6E93.Lyrics for Tom Jones’ 1965 hitIt’s not uncommon‘Is expressed as: 8E58EFDE840DF7CEC1872DE2B48222F2C3844646E0EAE4F4E6DD6CC7FE183E50.

If you change one letter of the word Forbes, or one letter of the lyrics of a song, you get another hash. This helps identify when some data has changed.

This is important for cryptocurrencies as the blockchain is a constant record of transactions. Cryptographic hashes flag attempts to change something, even if you have a large amount of data.

If someone tries to modify a transaction in a block on the blockchain, each transaction references the previous transaction, so all consecutive transactions must also be modified. This makes cheating virtually impossible.

Different cryptocurrencies use different hash algorithms.

HODL – – This meme has become a cry for a rally of crypto holders who want to encourage others to maintain their faith when prices fall. This is due to a misspelling that Bitcoin Forum users declared “IAM HODLING” in 2013. This term has retroactively become an acronym for “Holding On for Dear Life.”

Hot wallet – Online storage of cryptocurrencies provided by exchanges or third parties. Hot wallets are a target for hackers because storage is online and password-accessible. However, the hot wallet operator can allow the user to regain access to the asset if the user loses the access code.

ICO – Initial Coin Offering (ICO) is a cryptocurrency equivalent to Initial Public Offering (IPO). It provides investors with the opportunity to support new crypto projects.

ledger – A record of transactions including time, date, sender and recipient.

Market capitalization / upper limit – Total value of cryptocurrencies. At the time of writing, the combined market capitalization of all cryptocurrencies was $ 1.3 trillion.

Mining – Cryptocurrency mining is the process of using computer hardware to validate cryptocurrency transactions. Bitcoin Miners are volunteers motivated by the chance to win newly cast Bitcoins. Doing so will validate transactions on the blockchain together and prevent double payments.

Mining infers a 64-character hash, which can have trillions of possible combinations. The more computing power you have, the more guesses you can make within the 10 minute time frame and the more likely you are to win new Bitcoin.

A graphics card or ASIC is required for mining. The amount of computing power required to mine cryptos has increased over time and is now so huge that it is no longer practical for home PC users. Instead, the mining industry is now a protected area for businesses dedicated to it.

node – A computer or device that is connected to another computer or device that holds all copies of the blockchain. Each node supports the node’s network by sharing information and validating transactions.

P2P – peer to peer. A transaction between two people without the involvement of an intermediary or central authority.

Private key – The private key is basically the password for the cryptographic possession. It’s an incredibly long number that’s virtually impossible to guess. Approve the transaction by signing the transaction with a hash of the private key that only you know. Others can use the corresponding public key to verify the authenticity of the transaction.

Public key – The public address of the crypto wallet. You must share your public key to receive funds in your account. If the private key is like a password, the public key is like an email address or account number.

Proof of Work (PoW) – Proof that you have done some computational work to infer the 64-character hash needed to add the block to the blockchain. Broadcasting the solution allows you to quickly verify that the hash is correct and that other nodes need to do what it takes to get the hash.

Proof of Stake (PoS) – Proof of stake indicates that you have bet a certain amount of coins to get a chance to become a validator, rather than doing computational legwork to prove that you guessed the hash. The more coins you bet, the more likely you are to be a validator.

If you reach that position to deliberately approve a fraudulent transaction, you run the risk of losing your stake. Therefore, the willingness to cheat is discouraged.

PoS is environmentally friendly because it requires less computing power and uses less energy, but it is richer because it favors users who bet more money and is likely to enjoy the benefits of validation. Will be.

Satoshi Nakamoto – Anonymous creator of Bitcoin.

Satoshi – Satoshi is against Bitcoin and penny is against Pound.

Smart contract – A program that runs itself on the blockchain when certain conditions are met, without the need for human intervention or mediation. Once run, the contract cannot be changed or undone. For example, when account 1 receives asset Y, it releases asset X to account 2.

SHA-256 – A hash algorithm that compresses data of any size into an alphanumerical string that cannot be reverse engineered. It helps validate the input data while keeping the original data confidential and secure. It was partially developed by the US National Security Agency (NSA) and used by Bitcoin.

Seed (phrase) – A random series of 12-24 words generated by the cryptocurrency wallet and used to access it.

Stablecoin – Cryptocurrencies such as tether. Its value is associated with another currency, commodity, or financial instrument.