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The cryptocurrency industry is here to stay and as such learning the most commonly used terms can be an advantage to you. As with every field, cryptocurrency has come up with unique jargon and specific terminologies tied to it. In this article, we explore some of the most common terminologies you will encounter as you come across any crypto information.
Commonly used terms
- Blockchain
Blockchain is the technology that generates a list, more like a general ledger, where a listing of all blocks mined are held. It is an inventory of all transactions stored by order of verification and time. These transactions are impossible to alter and cannot be worked backwards.
- Node
All computers that connect to the bitcoin network are referred to as Nodes. They support the network by way of validating and conveying transactions and also receive a copy of the complete blockchain. The nodes may execute the full instructions of the main network or may perform just part of the instructions.
- Mining
Mining is the process of creating cryptocurrencies by solving complex mathematical puzzles. To accomplish this, a substantial amount of power is required. Miners usually opt to pool their computing power together in order to hasten the process of solving the algorithm. The rule is that the first miner(s) to get the correct value gets the reward. This is one of the first bitcoin terms you will learn.
- Fork
A fork is a split from the main blockchain. This happens when there is an agreement amongst the developers to change either the algorithm or other software and especially when there has been an attack or a virus in the program. A fork can be either hard or soft.
- A hard fork is whereby the change is permanent and all previous nodes running the older version are no longer accepted unless they upgrade to the newer version.
- A soft fork is when the older version is still compatible with the newer version.
- PoW
This is an abbreviation for Proof of Work. It is a concept used to prevent miners dealing fraudulently or monopolizing the network. A rule was therefore set that in order for one to become a miner, they have to find hash which involves solving a mathematical problem whose answer connects you to the previous block. This is the Proof of Work. It is power-consuming and thus limiting in the number of attempts.
- Wallet
A wallet is a digital transaction ledger that operates using an address, a private and a public key to facilitate in the storage, receiving and sending of cryptocurrency. There are two main options to choose from: hardware wallets and software wallets. Hardware wallets are offline wallets and more secure while software wallets are online and a bit susceptible to hacking due to public exposure on the internet.
- Altcoin
Any digital coin that is not bitcoin is altcoin. The full word is alternative coin. There are over 1,000 altcoins in the market currently. Altcoins with high market capitalizations are referred to as ‘major alts’ like Ethereum, Litecoin and Ripple while those with low market caps are ‘minor alts.
- FOMO
This is an Acronym for Fear Of Missing Out. It is an impulsive subjective purchase of coins without making a full analysis of it. It is a strong fear driven by greed that grips investors when they observe a coin peaking rapidly and they do not already own it. This may lead to purchasing the coin at a high price only to have it collapse immediately leading to massive losses.
- Hash
A hash is created when a miner solves a block algorithm. It is a sort of authority to start on a new block. Mining power is expressed in hashes per second. For example, 1MH/s refers to a mining rate of one million hashes per second.
- Fiat
Fiat money is physical money as we know it. It is legal tender and centrally regulated by individual governments through their finance system. The legal tender could also be electronic as in the case of credit cards. Currencies like dollars, Euros and Rupees are Fiat money. Their supply is decided upon by the government.
- ICO
This is short for Initial Coin Offering. It is crowd sourcing of funds through a custom website or an existing blockchain for the purposes of developing new cryptocurrency tokens. Because several people are involved along the ICO chain namely the miners, node operators and investors, they are offered attractive incentives to compensate their roles in making the ICO a success.
- Exchange
Digital exchanges are trading platforms where cryptocurrencies can be traded. Buyers and sellers trade using the prevailing market rates on a given day just like an ordinary stock exchange platform would operate. Also cryptocurrencies held can be exchanged with other cryptocurrencies or even fiat money (as in the case of U.S based Kraken Exchange), just like a forex would.
- HODL
It would seem like a misspelling of HOLD especially owing to the fact it almost resembles the English term. It was coined by one Game Kyuubi who was commenting on a BitcoinTalk forum as he was enjoying his whisky. It simply means Hold On to Dear Life. The concept behind HODL is to hold on to your coins despite the apparent marked increase in prices until some stability is established.
- Market Cap
Market Capitalization is the value vested on a coin based on the amount of conventional currency invested into it. It is worth noting that the price of a coin can be higher but less valuable than another lower priced coin. This is why Market Cap is the better gauge to determine a coin’s value. It is calculated by multiplying the total supply of circulating currency with the current price per coin.
- Peer to Peer
Peer to Peer denotes the element of decentralization and also the doing away with a middle man in order to carry out a transaction. All peers in the system are stakeholders and have access to all transactions carried out within the network. For a transaction to be valid, all peers must have consensus which is ensured by the blockchain.
With the above list we shall not be lost while going through any cryptocurrency journal as we have the basic vernacular that seems to be another version of the English language. With the popularity and embracing of the industry the world over, the language is apt to expansion and we shall continue to learn along the way.
Not a big fan of cryptocurrencies and unless something changes they will be unsustainable in the long-term costing more and more in the terms of energy to create. In fact, the act of new data mining farms is being banned in some US cities.