Key crypto/blockchain terms explained & definitions you will find below
— Distributed Ledger
— Hard Fork
— Hardware Wallet
— Market Capitalization
— Paper Wallet
— Private Key
— Public Key
— Soft Fork
— Software Wallet
HODL is defined as a misspelling of “hold”. It has evolved into a shortened form of “Hold On for Dear Life”.
After buying crypto, a person who is HODLing intends to keep it even as prices go up and down. Originally a misspelling of “hold”, HODL became a popular term among those who buy cryptocurrencies.
A person who does this is known as a “HODLer” or “HODLER”.
Fungible is a positive quality where two or more of the same thing have identical value. That is to say, one of a group of things can be a substitute for another and it won’t change the value.
For example, your $20 bill is worth the same to you as any other $20 bill. On the other hand, my car doesn’t have the same value as your car and so it is not easy substitute and is non-fungible.
Some cryptocurrencies like bitcoin don’t have fungible coins. That can be a problem when these coins are used for illegal transactions, because with enough research, some of the coins can be linked to that illegal activity. Coins with that bad mark are not desirable and so they are non-fungible.
A software wallet is a computer program designed device to secure your cryptocurrency while allowing only you to access it. A wallet is software that interacts with the network of recordings (blockchain) and lets users receive, store, and send their digital money.
A hardware wallet is a specially designed device to lock away access to your cryptocurrency. The device is extra secure because it is disconnected from the Internet and other computers and is virtually virus-proof. A cryptocurency wallet is software that interacts with the network of recordings (blockchain) and lets users receive, store, and send their digital money.
A paper wallet is simply a piece of paper containing the information needed to access and spend your cryptocurrency. A wallet is software that interacts with the network of recordings (blockchain) and lets users receive, store, and send their digital money. Paper wallets are often used to backup the information to access your money or as the only recording to prevent someone like hackers from stealing it from your computer.
Wallet is defined as software that interacts with the blockchain and lets users receive and send their digital money.
Blockchain wallets don’t actually store the money, instead they lock away access. The only way to get access to the money is by providing some type of password. Typically those passwords are called a “key” and they are a long string of letters and numbers.
There are many types of wallets, both physical and digital, each with their own advantages and disadvantages. Typically physical wallets offer more security features but their drawback is that they take longer to access your crypto.
Exchange is defined as a place where something of value can be traded. One of the purposes of an exchange is to ensure fair trades are conducted.
Traditionally, stocks were a common item traded on exchanges. Now with exchanges for cryptocurrencies, many new exchanges are being built in countries around the world.
Public key is defined as a string of letters and numbers that allows cryptocurrency to be received. However, public keys are not considered as safe to use as public addresses.
Though it’s called a “public key”, it isn’t publicly visible until you’ve shared it or sent money out. And while it can be used to receive money, it isn’t the safe to use.
A safer and more secure way to receive money is to use your public address.
Private key is defined as a string of letters and numbers known only by the owner that allows them to spend their cryptocurrency. NEVER SHARE your private key unless you want someone else to be able to take all of your money!
Your private key is very similar to your password to access your crypto. Compare a private key with a public key and address:
Your public key is rarely ever used, but you can use it to receive cryptocurrency.
Your address is a safer version of your public key and is what you should use to receive money.
Hard fork is defined as a disagreement in the operations of a cryptocurrency followed by a decision to make a permanent change to the technology resulting in part of the group splitting off to form their own cryptocurrency.
This change makes all new recordings (blocks) very different from the original blocks. They are changed so much that new blocks are seen as invalid to anyone who didn’t upgrade their technology. Which means, any computer that is not updated with the new technology, will find these new blocks appear invalid.
This process can cause a lot of trouble which is why, for a hard fork to go smoothly, it is important everyone agrees to the change. Any new fork in the blockchain can fail and if it does, all users will return to the original recording.
A soft fork is a change made to cryptocurrency technology creating a temporary split in the group of recordings (blockchain). This change creates all new, valid recordings (blocks) that are slightly different from the original blocks. They are just different enough that users of the new technology see blocks from original technology as invalid. But, users of the original technology see no problem with either one.
As a result this means, new blocks will work just fine for all computers including those using the original technology. But computers using the original technology will find their blocks are rejected by the rest of the network until they upgrade and rejoin the network. Any new fork in the blockchain can fail and if it does, all users will return to the original recording.
A fork or accidental fork is a split in the digital recordings, known as the blockchain.
A blockchain is the technology for creating permanent, secure digital recordings. Imagine the blockchain as a book of records where each new page in that book is what is known as a “block”. Blocks are attached to each other making what is known as the blockchain.
There are hundreds of blockchains created by many groups to record all sorts of information. Each blockchain is maintained simultaneously by a network of computers connected by the Internet. Updates to the blockchain are seen immediately and manipulation is extremely difficult, perhaps impossible.
With blockchains, only one recording (block) should be made at a time. However, sometimes two blocks are created at once by two computers, both valid. Because all recordings are shared among the network of computers, one block will reach one group of computers first while the second block will reach the other group of computers. This creates a split in the blockchain record, known as a fork.
Eventually, a computer in the network will build another block on one of the forks and it will grow. The computers always identify the longer fork as the correct one, and so will smoothly switch over, abandoning the shorter one.
Hash function is defined as a computer program that takes information and turns it into a series of letters and numbers of a certain length, this process is non-reversible.
For example, “I like bitcoin” can be hashed and will equal: ad3e58f21b94f32dcadca6b71df4c31a18179f38011551a17a80d0ff065d22c5
If I were to capitalize the “b” in bitcoin, so it says, “I like Bitcoin” the hash will be completely different: d988ca30eaa88c0410ad6e48a5297c0d505dcee572f9884f1a6fa2cbc8dedc86
Hashing is used to make storing and finding information quicker because hashes are usually shorter and easier to find. Hashes also make information unreadable and so the original data becomes a secret.
