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Glossary of Cryptocurrency Terms & Definitions

In the world of cryptocurrencies, there is a large plethora of terminology that is used on a daily basis. The whole subject of crypto financing is still considered new to the world and advances in the technology are being developed at a blistering speed. Therefore, I have made a glossary of the most common cryptocurrency terms which you might find useful when you are learning the ropes of coin staking.

A

  • ALGORITHM – The way that every action is carried out and under what rules the network works can be called an algorithm

B

  • BLOCK – The blockchain is made of many blocks of information connected together sequentially. Blocks contain the information for transactions.
  • BLOCK REWARD – This is the reward that is given out to participants when a block is created (found) or confirmed
  • BLOCK SIZE – This refers to the size of the block in digital units like Kilo Bytes (KB).
  • BLOCK TIME – This is the time it takes for a new block to be found or created. Most block times are a rough estimate.
  • BLOCKCHAIN – This is a revolutionary technology for storing transactional information without it being prone to change. It is distributed in a public ledger through the whole network.

C

  • CENTRALIZATION – When you say that something is centralized, it means that a small group or a singular person controls it.
  • COIN – The coin is a cryptocurrency that has its own blockchain network.
  • COIN AGE – This refers to the time the coins have spent in a wallet without being moved.
  • COLD STAKING – The ability to stake without keeping your wallet constantly online.
  • CONSENSUS ALGORITHM – the rules and method by which the network operates and reaches a consensus (mutual agreement).

D

  • DAPP – Decentralized Application. An application that is built and operates in the blockchain.
  • DECENTRALIZATION – You can call something decentralized when there is no singular governance over it.

E

  • ENCRYPTION – it is used when talking about wallets. Encrypting wallets means securing them with a passphrase that you need to enter every time you open the wallet.
  • EXCHANGE – This is an online website that acts as a platform for trading cryptocurrencies.

F

  • FIAT CURRENCY (MONEY) – Traditional, real life money (USD, Euro etc)
  • FORGING/MINTING – In Proof of Stake consensus driven networks, coins are not mined, but forged or minted depending on how the rules are set.
  • FORK – this term refers to the blockchain splitting or undergoing severe changes. There are 2 types of forking – hard and soft fork.
  • FREE-FLOATING COINS – Crypto coins that are in the network but not used for anything.

H

  • HARD FORK – This refers to when a blockchain suffers drastic changes. From most Hard Forks, new cryptocurrencies emerge from the original chain. Example Ethereum hard forked from the original chain that is called now Ethereum Classic.
  • HALVING – the process of regular lowering of rewards given out to participants. The value can vary.
  • HOLDING/S (COINS) – This refers to the coins you have in your possession.

I

  • INITIAL COIN OFFERING (ICO) – When a new project starts, the way it can incentivize investors to fund it is by ICO. In return the investors receive tokens or a stake in the network, which will be turned to the future crypto coin when the project is complete.

M

  • MASTERNODE – These are the most important nodes in the network. They are servers that validate transactions and bring different additional services to the network. Masternodes receive regular rewards for their service.
  • MATURITY PERIOD – it is the time period the coins need to spend in the wallet and the network without movement, before they are allowed to be staked.
  • MINEABLE – This is a quality of a crypto coin. Being mineable means that a user can obtain it by using hardware which mines it.
  • MINING – the process of extracting cryptocurrency from a digital source. These crypto coins are given out as a reward for completing a difficult mathematical problem in order to confirm transactions.
  • MINING/STAKING POOLS – a group of miners or stakers that combine their resources to operate as a single entity.

N

  • NETWORK WEIGHT – This is a combination of your coins, their age and their maturity within the network, thus envisioned as weight.
  • NODE – This is a device on the network carrying out a variety of tasks.

O

  • OFF-CHAIN – this means that any event that may be explained with “off-chain” is happening outside of the blockchain and its rules.
  • ON-CHAIN – this means that the event explained with “on-chain” happens within the rules of the blockchain and inside it.
  • OPEN SOURCE – Something that is widely open to the public for use and usually used as a software characteristic.
  • OPEN WALLET – A wallet that is not locked out and is active. For example, staking and masternodes require you to have an open wallet almost full time.

P

  • PRE-MINE – For a cryptocurrency to be pre-mined, it means that all of the coins or a portion of them, were mined beforehand by the developers.
  • PROOF OF STAKE (POS) – A consensus method by which transactions are confirmed on the blockchain, but instead of using expensive hardware, users use their coin holdings to validate information. They are chosen in a random manner to be validators. The more coins you have, the better your chances are. This method is not resource intensive.
  • PROOF OF WORK (POW) – This is a consensus method by which transactions are confirmed on the blockchain. Users with hardware “mine” the network for a solution to a mathematical problem in order to validate information and get rewarded with crypto coins. This is a resource intensive method.
  • Pros – Advantages, benefits.

R

  • RASPBERRY PI – This is a special device that is roughly the same size as a large smartphone. It is like a pocket computer that uses much less resources than a PC and it can be used for staking.
  • RETURN OF INVESTMENT (ROI) – Return of Investment is used as a term for the expected benefit or profit you can expect from a certain investment. If the ROI is 20%, this means that you can expect a profit of 20% per year of whatever you invest.

S

  • SEGWIT – Also known as Segregated Witness, this is a protocol that is implemented into blockchains. It separates the signatures of people doing transactions, from the transactional info itself. This way, more transactions can fit in a block, making the network scale better.
  • SMART CONTRACTS – They are rules that can be applied to a transaction. For example, you can apply a rule that you would like to sell your crypto coins when their price rises to a certain level. Only when the price jumps by 20% will the contract be activated.
  • SOFT FORK – A soft fork dictates updates to the network that don’t change the blockchain but rather functions within the network.
  • STAKEABLE – A coin that is stakeable means that the coin can be used in participation in the PoS consensus mechanism. The coin can be put in a wallet that has the staking function in it and earn you a passive profit.
  • STAKER (STAKEHOLDER) – A user that is currently staking coins.
  • STAKING – The process of putting coins in a wallet then using them in the PoS mechanism for confirming transactions and earning a passive reward.

T

  • TOKEN – A cryptocurrency that does not have its own blockchain and resides in a different blockchain.
  • TOKENIZE (TOKENIZING) – Turning assets in the real world into tokens and using them for trading within the crypto world.
  • TOTAL WEIGHT – This is a combination of all coins, their age and their maturity within the network, thus envisioned as total weight.
  • TRUSTLESS ENVIRONMENT – For an environment to be trustless means that you do not have to trust anyone for things to be done how they should be done. For example, the blockchain is a trustless environment, because it has hard-coded rules that cannot be changed or turned off and are the same for everyone. This also can be said for transactions – when there is no middle man, it is only you, the receiver and the blockchain. There is no need for trust.

V

  • VALIDATOR – The entity in charge of validating transactions and deciding if it’s true or not.

W

  • WALLET – A software program that stores two keys – private and public keys. The private key is used to access your funds on the blockchain, while the public key is used for receiving funds.
  • WALLET SEED (SEED PHRASE) – The wallet seed is a single piece of code or information from which the whole wallet and keys for your funds can be created from.