Blockchain, Mining, Satoshi: 15 Cryptocurrency Terms You Need to Know
01/08/2018 | 02:34pm CEST
Surely you’ve heard the buzz. It seems as if cryptocurrencies currently are in the news on a daily basis. A lot has been written, but despite the abundance of articles, Tweets and what not, it can be hard to fully understand the ‘crypto terminology’. Especially if you’re just getting into it.
Thats why we thought it could be useful to give you an overview: here are 15 cryptocurrency terms you need to know.
An altcoin whats in a name describes any alternative coin/cryptocurrency to Bitcoin. The number of altcoins keeps growing and at the moment there are more than 1300 different cryptocurrencies.
If youre familiar with the regular financial jargon, you may already know what the term bagholder means. In the world of cryptocurrencies, a bagholder is someone who holds an altcoin for too long; for instance, because its value is going down without any real prospect of it recovering, or because theres been a so-called pump and dump crash (well explain this term below).
The blockchain is mostly known as the underlying technology for Bitcoin. And although thats indeed how it started out, nowadays many companies and industries are experimenting with blockchain technology for all sorts of purposes.
Watch this short video to get an idea of how the blockchain works:
Coinbase is a coin exchange, a digital currency exchange based in San Francisco. Its one of the popular websites for people to buy and sell digital currencies.
To put it simply, Ethereum is an open software platform based on blockchain technology (like Bitcoin) that enables developers to build and deploy decentralized applications. The cryptocurrency used to pay for fees and services on the Ethereum network is called Ether.
Fiat money refers to government-backed- and issued currency like the US dollar.
7. ICO (Initial Coin Offering)
Think of an IPO (Initial Public Offering) but for cryptocurrencies. The idea is to buy digital coins from a new blockchain before they become tradable on the coin exchanges (and ideally to sell them with profit afterwards of course).
Mining is the process of two things: 1) computers verifying and adding transactions to a public ledger the blockchain and 2) releasing new digital coins. Mining requires a considerable amount of computational power and the more computational power you have, the bigger your chances of getting a return.
Miners are those who run the computers. Its their job to update every time a new transaction takes place and ensure the authenticity of information in order to make sure that each transaction is secure, processed properly and safety. In return for their services, miners receive physically minted cryptocurrency.
9. Public Key & Private Key
Whenever someone makes his or her first cryptocurrency transaction, a unique pair of a public and a private key is generated. Each key is a cryptographic code meant to ensure the safety of the digital ecosystem.
Think of the private key known only to the user as the users digital ID. Without going into the technical details, the private key generates the public key, which in turn generates the users public address, which is like a bank account number.
Heres a simplified version of what happens when a user wants to send digital coins to someone else: The transaction is signed digitally, using the private key. Then the users public is used to prove that the digital signature came from his or her private key. Once the transaction is verified and turns out to be valid, the funds are sent to the recipients public address.
10. Pump and Dump
Its not hard to imagine what this means. Pumping and dumping is about a cryptocurrency getting a lot of attention inevitably pushing up its price quickly followed by a big crash.
As you may have noticed, the Ripple price broke record after record last week. Just like for example Bitcoin, Ripple uses blockchain technology but unlike Bitcoin, its supply is largely controlled by one company, San Francisco based Ripple.
Another difference between Ripple and other cryptocurrency platforms is that the former is actually used by financial institutions (Bank of America, Santander, and UBS for instance).
A Satoshi named after Satoshi Nakamoto, the anonymous person or group of people who first created Bitcoin is the smallest unit of Bitcoin (BTC). It represents one-hundredth millionth of a Bitcoin or 0.00000001 Bitcoin.
In case you were wondering: 1 BTC equals a 1000 milibitcoins (mBTC), 1000,000 microbitcoins (μBTC) and 100,000,000 satoshis.
Tokens are a type of cryptocurrency that doesnt have its own separate blockchain. Instead, tokens operate on top of an existing blockchain that facilitates the creation of decentralized applications.
This one should be pretty straightforward. Just like we keep our physical coins and bills in a wallet (most of us anyway) people who have cryptocurrencies keep them in a wallet too.
There are two types of crypto wallets: a software wallet and a hardware wallet. The former stores cryptocurrency as software files on a computer you can generate this kind of wallet for free from various sources whereas the latter is an actual device that securely stores cryptocurrency.
A whale is a big fish in terms of cryptocurrency wealth. Its someone who owns a very large quantity of a certain crypto coin. As such, they can have a big impact on its price.
These 15 cryptocurrency terms are by no means exhaustive, but they should certainly get you started next time you read a crypto-related article.