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Cryptocurrency Glossary
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Blockchain
A decentralized digital ledger that records transactions across many computers so that the records cannot be altered retroactively. Example: Bitcoin's blockchain.
Bitcoin
The first decentralized digital currency created by an unknown person or group of people under the name Satoshi Nakamoto in 2009. Example: Used for online transactions and regarded as 'digital gold'.
Ethereum
An open-source, blockchain-based platform known for its smart contract functionality. Example: Deploying decentralized applications (dApps).
Smart Contract
A self-executing contract with the terms of the agreement directly written into code. Example: An automated escrow system.
Altcoin
Any cryptocurrency other than Bitcoin. Example: Litecoin, Ripple, Dogecoin.
Satoshi Nakamoto
The pseudonymous person or group of persons who developed Bitcoin. Example: Wrote the Bitcoin white paper.
Initial Coin Offering (ICO)
A type of funding using cryptocurrencies, often for startups, where tokens are sold to investors. Example: Ethereum's ICO in 2014.
Token
A unit of value that an organization creates to govern its business model and empower users to interact with its products. Example: BAT (Basic Attention Token).
Cryptocurrency Wallet
A software program or hardware device that stores private and public keys for cryptocurrency transactions. Example: Ledger Nano S.
Mining
The process of validating and recording the transactions of a cryptocurrency's blockchain. Example: Bitcoin mining through Proof of Work.
Proof of Work (PoW)
A consensus mechanism that requires a participant to do a certain amount of computational work to prevent spam or manipulation. Example: Bitcoin's mining process.
Proof of Stake (PoS)
An alternative consensus algorithm to Proof of Work, where blocks are validated based on the validator's stake in the cryptocurrency. Example: Ethereum's planned transition to PoS.
Decentralized Exchange (DEX)
An exchange that operates in a decentralized manner, without a central authority. Example: Uniswap.
Stablecoin
A type of cryptocurrency that is pegged to a stable asset, like gold or fiat currency, to reduce volatility. Example: USDT tethered to the US Dollar.
Fiat Currency
Currency that a government has declared to be legal tender, without any physical commodity backing. Example: US Dollar, Euro, Japanese Yen.
Private Key
A secret alphanumeric code that enables cryptocurrency transactions and access to the owner's funds. Example: Security feature in a crypto wallet.
Public Key
An alphanumeric code that corresponds to a private key and is used to receive cryptocurrency. Example: Shared like an account number.
White Paper
A document that outlines the purpose, technology, and mechanism of a cryptocurrency project. Example: Bitcoin white paper.
Cold Storage
The offline storage of cryptocurrencies to protect from unauthorized access, cyber hacks, and other vulnerabilities. Example: Paper wallet.
Hot Wallet
A cryptocurrency wallet that is connected to the internet, providing convenience but potentially lower security. Example: Mobile crypto wallet.
Decentralized Application (dApp)
An application that operates on a decentralized network, preventing a single point of failure. Example: A lending platform on Ethereum.
Hard Fork
A permanent divergence in the blockchain, which occurs when non-upgraded nodes can't validate blocks created by upgraded nodes that follow newer consensus rules. Example: Bitcoin Cash forked from Bitcoin.
Soft Fork
A backward-compatible upgrade to a blockchain. Non-upgraded nodes can still validate transactions but do not use the new rules. Example: SegWit update on Bitcoin.
Consensus Algorithm
A process in blockchain technology that is used to achieve agreement on a single data value among distributed processes or systems. Example: PoW and PoS.
51% Attack
An attack on a blockchain where a single entity or group controls more than 50% of the network's mining power and can disrupt the network. Example: Double-spending coins.
KYC (Know Your Customer)
The process of a business verifying the identity of its clients, often used in the context of financial services to prevent money laundering. Example: Exchanges requiring ID verification.
AML (Anti-Money Laundering)
Laws, regulations, and procedures intended to prevent criminals from disguising illegally obtained funds as legitimate income. Example: Monitoring suspicious transactions.
FOMO (Fear of Missing Out)
The anxiety that an exciting or interesting event may currently be happening elsewhere, often aroused by posts seen on social media. Example: Buying cryptocurrency during a price surge due to fear of missing profits.
FUD (Fear, Uncertainty, Doubt)
A strategy to influence perception by disseminating negative and dubious or false information. Example: Spreading rumors about a cryptocurrency to cause a sell-off.
Hash Rate
The measuring unit of the processing power of a cryptocurrency network. Example: Bitcoin network's hash rate represents the number of times a hash function can be computed per second.
Multi-Signature (Multi-Sig)
A digital signature scheme which allows a group of users to sign a single document. Example: Requiring multiple approvals to execute a larger cryptocurrency transaction.
Gas (Ethereum)
A measure of the computational effort required to execute operations on the Ethereum network. Example: Users pay gas fees for transactions and smart contracts.
Hash
The output of a hash function which turns an input (or 'message') into a fixed-length string of bytes. Example: A transaction's hash on the blockchain.
Cryptography
The practice and study of techniques for securing communication and data in the presence of adversaries. Example: Encrypting data in a blockchain transaction.
Node
A computer connected to a cryptocurrency network that uses a client to perform the functions of the network. Example: Full nodes store the entire blockchain.
Fork
When a blockchain's users adopt a new set of consensus rules that can either create a new branch off the main blockchain or result in an entirely new blockchain. Example: The creation of Ethereum Classic from Ethereum.
Cryptocurrency Exchange
A platform where cryptocurrencies can be traded with other digital currencies or traditional fiat currencies. Example: Coinbase, Binance.
Digital Signature
A mathematical scheme for verifying the authenticity of digital messages or documents. Example: Signing a cryptocurrency transaction to verify ownership.
Scalability
The capability of a cryptocurrency network to handle a growing amount of work or its potential to be enlarged in order to accommodate growth. Example: Layer 2 solutions like Bitcoin's Lightning Network.
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