2 Factor Authentication is a double layer security measure. Most crypto exchanges use it. In order to log in, you not only need to enter a password, but also a code that you receive from the Google authenticator for example.
A ‘51% attack’ refers to a possible attack on a blockchain by a group of ‘miners’, who hold more than 50% of the hashrate. In such a situation the ‘miners’ have the possibility to deliberately not confirm transactions or to issue transactions twice (double-spend).
A unique identifier serving as a virtual location where the cryptocurrency can be sent.
An airdrop is a way to distribute coins. End users can generally get coins for free or in exchange for a small task, such as subscribing to a newsletter, sending a tweet or inviting other people via a personal affiliate link.
Altcoin - Any cryptocurrency that is not Bitcoin. For example: ethereum, litecoin, XRP, are all altcoins.
AML is the abbreviation for ‘anti-money laundering’. AML stands for policy and legislation on money laundering. This prevents illegally acquired funds from being converted into a legal variant. Within the crypto world, it is no longer unusual for AML techniques to be used by exchanges and wallets. This term is often used as AML/KYC, where KYC stands for 'Know your customer'.
Short for All Time High. Refers to the highest price a cryptocurrency asset has ever had. For example, Bitcoin’s ATH is 20 089 USD according to the CoinMarketCap.
Atomic swap - A smart contract technology that allows to exchange one cryptocurrency for another without using centralized intermediaries. The technology is being used by the DEXes.
Bitcoin is a digital or virtual cryptocurrency created in 2009 that uses peer-to-peer technology to facilitate instant payments.
Short for Bitcoin Exchange-Traded Fund. A financial asset that is tied to Bitcoin price, allowing its holder to benefit from Bitcoin price fluctuations without having to store and trade Bitcoin itself.
Bitcoin halvening – also known as Bitcoin halving. A 50% reduction in rewards for Bitcoin miners. Happens approximately every four years or exactly once in 210 000 blocks. The next halvening will happen in 2024, when bitcoin block count reach 840,000. Bitcoin miners currently receive 6.25 BTC for each successfully mined block. After the next halvening in 2024, the block reward will be reduced to 3.125 BTC.
Block – a file containing the information about the most recent transactions which have not been recorded in the previous blocks. All the blocks mined are recorded in the blockchain.
A block explorer is an online service to track blockchain transactions. It usually is a website where you can see all the new blocks that are being created. You can also search for transactions and wallet addresses. The best-known block explorers are blockchain.info for Bitcoin and etherscan.io for Ethereum.
Block header – a unique alphanumeric string used to identify a particular block on an entire blockchain. It is necessary for miners to be able to carry out PoW. For example, 0100000095 00c43a25c6 24520b5100 adf82cb9f9 da72fd2447 a496bc600b 0000000000 006cd86237 0395dedf1d a2841ccda0 fc489e3039 de5f1ccdde f0e834991a 65600ea6c8 cb4db3936a 1ae3143991 is a block header.
Block time – an amount of time it takes blockchain to create a new block. For example, average Bitcoin block time is 10 minutes.
Blockchain is most simply defined as a decentralized, distributed ledger technology that records the provenance of a digital asset.
Bounties are simple tasks of jobs by the team behind a coin. These can be as simple as joining a Telegram channel or by (re)tweeting. It could also be a bit more difficult like a translation job for example. The participants receive rewards in the form of coins in exchange for completing these bounties.
Cryptocurrency exchange – a platform that allows its users to trade cryptocurrencies for other cryptocurrency or any other asset. Can be either centralized or decentralized. For example, Binance is a cryptocurrency exchange.
Cryptocurrency wallet – A medium of accessing and controlling user’s cryptocurrency. Contrary to a common misconception, cryptocurrency wallet does not store any cryptocurrency; it just grants user access to a certain amount of cryptocurrency associated with the wallet. A wallet stores user’s private keys. There are two types of cryptocurrency wallets: physical and virtual.
