Cryptocurrency and Blockchain Dictionary

Terms commonly used in the world of blockchain and cryptocurrency

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DAG

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.

Other Important Terms

Liquidation

Liquidation – the automatical placement of sell order for the market price.

PoW

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.

Block

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.

Fork

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

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.

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