Minting is defined as the computer process of validating information, creating a new block and recording that information into the blockchain.
Imagine the blockchain as a digital book of records. Just like paper pages, these digital pages can only store a limited amount of information. So new pages are created regularly to store more information. Those pages are blocks in the blockchain.
To keep the blockchain network running smoothly, only one block can be created at a time. Proof of stake is the minting process of controlling how blocks are created and how data is added to a block. Here’s how proof of stake happens:
To be eligible to participate, users are required to deposit and risk a large number of cryptocurrency, this is known as a “stake”.
People who provide a stake (known as “forgers”) are randomly selected to record and verify information on the blockchain.
Forgers participating in proof of stake cannot spend or move their stake. If they are caught recording false information or doing something against the rules, they risk forfeiting their entire stake.
In most proof of stake systems, the larger your stake the greater your chances of being selected to record and verify the blockchain.
Forgers are willing to endure the cost and risks of staking for the chance to earn transaction fees paid by users of the system.
With over 1,500 cryptocurrencies and many more being created each month, many new interesting ways of maintaining the blockchain are regularly being explored and discovered.
Distributed ledger is defined as a system of independent computers that are simultaneously recording data. With distributed ledger technology, identical copies of the recording are kept by each computer.
We can define a distributed system, as one where all computers work independently toward the same goal as one large system. We can define a ledger as a book used to record transactions (money in, money out). However, distributed ledger technology has evolved beyond recording transactions so that it can record any data.
With distributed ledger technology, there is no central authority maintaining the system. Instead, updates to the ledger are independently created and then voted on. Once an agreement regarding the update has been reached, a recording is made in the ledger.
The latest version of the ledger, with the new recording, is then saved to each computing system and the process repeats itself.
The first type of distributed ledger technology is called the blockchain.
Market capitalization or Market Cap is defined as a way to rank the value and size of an asset (stock, cryptocurrency, etc.). This is calculated by multiplying the total number of coins by the latest price.
To get market cap, the total supply (of a stock or cryptocurrency) is multiplied by the price. For example, if bitcoin is worth $4,000 and there are 16,500,000 coins in existence, that means its market cap is $66,000,000,000 or 66 billion dollars.
Satoshi Nakamoto is the founder and creator of bitcoin, the most popular cryptocurrency. The smallest amount of bitcoin (0.00000001) was also named after him, it is called a Satoshi.
This tiny amount of bitcoin is one hundred-millionth of a bitcoin. That’s 7 zeros before the number 1!
Satoshi Nakamoto is an unknown person or group of people who created bitcoin in 2009. Very little is known about Satoshi. In an online profile he claims to be a Japanese man born in 1975, but all of his software and online conversations are in perfect English.
Altcoin is defined as any cryptocurrency except for Bitcoin. “Altcoin” is a combination of two words: “alternative Bitcoin” or “alternative coin”.
There are over 1,500 altcoins with many more planned for release.
Bitcoin is defined as an early digital cash that started the cryptocurrency movement. It was created in 2009 by an unknown person or group who went by the name, Satoshi Nakamoto.
Bitcoin is unique because it does not rely on government/bank created money. In addition, transactions occur directly between pseudonymous people (their real names are not known), meaning there are no banks or middlemen.
Each transaction is recorded on a digital record kept by many people across the world known as the “blockchain”. The data on the blockchain is publicly available and stored on many computers. Because there are so many copies being simultaneously maintained, the transaction and banking data is very safe and virtually impossible to manipulate.
Individuals protect their bitcoins using their digital wallet. A wallet is software that can only be accessed by using a key, which is a long string of letters and numbers. Bitcoin’s price has risen into the thousands of dollars, but you can still own bitcoin by purchasing a fraction of it for dollars.
Because of bitcoin’s popularity, it has become an anchor in the cryptocurrency market. That means, as the price of bitcoin goes up and down, the prices of other cryptocurrencies move too.
Block is defined as a single digital record created within a blockchain. Each block contains a record of the previous block, and when linked together these become the “chain”.
Blockchain tech creates permanent, secure digital recordings. It can record any information, but it started with recording bitcoin transactions.
If you imagine the blockchain as a book of records, then each page in that book is what is known as a “block”. Blocks are attached to each other making what is known as the blockchain.
Cryptocurrency is an electronic money that uses technology to control how and when it is created and lets users directly exchange it between themselves, similar to cash.
Crypto- is short for “cryptography”, and cryptography is computer technology used for security, hiding information, identities and more. Currency simply means “money currently in use”.
Cryptocurrencies are a digital cash designed to be quicker, cheaper and more reliable than our regular government issued money. Instead of trusting a government to create your money and banks to store, send and receive it, users transact directly with each other and store their money themselves.
Because people can send money directly without a middleman, transactions are usually very affordable and fast.
To prevent fraud and manipulation, every user of a cryptocurrency can simultaneously record and verify their own transactions and the transactions of everyone else.
In the real world, a book used to record transactions is called a ledger. And so it is with this digital money. But unlike in the real world, with cryptocurrencies, anyone can keep their own complete copy of this ledger.
Because the data is public and maintained by many thousands of people, transactions are permanent and very secure.
With public records, cryptocurrencies don’t require you trust a bank to hold your money. They don’t require you trust the person you are doing business with to actually pay you. Instead, you can actually see the money being sent, received, verified, and recorded by thousands of people. This system requires no trust. This unique positive quality is known as “trustless”.
The first cryptocurrency was bitcoin.