DAG – short for Directed Acyclic Graph. The alternative to blockchain where each next transaction is being confirmed by the previous transaction(s). Has better scalability than the blockchain. There are several DAG-based cryptocurrencies right now. For example, Nano is a DAG-based cryptocurrency.
DAO – short for Decentralized Autonomous Organization. It is an organization governed by the rules encoded as a computer program. DAO is transparent, controlled by shareholders and not influenced by a central government.
dApp – short for decentralized Application. They are applications that run on a P2P network of computers rather than a single computer. There are several blockchains that support dApps. For example, Ethereum is a blockchain that supports dApps.
DAO is an abbreviation of 'Decentralised Autonomous Organization'. This is basically an organisation that runs automatically on itself without any human interventions. The work is automatically excecuted through Smart contracts.
'Decentralized Finance' or 'DeFi' - generally refers to the digital assets and financial smart contracts, protocols, and decentralized applications (DApps) built on Ethereum blockchain.
With digital currency, there is a risk that the holder could make a copy of the digital token and send it to a merchant or another party while retaining the original.
Launched in 2015, Ethereum is the world's programmable blockchain. Like other blockchains, Ethereum has a native cryptocurrency called Ether (ETH). ETH is digital money. People all over the world use ETH to make payments, as a store of value, or as collateral. But unlike other blockchains, Ethereum can do much more.
Fiat currency – currency that a government has declared to be legal tender, but it is not backed by a physical commodity. For example, US Dollar is a fiat currency.
FOMO – short for Fear Of Missing Out. Describes the anxiety a trader feels when it seems he did not buy in before the increase in price or did not sell before the fall. If the increase/fall is still happening while the trader is experiencing FOMO, it can force him to make an irrational decision. For example, those who bought Bitcoin at 19 000+ USD during the late 2017 bull run were experiencing FOMO.
Fork – splitting the blockchain into two branches. There are two types of fork: Soft Fork – a change to the protocol where only previously valid blocks or transactions are made invalid. Since old nodes will recognize the new blocks as valid, a soft fork is backward-compatible. Requires a majority of the miners upgrading to enforce the new rules. Hard Fork – a radical change to the protocol that invalidates previously valid blocks or transactions. Sometimes, both the old and the new blockchain continue to coexist, separating into two different cryptocurrencies. Requires all the miners upgrading to enforce the new rules. For example, Bitcoin Cash was created by hard forking the Bitcoin protocol; both cryptocurrencies coexist now.
FUD – short for Fear, Uncertainty, Doubt. Describes the act of sharing negative rumors about a certain cryptocurrency or the market in general, which can negatively affect their price. Usually the rumors are not based on any evidence.
Fungible token – a cryptocurrency asset that is divisible, interchangeable and is similar to other tokens of its kind. For example, bitcoins are fungible tokens because any bitcoin can be divided, exchanged for another bitcoin and is not unique in any way.
Hash – a unique alphanumeric string produced by the hash algorithm. For example, 47a83dfbba d320acff42 e5400b2b7d 654acb0a44 1dd982b2f9 34454a730f 8b28 is a SHA-256 hash.
Hash algorithm – an algorithm that transforms the information about transaction into hash. It is a one-way function, meaning that the information about transaction cannot be obtained from hash alone. For example, SHA-256 utilized by Bitcoin is a hash algorithm.
Hash rate – also known as hash power, is a value that represents a number of times a hash function can be computed per second by a miner or the whole network. This value depends on 2 factors: The actual computing power of a miner; The network a miner works in. Difficulty of hash function can be different in different networks. For example, the hash rate of Nvidia GTX 1060 6GB, one of the most popular GPUs for mining, in Ethereum network is approximately 24 MHash/s. It means that this GPU is able to run hash algorithm approximately 24 million times per second.
