Cryptocurrency Glossary

Author & Guarantor: Anton Yurchenko
16 min read

Crypto-Auditor.com is here to assist you in building the initials of your crypto knowledge! Scroll down slowly to learn the most basic terms!

A

Altcoin

is the abbreviation for ‘alternative coins’ and refers to all crypto assets that arose after Bitcoin. Bitcoin is considered the first cryptocurrency. All other alternatives or variants to Bitcoin are therefore Altcoins, e.g. Ethereum or Ripple, and can have various differences to Bitcoin.

B

Bitcoin

In the broadest sense, it is one of the first crypto assets to be used with the character of payment and can be exchanged for real currency (meaning “fiat currency”, “fiat money”) at appropriate acceptance points.

Blockchain

is a form of technology that can be used in many ways. It is a form of storing data that cannot be changed afterwards. This technology is also used, for example, for the creation of bitcoins, whereby a very high energy consumption is necessary in this area of ​​application.

C

Coin

is a crypto asset based on a new, proprietary blockchain, e.g. Bitcoin. All other alternatives to Bitcoin are called ‘Altcoins’, e.g. Ethereum.

Crypto Asset

represents the umbrella term for blockchain-based investment opportunities, such as tokens. The term ‘cryptocurrency’ was used in the past. Only the term “virtual currency” is legally defined.

Cryptocurrencies

is the original name of crypto assets. Since it is not a legally recognized means of payment (currency), the term ‘crypto asset’ is currently used to delimit it. Only the term “virtual currency” is legally defined.

D

Dapps 

stands for ‘decentralized applications’. Dapps is about that: decentralized applications that can be processed based on a blockchain. This can be crypto money, smart contracts or any other services and rights that can be exchanged via a decentralized network. Basically, everything where one party acquires something from another or there is a transfer of rights or the like (e.g. rights of use) can be processed in this way. Many see this as the comprehensive future potential of blockchain technology.

Distributed Ledger Technology (DLT)

is a special form of data processing and storage. A distributed ledger is a decentralized database that allows network participants to read and write together. As part of the consensus mechanism, new data records can be added by any user (permissionless) or only by specific users (persmissioned). They are checked by all nodes (users) and stored locally. One form of DLT is, for example, the blockchain.

E

Etherium 

is a distributed system within blockchain technology that enables smart contracts to be executed on a platform and is based on a public blockchain. Ethereum uses the crypto currency ether as a means of payment for computing power, which all participants in the distributed system make available.

Equihash

a variation of the Proof of Work that is based on GPU / RAM instead of CPU. It is considered leaner and more accessible. But in the long run it has the same problems that always arise with the Proof of Work.

F

Flippening, the

is the name given to the impending change of the throne between the cryptocurrencies Bitcoin and Ethereum. The value of a single Bitcoin is still far above that of an Ether. However, Ethereum was recently able to achieve a higher transaction volume than Bitcoin for the first time.

Fork

is roughly translated as a fork or branch of a blockchain. Since a blockchain is a huge chain of data records that build on one another, the integrity of which lies in the referencing of all previous data records, it can be imagined in the model as an ever-growing chain to which new links are constantly being added. To do this, the information in each chain link must be consistent with the previous information in the entire chain. But sometimes it can happen that two chain links are created almost at the same time. Normally this is not a big deal. The chain will only continue at one point and the other process will be ignored and orphaned.

H

Hard Fork

A hard fork is a fork in which a non-backward-compatible update is carried out on a blockchain. This is always the case if certain parameters within the algorithm change in such a way that the new calculations would not recognize the old results (i.e. the previous blockchain) if they were recalculated. The blockchain history remains. But new blocks are calculated with the changed algorithm, since the old one behind the hard fork will no longer work.

Hash 

A hash is the mathematical process in which a significantly shorter result is calculated from a variable number of data. This creates two special features. First, it is mathematically very difficult to understand what the original data set looked like, and second, changes to a single component would change the entire result.

Hash Rate

is something that only plays a role in the proof of work. As a cryptocurrency continues to grow, more and more miners with ever greater computing power are trying to solve the calculations and thus reap rewards, maintaining network stability is important. To do this, the speed at which new blocks are created must remain as constant as possible. In order to guarantee this in the face of ever larger hordes of ever more efficient miners, they are given a calculation task. This can be thought of as an encrypted password combination that has to be calculated using computing power (combination entries per second). This artificial hurdle or its difficulty is known as the hash rate. It serves as a buffer and is flexibly adapted to the computing power of the miners as a whole. As a result, the average block times remain constant and the network stability is maintained. The higher the hash rate, the more powerful the hardware must logically be, which should solve this calculation before everyone else.

