Terms used in crypto sphere. Part 1

The crypto sphere can be confusing, especially if you aren’t familiar with all the terminology. Let’s get acquainted with the terms most commonly used in crypto sphere.

51% Attack – this term describes a situation in which too much of the blockchain network’s power is concentrated in one place. A user, or group of users, controlling 51% of the system can manipulate it on purpose, or inadvertently conduct conflicting transactions that can compromise the system.

Airdrop – a distribution of tokens by the operators of a cryptocurrency network. The tokens are either given away to all holders of the cryptocurrency for free, or conditioned by some sort of activity, for instance promoting the crypto on a social network.

Altcoin (short for «alternative coin») – any cryptocurrency other than Bitcoin (XRP, NEO, Stellar and many others).

ASIC (Application Specific Integrated Circuit) – a chip designed specifically for a certain task. In the world of blockchain, it usually refers to chips developed to run on mining computers, and is considered superior to CPUs and GPUs.

Bitcoin – the first and largest cryptocurrency. Bitcoin was launched in 2009 as a decentralized currency, built on on blockchain technology. It is the first real-world application of blockchain. Bitcoin was created by a person or group of people identifying themselves under the pseudonym Satoshi Nakamoto.

Blockchain – a decentralized network, built from a continuous chain of code segments of predetermined size (blocks). All transactions on the network are stored on a public ledger, which exists throughout the network, what means there is no need for a central server to authorize transactions on the network.

Cold storage – a security measure for storing cryptocurrencies in an offline environment. For example, a storage device (such as a USB flash drive) or a paper wallet.

Cryptocurrency – the first major application of blockchain, a cryptocurrency is a currency designed to have no central ownership, with each token and transaction uniquely encrypted. Blockchain technology enables cryptocurrencies to be stored and for tokens on the network to change hands.

DAO (Decentralized Autonomous Organization) – this term describes an organization that uses blockchain practices, such as smart contracts, to manage itself, without the need for a central authority.

Digital signature – a common term used to identify a single individual or action on the Internet. In blockchain, it usually refers to a unique identifier given to a certain user, token or transaction.

Genesis block – the first block of code created on a blockchain network.

Hash – the practice of using an algorithm to give any piece of data a «digital fingerprint». When storing information on blockchain, hashing is used to create a unified form for identifying blocks of code, by converting them into a string of numbers and letters of a fixed size.

ICO (Initial Coin Offering) – this term describes a situation in which a company raises funds by issuing cryptocurrency tokens, sold at a fixed price to early investors.

Ledger – a digital log of all of the transactions which took place on a certain blockchain network. Copies of the ledger are stored across the network and are constantly updated to match each other, so transactions can be verified by anyone on the network.

Lightning Network – a solution, designed to greatly increase the speed of transaction processing time on a blockchain network. The Lightning Network creates a P2P network to process transactions, before broadcasting them to be logged on the underlying blockchain public ledger.

Liquidity – the ease with which a certain cryptocurrency can be converted into cash. Liquidity depends on a lot of factors, including supply and demand and transaction processing times.

Mining – the practice of allocating computer power to carry out transactions on the network and being rewarded with tokens. Each transaction is encrypted by an equation which requires significant computing power to be processed. Miners who solve the equation first, thus enabling the transaction to take place, are rewarded with a small fee.

Mining pool – a construct created by a group of miners with the aim to process more transactions and receive more fees. The funds are then split between the pool’s members.

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