ICO – short for Initial Coin Offering. A way for a cryptocurrency startup to raise money via selling own issued tokens for fiat or a common cryptocurrency, such as Bitcoin or Ether. The money raised is then used to realize the plans described in the startup’s roadmap and whitepaper.
Liquidation – the automatical placement of sell order for the market price.
Long position – a state the trader is in when he buys cryptocurrency asset expecting that its price will rise. For example, if a trader bought Bitcoin 2 months ago and still hasn’t sold, he/she is in a long position.
Market cap – short for Market capitalization. A total value of all the units of a certain cryptocurrency combined. Changes proportionally to a single unit price change. Can be calculated using this formula: Market cap = Total supply * Price of a unit For example, if a supply of hypothetical cryptocurrency is 100 coins and each coin costs 25 USD, then the market cap is 100 * 25 = 2500 USD.
Miner – has two definitions. A node which carries out the mining process. A person who owns the working hardware for mining.
Mining – a process during which transactions are verified and added to the P2P network. It is conducted by the miners, which have to solve a cryptographic problem. In order to do it, miners have to produce the hash equal or less than the target hash; they try to do it again and again, inputting the combination of the block header and nonce into a hash algorithm, until the solution is found.
Mining pool – a group of miners who combine their system resources, allowing them to generate a higher hash rate than it would be possible for any of them to generate individually. Higher hash rate = greater chance of mining a whole block. Mining reward gets split between mining pool members. Note: not every PoW cryptocurrency has mining pools. Some PoW cryptocurrencies accept transactions one by one, not by combining them into blocks, thus eliminating the point of having mining pools.
Mining reward – a certain amount of cryptocurrency awarded by the network to select miners for every block/transaction mined. For example, the current Bitcoin mining reward is 12.5 BTC per block mined (this amount will reduce in the future with each halvening).
Mnemonic phrase – also known as mnemonic seed, mnemonic phrase, mnemonic recovery phrase and seed phrase. An order sensitive combination of words that contains all the information necessary for restoring a cryptocurrency wallet. For example, circus collapse practice feed trap open despair creek road long ice least is a seed phrase.
NFT – short for Non-Fungible Token. Has a number of differences from the fungible token: Each token cannot be divided; Each token has unique information or attributes that make it irreplaceable and impossible to swap; Each token is unique and cannot be replaced with other tokens of the same type.
Node – a device that is connected to the P2P network. Each node has a copy of all the previous transactions and supports the network by validating and relaying transactions.
P2P – short for Peer-To–Peer. A network where all the peers are connected to each other, each peer sharing files with the other. Peers are nodes.
Physical cryptocurrency wallet – a physical object containing user’s private keys. There are several types of physical wallets: Hardware wallet is a device that has user’s private keys saved to its memory. In order to access them, user has to connect such a wallet to a device that is connected to the Internet, such as PC or smartphone, and enter a pin code. For example, Ledger Nano X is a hardware wallet; Paper wallet is a copy or printout of user’s public and private keys.
PoW – short for Proof of Work. A type of consensus mechanism, where nodes validate transactions by using computing power. Here is how it works: User A makes a transaction; User A’s transaction gets bundled into a block along with other users’ transactions; Transactions get validated; The header of the most recent block is inserted into this block as a hash; The cryptographic problem is solved during the mining process; The block is published to the blockchain; User B receives a transaction. For example, Bitcoin uses PoW consensus mechanism.
Private key – a unique alphanumeric string that allows cryptocurrency to be spent from user’s wallet. For example, E9873D79C6D87DC0FB6A5778633389 is a private key.
Public key – a unique alphanumeric string that allows cryptocurrency to be received to user’s wallet. It is generated from the private key. For example, 0418fae4ee 35dae20c20 9da4aa4921 156c3fb519e c33fbf37ec7 13e9c7276dc 9d41bce8825 34118684dc8 e47b6ee49cc ce4c77b197e 38441a06c6d 3a15978c724b is a public key.