I

Initial Coin Offering (ICO)

or ‘Initial Token Offering’ (ITO) is a form of corporate and project financing based on blockchain technology, for example. Sometimes referred to as a crowdsale. Since the beginning of 2019 there has also been the so-called Initial Exchange Offering (IEO), on which crypto trading platforms carry out or support the processing of the issue.

M

Market Capitalization

a term that is also used in the stock exchange business apart from crypto currencies. It expresses the total value of the tokens of a cryptocurrency available on the market (number of tokens times their respective value). The market capitalization provides an important indicator of how established and correspondingly present a cryptocurrency is on the market. However, it is only a purely quantitative factor—not a qualitative one! Large caps could also be a scam.

Miner

is the ‘node’ that operates the mining. This can also be a large number of “computers” under one node. The processes are saved on all nodes, so that manipulation is difficult or impossible. The blockchain technology enables the transaction or the direct transfer of the crypto assets without an intermediary such as a bank or a stockbroker being involved.

Mining

is the ‘creation’ of crypto assets (more precisely, it is the process of validating and executing transactions on a distributed ledger technology DLT) such as the blockchain.

Mining Pool

is a merger of several nodes that want to increase their computing power together in order to operate mining together and increase their chances of success. Realized profits are shared within the pool.

N

Nodes

are all members or users of the blockchain system.

P

Peer-to-Peer (P2P)

in a peer-to-peer network, all computers have equal rights and can use and provide services. The exchange between two network participants takes place directly without the interposition of third parties.

Private Key

is generated when each wallet is installed for the first time and is something like the master key. It grants access to the cryptocurrencies stored in the wallet and should always be kept safe (for example on paper or a USB drive). Because if you lose the private key to the wallet, you will not see your cryptocurrencies again.

Proof-of-stake and proof-of work

are possible types of algorithms that are used in blockchain technology.

S

Scamcoins

are fraudulent attempts to launch a crypto currency and make it popular through aggressive advertising and lofty promises. It is usually set up by the initiators of the fraud in such a way that they hold large shares themselves, so that their originally worthless coins suddenly increase in value as soon as enough people jump on this bandwagon into nowhere. Usually an ‘exit scam’ follows at some point, in which the fraudsters throw their shares on the market at a high profit, which until then probably only stop the rudimentary development of the crypto currency and disappear without a sound. A snowball system if you will. BitConnect is a particularly sad example of such an exit scam, in which numerous (admittedly) careless investors have lost a lot of money.

Scaling/Scalability

of a blockchain describes the fundamental technical challenge of how to keep a blockchain efficient with increasing use and size, without it becoming slower due to the constantly growing data sets and increasing traction in its service. For future mass adaptation of blockchain technologies, good scalability is an absolute must.

Smart Contracts

represent a kind of program code via blockchain technology, which automatically processes specified activities as soon as certain requirements are met.

Soft Fork

A soft fork is a fork in which a backwards-compatible update is carried out on a blockchain. Certain fine-tuning is made to the algorithm, but these are designed in such a way that they would also recognize old results from the blockchain if they were recalculated. This is crucial because—unlike a hard fork—nodes can still view new transactions as valid without the upgrade. Both the old and the new algorithm both work under the same conditions.

T

Tokens

are generated on an already existing blockchain. They can have different functions and can therefore also be categorized, namely into investment, asset or security tokens (financial instrument-like character); Payment, currency or exchange tokens (payment and safekeeping function); Utility token. Tokens that cannot be classified are referred to as mixed tokens or hybrid tokens.

V

Virtual currency

is legally defined as a digital representation of value that has not been issued or guaranteed by any central bank or public body and is not necessarily tied to a legally specified currency and which does not have the legal status of currency or money, but of natural or legal persons are accepted as a medium of exchange and which can be transferred, stored and traded electronically

W

Wallet

is the electronic wallet to which only the user himself has access with his private key. If this is lost, nobody can access the wallet. There are different wallet providers.

Whitepaper

the blockchain movement whitepaper was written by Satoshi Nakamoto and posted to the Cryptography mailing list in 2008. The white paper describes the entire Bitcoin protocol in detail and enables the technology.

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