Crypto Glossary: Part II
Some time ago, we posted our cryptocurrency glossary, with some accessible and useful terms which apply to the crypto world. But this industry is developing so quickly, and that's why we provide you the next batch of essential words related to crypto!
Address - the unique location where coins might be sent to or sent from. It consists of the string of numbers and letters and might be shared in the form of QR code.
AML - stands for "anti-money laundering", the law aimed at preventing money laundering.
Block reward - a sum of coins acquired by a miner who successfully calculated the hash
Blockchain - it is probably the most crucial term in the cryptocurrency world. It is a ledger of data blocks, chained to each other. Every block consists of a cryptographic hash of the previous one, a timestamp, and transaction data. Blockchain is decentralized, which means that the data is not stored in one specific place, but it is distributed around participants.
Burned - we called that a coin which cannot be spent in any possible way (for example, its owner lost the private key of it).
Cold wallet - a way of storing cryptocurrency assets; in that solution, they are kept on the offline disc, which prevents any third party interference.
Consensus - it's an agreement between all blockchain nods when the transaction is valid for the whole blockchain network.
Consensus mechanism - it's the mechanism used to verify the compatibility of the whole blockchain network.
Distributed ledger - ledger, which is maintained in multiple locations, not by one centralized entity.
Double spend - attempt to use a coin to spend it in two different ways in the same time (for example, by sending them to two separate locations).
Fiat - a "classical" national currency, like the US dollar or British pound.
Fork - a situation, when the new version of blockchain (or any other software, cause its term is not only used in crypto industry) is created. There are two types of forks: soft, when the new blockchain is backward compatible, and hard, when the new one is entirely separate from the original.
Genesis Block - the very first block of the blockchain.
Halving - a procedure, when the block reward for miners is cut in half, to ensure that the overall limit of coins won't be reached too quickly. Usually, this is the moment of increased activity on the coin market.
ICO - Initial Coin Offering, a way of raising funds when the initial sum of the cryptocurrency is put up for sale.
KYC - stands for "know your customer"; a verification procedure of future user, usually needed to fulfil AML policy.
Mining - process of verifying new transactions in blockchain network. Participants use the computing power of their software to maintain it.
Ledger - a record/list of transactions.
Lighting network - cryptocurrency payment protocol, which is aimed to provide cheap and fast transaction.
Liquidity - it shows how easily the cryptocurrency might be bought or sold, without interference in the global market situation.
Moon; to the moon - a slogan/meme popular in the crypto world, which usually refers to the rapid increase in value.
Node - a computer connected to the blockchain network.
Paper wallet - storing private keys on paper may be referred to in that way.
Peer to peer (P2P) - the connection between two or more computers, held without any third-party interference.
Private key - password which locks your private wallet; keep it safe for all costs!
Proof of stake (PoS) - it's an alternative consensus mechanism to the proof of work, a way of distributing rewards among mining participants. In PoS, the next block owner is chosen from the people who already hold a significant amount of coins - so-called stakeholders.
Proof of work (PoW) - it's the common consensus mechanism in the cryptocurrency world, used by Bitcoin for example. In PoW, the verification process of new transaction requires providing a computer processing power to resolve some mathematical tasks. Such acquired piece of data is hard to obtain but easy to check.
Satoshi Nakamoto - the person (of a team of people) who created Bitcoin. We still don't know his/her identity.
Token - in cryptocurrency world, this is a digital unit designed for being used in a larger-scale system.
Wallet - it's a "place" where cryptocurrency assets are held. Such software has its public key, and it's accessible with a private key known only for its owner.
White paper - it's the complex description of cryptocurrency, which contains its idea, information about how it works, and goals which it aims to achieve. The white paper's purpose is to encourage investors to spend their funds on the project.