TERMS TO UNDERSTAND IN THE BLOCKCHAIN SPACE
In the blockchain space, some words are always used in communication. Getting familiar with these words is the basis of understanding other news in the blockchain and crypto space.
We have compiled a list of words you should know and defined them in simpler terms for your understanding:
Altcoin: Altcoin is the term used to classify alternative crypto coins or cryptocurrencies to Bitcoin. Such coins include Dash, Litecoin, Ethereum, etc.
Application Programming Interface (API): An API is a software intermediary that allows data to be shared between two applications. Two different internet applications contain unique data and for these applications to share data that each of their users needs, an API is used and thereby allowing them to share data on both sides.
Bitcoin: Bitcoin is the first cryptocurrency that was built on blockchain technology. It was invented and launched in 2009 by an anonymous developer referred to as Satoshi Nakomoto. Bitcoin is the highest valued coin in the cryptocurrency market as of March 2021 it was valued at over $60,000.
Cryptocurrency: Cryptocurrency is a digital currency that is encrypted with cryptography and is built on blockchain technology, a decentralized ledger technology, that makes the currency impossible to counterfeit and double spend. The transactions performed with the currency are made visible to everyone on the crypto network.
Cryptography: It is a method of storing and transmitting data in a particular form so that only those for whom it is intended can read and process it. It is the type of data encryption that is used for cryptocurrencies such that information is only accessible by the intended recipients of the data. Cryptography not only protects data from theft or alteration but can also be used for user authentication.
Cold Wallet: A cold wallet is a type of wallet storage that is not connected to the internet which makes it less prone to hacks and system malfunctions. It is mostly regarded as the safest storage for cryptocurrencies. It can also be referred to as hardware or offline wallet.
Digital Wallet: A digital wallet is a form of payment service that allows users to make payments online without the use of physical cash or plastic credit cards. It is a form of storage for cryptocurrencies as it is a digital currency.
Digital Mining: DIgital mining is the process of creating new coins (cryptocurrency) by solving cryptographic and computational equations through the use of computers. Mining enables transaction validation on the coin’s network. Miners work to solve the complex cryptographic equations to validate transactions on the chain.
Distributed Ledger Technology: Distributed ledger technology is a decentralized peer-to-peer digital system for recording transactions between parties in multiple places at the same time. DLT deploys cryptography and consensus mechanisms to allow participants to share an immutable replica of the same ledger. Blockchain is a type of DLT.
Decentralized Finance: Decentralized Finance is a blockchain-based form of finance that does not rely on intermediaries to make traditional financing instruments available. It utilizes smart contracts in blockchain to make forms of financial instruments available to people in the network.
Encryption: Encryption is a method of securing data by scrambling the bits of a computer's files so that they become illegible. Blockchain uses data encryption because it is a decentralized network where data is accessible to all on the network but in order for some important information to be discrete on the network, encryption is used.
Encryption is the most effective way to achieve data security. Cryptography is a form of encryption used in blockchain.
Ethereum: Ethereum is a blockchain-based, decentralized, open-source software that powers its cryptocurrency, ether. It also enables smart contracts and distributed applications to be built and run on the platform. Most Defi tokens are built on this blockchain.
Fork: Fork is an occurrence in a blockchain, where the main chain of a cryptocurrency is duplicated with a change referred to as a ‘change in the protocol’. The blockchain spreads over two paths. This can happen because of the transaction history or a new rule that decides on the acceptance or validation of the transaction.
Hash: A hash is a code that proves a transaction between two nodes on a blockchain network. In more technical terms it is a function that converts the inputs of letters and numbers to an encrypted output of a fixed length. The hash is essential for any cryptocurrency chain management.
Initial Coin Offers: This is a type of funding using cryptocurrencies. It is an occasion where a coin or token is put out on an exchange for the users to buy and take part of. ICOs are a capital-raising or crowd-funding activity with cryptocurrencies. They are done to raise funding for particular projects or a cause.
Nodes: Nodes are simply the infrastructure of a blockchain. Every data that is stored on the blockchain is available to each node on the network. All nodes on a blockchain are connected to each other and they constantly exchange the latest blockchain data with each other so all nodes stay up to date. Without these nodes, the blocks are not made widely accessible on a chain.
Peer-2-Peer: This is the beauty and essence of blockchain technology. It is a decentralized technology that allows cryptocurrencies to be transferred all over the world from user to user without the role of intermediaries on the network. Blockchain technology eliminates intermediaries by providing a P2P system of transactions with cryptocurrencies.
Smart Contract: A smart contract is an agreement written into a computer program that is automated to execute on its own. The terms of the contract agreements are written in sets of codes such that when one party takes action (mostly online), the contract is executed automatically without physical meetings. The proof of the contract execution is recorded on its blockchain network.
Tokens: A token is a type of cryptocurrency that is made to represent an asset or utility and resides on its own blockchain. It is a unit of value that is issued by an organization and plays a role in a particular network.
written by Joy Abia