Crypto Related Terms You Must Know

ajaymahar (25)in #crypto • 7 years ago

Here are some terms you’ll need to know:

POW - Proof of Work is a way to validate transactions. It prevents an attack on the network by making mining calculations difficult and preventing multiple fake requests. It takes a long time for miners to calculate the block equations, but then they are rewarded when solving the block.
POS - Proof of Stake is a different way to validate transactions. The block is chosen and mined based on how much wealth it has or "stake". When it is processed there is no reward, but the "foragers" (similar to miners) take the transaction fee instead.
HODL - Hold On for Dear Life is an acronym, but it really started as kind of an accident! According to crypto legend it was a miss spelling on a post on the Bitcointalk.org forums. Basically the practice of holding on to your coins and not selling.
Fiat - This term is used a lot to set the two worlds of cryptocurrency and traditional currency apart. Traditional currencies like USD, Euro, Yen, etc are what you would call "Fiat" currency. Fiat money is physical currency that a government has declared to be legal tender, but it is not backed by a physical commodity.
FOMO - Fear Of Missing Out. People tend to see prices drop or rise quickly or a hot coin or ICO on the market and they don't want to miss out on the opportunity. Resisting the FOMO can be hard, but you must use the force Luke!
FUD - Fear, Uncertainty, Doubt. This describes a general disinformation strategy to cause fear among consumers or competition. Emotions tend to drive the market more then anything, don't give in to the FUD side...
Altcoin - This is an umbrella term used to refer to every other coin besides Bitcoin. There are thousands of different coins out there, all with their own individual purpose. Ethereum, Litecoin, Dash, & Monero are all examples of Altcoins as they are "alternatives" to Bitcoin.
Wallet - A "wallet" in terms of cryptocurrency is a digital place to store your bitcoins. There are MANY different types of wallets.
Address - Every wallet has an "address" which is a string of numbers that acts like a bank account number. People can send you cryptocurrency directly to this address. You need different address for each cryptocurrency link Bitcoin, Ethereum, etc.
Private Key - This is like your top secret password to unlock your wallet. Never share this, it is 100% full access to your cryptocurrency. This private key protects your wallet.
Public Key - The public key is mainly used to accept cryptocurrency to your wallet. So if your friend was going to send you 5 BTC (what an amazing friend! Keeper!) then you would give them your Public Key of your wallet to send the BTC to.
Blockchain - This is the unchangeable digital ledger where every transaction lives forever. It is the underlying technology of all cryptocurrencies and is (and will continue in a huge way) to change human life as we know it.
Block - A block is basically a batch of transactions that is processed and recorded forever on the blockchain.
Whitepaper - This is the technical write up that most cryptocurrencies provide to take a deep look into their structure and plans.
Decentralised - In the case of cryptocurrencies it is a copy of the blockchain or digital ledger on every device connected to the network. An exact copy of the information is everywhere instead of in a central location like a government or companies servers.
Hash Rate - This is the speed of how much computing power is being used to mine a coin on a network. The bigger the hash rate the better.
Hard Fork - This is when the code or software that comprises a coin like Bitcoin changes in some significant way, typically for improvements. Bitcoin Cash is a hard fork from Bitcoin as an example.
Distributed Ledger - The basis for decentralisation, a distributed ledger is a list of transactions that is cloned on every computer and software that is connected to the network. This ledger is updated in every location, all at once, each time a transaction is made.
Node - A node is basically any software or computer that is connected to the Bitcoin's (or other cryptocurrencies) network and maintains a copy of the blockchain.
Mining - This is the process of using computer power to process transactions on a blockchain. Miners are rewarded with newly created cryptocurrency for each block they process.
Token - A token is similar to and based on cryptocurrency, but it's main function isn't necessarily just transfer of value. Ethereum tokens are a great example of this and extremely popular. ERC-20 tokens are created on top of the Ethereum network and you can read more about that in my article on what is Ethereum.
ICO - Initial Coin Offering. This is when a coin first puts their token or currency on the market for people to purchase. I wrote a great introduction to ICO's here.
Pump & Dump - This is a method of hyping up a coin by buying and holding and getting others to do the same, only to then "dump" it or sell it off at the highest price.
Whale - An investor that controls a large portion or amount of a specific cryptocurrency. This gives them an advantage similar to having the most chips in Texas holdem poker, you can just lean on the market to make waves.
Bear/Bearish - Term used to denote that the market is going down.
Bull/Bullish - Term used to denote that the market is heading up.
Exchange - An online hub for trading cryptocurrencies. Not all exchanges carry each coin.
KYC - Know Your Customer. This is an acronym, but also a bank regulation (mostly US) to verify identity of their customers.
Satoshi - Bitcoins can be bought and sold in tiny amounts! A Satoshi is the smallest sub-unit of a Bitcoin currently available (0.00000001 BTC).
Satoshi Nakamoto - The pseudonym for the mysterious creator of Bitcoin. No one TRULY knows who created Bitcoin, and while there is some speculation out there I don't agree with the moves by some of those thought to be Satoshi so I will not name them here.