20 Cryptocurrency Definitions That You Need to Know – InsideBitcoins



Whether you’re delving in cryptocurrency and blockchain for the first time, or are a vetted crypto community member with an extensive background in the field, there is typically always a new term, phrase, or concept that is being presented that is most likely important to know about.
Cryptocurrency and blockchain terminology is definitely difficult at first, no matter what your level of previous technological experience and understanding is. Here are some of the most important and valuable terms and definitions you need to know if you’re looking to associate yourself in the cryptocurrency and blockchain community.

Peer to Peer (P2P): The entire basis of Bitcoin and the edge that it offered in its first appearance in the media was that the entire currency ran off of a peer to peer structure; what does that mean exactly, though? Peer to peer (Often labeled as P2P), specifically in the term of networking and computer science, refers to the idea of one server or computer serving as a “peer” for the connectivity of other “peers” in either a certain ecosystem, network, and so on. Bitcoin functions off of a peer to peer infrastructure in that the network continues to be proven as validated and verified because of all of the peers that interact with the network. In a P2P setting, there is no reliance on a central system, so if one system goes down, there can be a plethora of different systems to then connect to and rely on for connectivity. As is the case with Bitcoin, if one peer goes online, there are a multitude of other peers to connect to.

Smart Contracts: The concept of virtual agreements that are made amongst parties anywhere in the world and can be executed, stopped, and subsequently irreversible was first proposed in the early 1990s by a computer scientist named Nick Szabo. While they were first proposed by Szabo, they were brought to the mainstream and enterprise light in 2013 when the founder of Ethereum, Vitalik Buterin, launched the Ethereum Virtual Machine (EVM) which enabled for creation and compilation of smart contracts from anywhere in the world. Smart contracts are very similar to escrow accounts in the present day financial system; they are agreements that hold funds and do not release funds until a set criterion is achieved and consensus has validated this criterion is true. However, in the case of smart contracts, this can be any number of criterion; it doesn’t just have to be fund transfer, it can be user input, interaction, and so on. Smart contracts are one of the most important concepts in blockchain and cryptocurrency.

Decentralized Applications (DApps): Everyday applications run off of centralized systems; this has pros and cons, however, the idea of decentralized applications was proposed with the mainstream entrance of blockchain in that applications could connect to decentralized infrastructures such as Ethereum. Decentralized applications work by connecting front-end user input (Or applications) to back-end infrastructure that functions decentrally. This is traditionally done through smart contracts. The front end of an application, such as where you log on and play an online game, is then connected to a back-end instance of a smart contract where users can immediately interact with the blockchain. DApps offer blockchain interaction in a user-friendly way.

Solidity: Solidity is currently the most used programming language to create smart contracts and decentralized applications at the moment. The programming language was created by Ethereum, however, has been adopted and is functional with a variety of different blockchains that also integrate equivalent smart contracts. You can subsequently code smart contracts that function on Ethereum-ran assets or single-handedly code smart contracts to function on individual blockchains apart from Ethereum, such as Tron. Solidity was designed in accordance to be similar to a JavaScript-like language for DApps because of its friendly user applicability.

Mining Incentive: Blockchains run off of a framework that rewards users that allocate their own computational power to the solving and facilitation of the network. For example, by allocating computer power and mining on the Bitcoin blockchain, you are given a reward which is equivalent to a portion of Bitcoin. This is considered to be mining incentive due to the fact that it is incentivizing users to mine on the inclusive network. Mining incentives are programmed differently depending on certain blockchains, and in the case of pre-mined blockchains, there is no mining incentive at all. Incentives give these aforementioned miners a reason to spend money on electricity and keep their systems running to essentially keep the network running.

Consensus: Many blockchains function off of mechanisms that work to reach a general consensus in the network. However, without proper explanation, this can be very unnecessarily complex. First, we’ll break down the simple fact that a blockchain is a network composed of many users. These users work together to validate that each transaction that is placed on the blockchain is valid, that it makes sense, and that it is legitimate and not fraudulent. The users do this in a variety of ways (Dependent on the type of blockchain), however, once they can finally agree on the core idea that a transaction or any process completed on the blockchain is valid, considered to be real and non-fraudulent, then the network has then been considered to have reached a consensus. This applies for non-valid transactions as well; consensus is essentially the process of reaching a decision for a process on the network. Different blockchains and different technologies have different methods for reaching this consensus, and that’s where the main arguments for different blockchains come into play.

Paper Wallets: Paper wallets are commonly misunderstood in cryptocurrency. Traditionally, wallets in cryptocurrency are simply any type of technology that can enable the sending, receiving, and storage of a specified cryptocurrency. This is traditionally true, however, with Paper Wallets, there is a distinct quality they possess that differentiates them from other wallets: their most sensitive information is stored on a separate piece of paper. This is traditionally done through a unique string of words that if entered in the specified order will open all information about the wallet at hand.

Distributed Ledger Technology (DLT): The term “DLT” is used very often in the world of blockchain and cryptocurrency to describe a form of technology (This can be an application, a trading exchange, or even a blockchain) that runs some protocol in a distributed manner. Distributed ledger technology is simply a form of tech that utilizes the concept of replicating a record of historical data to other “peers” (As we discussed before) in a method of reaching global consensus amongst one another by simultaneously reviewing the previous data, and deciding for or against approval of validation. Most blockchains employ some level of distributed ledger technology.

