Cryptocurrency address is used to send and receive transactions on the blockchain network, and it is available to the public. An address is usually created from a long string of alphanumeric characters. It can be compared to a username, as it is a form of identification on the public ledger.
It is an abbreviation of ‘Application Specific Integrated Circuit’, and it is used for cryptocurrency mining. Often compared to GPUs, it is more powerful and more expensive. Bitcoin is one of the most popular cryptocurrencies that uses ASIC.
Bitcoin is the first cryptocurrency, created in 2009 by Satoshi Nakamoto with a limited supply of 21 million. It is decentralised, and it runs on a global peer-to-peer sharing network. Bitcoin is not controlled by a central bank or authority; it does not have an owner either. It is primarily used as a store of value, and it is the most expensive cryptocurrency on the market.
Block is a crucial component of blockchain technology. It gathers the transaction data and permanently stores it on the blockchain network.
The blockchain is a peer-to-peer (P2P) ledger where transactions are permanently recorded and stored in appending blocks. It is a historical record of all transactions that have ever occurred. The blockchain is a backbone technology for the cryptocurrency, but it can be applied to almost every industry. The most popular use for blockchain is smart contract programming.
It is an online tool that enables viewing all transactions (past and current) on the blockchain. It collects information about the networks such as hash rate and transaction growth.
Block height is some blocks attached to the blockchain.
A block reward is a form of incentive for the miner who successfully calculated the hash in a block during mining. Verification of transactions on the blockchain generates new coins in the process, and the miner is rewarded with a portion of those.
It’s a successful, and lucky, process of hashing a transaction and adding it to the blockchain.
The consensus is achieved when all participants of the network agree on the validity of the transactions, ensuring that the ledgers are exact copies of each other. In case of Bitcoin, it’s 95% of the network; no upgrades can be performed if the consensus is not reached.
Also known as tokens, cryptocurrency is a digital currency, and it’s a representation of digital assets. The technology behind them is called blockchain.
Cryptographic Hash Function
Cryptographic hashes produce a fixed-size and unique hash value from variable-size transaction input. The SHA-256 computational algorithm is an example of a cryptographic hash.
A decentralised application (Dapp) is an application that is open source, operates autonomously, has its data stored on a blockchain, incentivised in the form of cryptographic tokens and works on a protocol that shows proof of value. The majority of Dapps run on the Ethereum blockchain.
Decentralised Autonomous Organizations can be thought of as corporations that run without any human intervention and surrender all forms of control to an incorruptible set of business rules.
Distributed ledgers are ledgers in which data is stored across a network of decentralised nodes. A distributed ledger does not have to have its currency and is publicly available to view.
A type of network where processing power and data are spread over the nodes rather than having a centralised data centre.
Difficulty refers to how quickly a data block of transaction information can be mined successfully. If a difficulty is too high, it will result in slowing down the transaction process. Miners alternate difficulty now and then to make sure a difficulty is not too easy, which would expose it to hackers’ attacks.
A digital code generated by public key encryption that is attached to an electronically transmitted document to verify its contents and the sender’s identity. A digital signature is a combination of a public and private key.
Double spending occurs when a sum of money is spent more than once.
Ethereum is a blockchain-based decentralised platform for apps that run smart contracts, and it aims at solving issues associated with censorship, fraud and third-party interference. The native token of Ethereum is Ether.
The Ethereum Virtual Machine (EVM) is a Turing complete virtual machine that allows anyone to execute arbitrary EVM Byte Code. Every Ethereum node runs on the EVM to maintain consensus across the blockchain.
Cryptocurrency exchange is a platform where users can buy/sell/trade cryptocurrency for fiat currency or other cryptocurrencies.
Forks create an alternate version of the blockchain, leaving two blockchains to run simultaneously on different parts of the network. Forks usually result in creating a separate altcoin from the main currency it broke from.
The first, or first few blocks, of a blockchain.
A type of fork that renders previously invalid transactions valid, and vice versa. This kind of fork requires all nodes and users to upgrade to the latest version of the protocol software. Those that don’t update won’t be able to use the network.
The act of performing a hash function on the output data. It is used for confirming coin transactions.
Measurement of performance for the mining rig is expressed in hashes per second.
A hybrid PoS/PoW allows for both Proof-of-Stake and Proof-of-Work as consensus distribution algorithms on the network. In this method, a balance between miners and voters (holders) may be achieved, creating a system of community-based governance by both insiders (holders) and outsiders (miners).
Mining is the act of validating blockchain transactions. The necessity of validation warrants an incentive for the miners, usually in the form of coins. Mining is usually done with the use of GPUs or ASICs. In this cryptocurrency boom, mining can be a lucrative business when done correctly. By choosing the most efficient and suitable hardware and mining target, mining can produce a stable form of passive income.
Multi-signature addresses provide an added layer of security by requiring more than one key to authorise a transaction.
A copy of the ledger operated by a participant of the blockchain network. It’s represented in a form of a computer.
Oracles work as a bridge between the real world and the blockchain by providing data to the smart contracts.
Peer to Peer
Peer to Peer (P2P) refers to the decentralised interactions between two parties or more in a highly-interconnected network. Participants of a P2P network deal directly with each other through a single mediation point.
A public address is the cryptographic hash of a public key. They act as email addresses that can be published anywhere, unlike private keys. A public address is used for sending transactions to a relevant recipient.
A private key is a string of data that allows you to access the tokens in a specific wallet. They act as passwords that are kept hidden from anyone but the owner of the address. Most often is a lengthy combination of characters.
A consensus distribution algorithm that rewards earnings based on the number of coins owned or held by a miner. The more miners invest in the currency, the more they gain by mining with this protocol. Ethereum is the most popular cryptocurrency that will switch to a proof-of-stake
A consensus distribution algorithm that requires an active role in mining data blocks, often consuming resources, such as electricity. The more ‘work’ miners do, or the more computational power they provide, the more coins they are rewarded with. Bitcoin and most altcoins use proof-of-work to confirm a transaction, however, it became inefficient.
Scrypt is a type of cryptographic algorithm and is used by Litecoin. Compared to SHA256, it is quicker as it does not use up as much processing time.
SHA-256 is a cryptographic algorithm used by cryptocurrencies such as Bitcoin. However, it uses a lot of computing power and processing time, forcing miners to form mining pools to capture gains.
Smart contracts encode business rules in a programmable language onto the blockchain and are enforced by the participants of the network. Etherum is a form of blockchain that can program smart contracts.
A soft fork differs from a hard fork as only previously valid transactions are made invalid. Since old nodes recognise the new blocks as legitimate, a soft fork is essentially backwards-compatible. This type of fork requires most miners upgrading to enforce, while a hard fork requires all nodes to agree on the new version.
Solidity is Ethereum’s programming language for developing smart contracts.
A test blockchain used by developers to prevent expending assets on the main chain.
A collection of transactions gathered into a block that can then be hashed and added to the blockchain.
All cryptocurrency transactions involve a small transaction fee. These transaction fees add up to account for the block reward that a miner receives when he successfully processes a block. It is paid by a sender of a transaction.
Turing complete refers to the ability of a machine to perform calculations that any other programmable computer is capable of doing. An example of this is the Ethereum Virtual Machine (EVM).
A cryptocurrency wallet is a file, or a device, that stores private keys. There are several types of wallets:
Wallets are used for sending and receiving cryptocurrency transactions. Depending on a chosen type, the security of a wallet increases.