SAFT (Simple Agreement for Tokens): The SAFT was a form of fundraising sought out by a variety of different blockchain and cryptocurrency companies that replicated the “SAFE” (Simple Agreement for Equity) used in the private equity markets. The agreement is secured through a contract where a party agrees to invest a certain amount in a company that is issuing tokens (Or their own cryptocurrency), in exchange for a portion of the tokens they are issuing at a later date. The product of a SAFT sort of demeans the idea for decentralization and has come under minor scrutiny because of this, however, it was a staple form of financial product in Telegram’s private ICO raise.

Airdrops: Many different blockchain and cryptocurrency projects have completed what is called an “airdrop”; this is simply being allocated another asset in exchange for holding one asset. For example, if you held Tron (TRX) in early February 2019, you were airdropped BitTorrent tokens (BTT), meaning you were simply given BTT for free for simply holding TRX. Airdrops are incentives for holding certain cryptocurrencies and are traditionally associated with marketing promotions. In order to receive airdrops, you need to be holding a base asset in a wallet that supports multi-types of assets.

HODL: If you’re familiar with cryptocurrency, you’ve most likely heard the term “hodl”. The term was first recorded being used over 7 years ago on a Bitcointalk forum where the user was commentating on the price dips of Bitcoin and misspelled “hold Bitcoin” to “hodl Bitcoin“. Since then, the term was adopted across the entire community and became one of the largest cryptocurrency related memes; the acronym of “Hold on for dear life” was even dubbed for HODL. The term is now used jokingly whenever prices of a certain cryptocurrency are declining, people remind one another to “hodl”, or not to sell, and live out the price decline.

51% Attack: As we previously stated, many decentralized or distributed networks tend to rely on a peer to peer network that relies on overall consensus for validating certain processes that occur. The idea is that because there is such a large plethora of users utilizing computing power to keep the network powered and equilibrium, no singular entity or person would ever control more than 50% of the network (If a single entity ever had more than 51% control over a network, they would havthe e power to dictate all of the decisions and direct all processes in the network). However, if a single entity or coordinated attack to hijack over 50% of the computing power that runs a network is ever obtained, then that entity would be able to basically run the entire network and do whatever they want; that means basically print money to their own accounts. Most blockchains are highly secure and immune to these attacks because of the vast decentralization that is incurred, however, some blockchains have succumbed to 51% attacks and lost millions of dollars as a result.

Moon: The cryptocurrency dubbed “moon” or the verb “mooning” as the process of a certain cryptocurrency increasing in value relative to amounts that were almost unbelievable. The analogy is that price has increased so high that the price is “on the moon”. If you hear someone say “Bitcoin is mooning”, it’s a joke to say that Bitcoin price is making huge gains.

Node: In almost all instances of blockchain or cryptocurrency-related networks/processes, there must be what is referred to as “nodes” that connect to the network and assist in facilitating its overall functionality. Nodes are pretty much any type of computer or form of hardware/technology that connects to a certain network. For example, when you are “running a Bitcoin node”, you download the entire Bitcoin transaction history and network data and assist in the facilitation of transaction validation/verification. Nodes are required to keep the majority of these technologies online but are also required to maintain decentralization. For example, if the Bitcoin network did not possess any nodes at all, it would essentially be unable to function.

Security Token Offering (STO): STOs are a play on words for ICOs, which stand for initial coin offerings; STOs are equivalent, standing for security token offering, except in the fact that they seek validation and recognization as being a security under a respective jurisdiction’s legislation. The process for contributions is essentially equivalent to ICOs in that the crowdfunding/fundraising method is done on a smart contract and enforced through immutability on the blockchain. STOs, rather than ICOs, are accepting of a certain countries securities laws and is willing to classify itself as a security in its “offering” which is conducted on the blockchain.

Whales: In cryptocurrency and blockchain-based markets, there is no escaping institutional or larger scaled size investors or traders. These are subsequently named “whales” because of their large and bulky appearance in an ocean (In this case, the ocean is simply equivalent to the markets). Whales are considered to be such if they have sizable capital investments and power in the markets and have an ability to move markets a certain way strictly based on their stance. Any investor or trader that moves through the markets with comparatively large capital is considered to be a “whale”.

Dark Pools: In the cryptocurrency markets there are many times investments or trades to be made that cannot be completed on the public markets simply because of their institutional and size. As a result, institutions, funds, banks, and even companies who have conducted ICOs and have large cryptocurrency capital on reserve complete their processes through dark pools, or off-market private exchanges/investment vehicles tailored specifically for trade/investment size of their magnitude.

Algorithmic Trading: Trading the cryptocurrencies markets is possible in a multitude of ways, however, because of its programmatic and almost entirely end-to-end technological nature, the possibility for “algorithmic trading” has opened, which is essentially automatic market trading completed by robots. Programmers traditionally engage in algorithmic trading within the cryptocurrency markets by programming a robot that links an exchanges “API” (Application Programming Interface) and then allows trades through their own coded robot.

Volume Incentive: Many cryptocurrency and blockchain exchanges run on foundations which are called “volume incentives”, which essentially rewards users that generate their exchange more volume. Exchanges have what are called “tiers” representative of amounts of volume you’ve given to the exchange. Each tier you pass, the less your trading fees become.

Wash Trading: Wash trading is the unethical act of creating fake and empty orders on a certain exchange in order to simulate volume on the platform. As a result, this is done to attract more real users to the platform who will then believe the asset is generating significant real volume. This has been considered to be illegal in traditional markets, and now recently illegal in cryptocurrency markets.

Credit: Market Business News



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