Cryptocurrency Glossary Of Terms & Acronyms – Forbes Advisor UK

From mainstream media to essentially the most area of interest corners of the web, crypto and your entire language of associated phrases which have sprung up alongside the investing phenomenon are in every single place.

No matter how a lot you understand or don’t learn about cryptocurrencies and the know-how that underpins them, this jargon could make a difficult topic even tougher to know.

We’ve put collectively a glossary of widespread phrases you’re prone to come throughout to make crypto simpler to get your head round, whether or not you’re seeking to make investments or not.

A B C D E FG H I J Okay L M N O P Q R S T U V W X Y Z

A

Altcoin –  any cryptocurrency aside from Bitcoin.

ASIC – Application-Specific Integrated Circuit. An ASIC is a strong and costly computing system used for mining cryptocurrency (see ‘mining’).

B

Bitcoin – the original, largest and best-known cryptocurrency.

Buy the dip – the notion of buying cryptocurrencies when prices have fallen in order  to reap the benefits when they rise again.

Blockchain – the underlying technology on which cryptocurrencies operate. A blockchain is essentially a complete ledger of transactions held simultaneously by several people on a computer network. Read more about blockchain here.

C

Coin – a colloquial term for a cryptocurrency. See also: altcoin, memecoin.

Cold wallet – a physical storage device such as a flash drive, hard drive or solid state drive used to store cryptocurrency offline.

Cryptocurrency – a digital form of currency that can be traded for goods, services or other currencies. Transactions are verified and recorded using cryptography by ordinary people, rather than a centralised authority such as a bank.

Cryptography – a computer science method of keeping information secret and secure by scrambling it into indecipherable information. The information can only be decrypted and read with the necessary key.

D

Defi – short for decentralised finance. Finance is traditionally centralised because it relies on intermediaries. For example, if you want to send money to a friend or relative, you rely on your bank to send it to the recipient’s bank. Defi requires no intermediaries, with participants able to send and receive assets directly. In theory, this makes transactions faster and cheaper.

DAO – decentralised autonomous organisation. A DAO is a group of people who work together towards a shared goal and abide by rules written into the project’s self-executing computer code. Bitcoin (the project, not the currency) is an example of a DAO.

Distributed ledger – in traditional finance, an organisation such as a bank holds a ledger of all its customers’ transactions. In defi, the ledger is shared and synchronised among users in different locations around the world. A blockchain is an example of a distributed ledger.

Double spend – If you handed a shopkeeper £5 for a sandwich, you would no longer own the £5 and couldn’t spend it again, and sophisticated anti-counterfeit measures prevent people from making copies of physical currency. Even with digital transactions, central authorities such as banks can secure and check their ledgers to verify the legitimacy of a payment.

However, digital information can be copied. In theory, a single Bitcoin could be copied 100 times and spent 100 times. A distributed ledger such as blockchain prevents this. 

When you send a Bitcoin to someone, you destroy your version of it and create a new version for the recipient. Both destruction and creation are recorded on everyone’s copy of the ledger, preventing you from claiming you still own the spent coin and trying to spend it again. 

E

Exchange – A website or app that allows users to buy and sell crypto assets.

Ethereum The second biggest cryptocurrency by market capitalisation, after Bitcoin. (See market capitalisation.)

Encryption – The process of making digital information into a form that prevents unauthorised access. If you use a password to access a website, the site should be encrypting it so that it is of no use to hackers if stolen.

F

Fiat – refers to traditional, state-backed currencies like Sterling, euro and US Dollar.

Fork – a fork occurs when a community makes a change to its blockchain’s governing protocols. The change marks a forking-off from the previous iteration of the blockchain in a new direction. 

Soft forks involve iterative changes to the blockchain’s rules that can be considered as an update only. Hard forks are when changes are so significant that the new version is incompatible with the old version and stands apart from it.

G

Gas – Transactions on the Ethereum network carry a fee. For every transaction, users must pay an amount of the native Ethereum currency ether (ETH). This fee is referred to as gas. Gas is used to reward Ethereum ‘miners’ (see ‘mining’) for the energy they use validating transactions. Gas also serves as a deterrent against malicious users.

Graphics card – Verifying a transaction on a blockchain involves solving a cryptographic problem. Solving these problems requires significant computing power, which in turn uses significant amounts of energy. High-end graphics cards used in PC gaming have the kinds of processing power needed to validate transactions.

H

Hash – A hash is the result of a piece of data being put through a special algorithm. A hashing algorithm essentially compresses data of any size down into an almost-unique alphanumeric string of text.

For example, a hash of the word ‘Forbes’ using SHA-256 (more on that later) reads: ADD913C2C3CF3F4A0628B58B505BC09C6C3797F2EE7DEE86AD9F701A191E6E93.  The lyrics to Tom Jones’ 1965 hit ‘It’s Not Unusual’ are expressed as: 8E58EFDE840DF7CEC1872DE2B48222F2C3844646E0EAE4F4E6DD6CC7FE183E50.

Change just one letter in the word Forbes, or one word in the song’s lyrics and you’ll get a different hash. This can be useful for identifying when some data has been changed. 

This is important in crypto because a blockchain is an immutable record of transactions. Cryptographic hashing will flag attempts to change something, even when there are huge amounts of data.

If someone tried to alter a transaction in a block on the blockchain, they’d have to alter every consecutive transaction too, since each transaction refers to its predecessors. This makes cheating practically impossible.

Different cryptocurrencies use different hashing algorithms.

HODL This meme became the rallying cry of crypto holders who wanted to encourage others to keep the faith as prices fell. It stems from a misspelling made by a Bitcoin forum user in 2013, in which they declared: “I AM HODLING”. The term has been retrospectively turned into the acronym Holding On for Dear Life.

Hot wallet – Online storage for cryptocurrencies, provided either by an exchange or a third party. Since storage is online and accessed with passwords, hot wallets are a target for hackers. However, hot wallet operators can help users regain access to their assets if they lose their access codes.

I

ICO – an Initial Coin Offering (ICO) is the cryptocurrency equivalent of an Initial Public Offering (IPO). It offers investors the opportunity to back a new crypto project.

L

Ledger –  a record of transactions, including times, dates, senders and recipients.

M

Market Capitalisation/Cap – the total value of a cryptocurrency. At the time of writing, all cryptocurrencies combined had a market cap of $1.3 trillion.

Mining – crypto mining is the process of verifying cryptocurrency transactions using computer hardware. Bitcoin miners are volunteers motivated by the chance to earn an amount of newly minted Bitcoin. In doing so, they collectively validate transactions on the blockchain and prevent double spending.

Mining involves guessing a 64-character hash, of which there are trillions of possible combinations. The more computing power you have, the more guesses you can make within each ten-minute timeframe and the greater your chances of earning new Bitcoin.

Mining requires graphics cards or ASICs. The amount of computing power necessary to mine crypto increases over time, and is now so immense that it’s no longer practical for home PC users. Instead, mining is now the preserve of companies dedicated to it.

Memecoin – An altcoin based on a meme, which is a kind of inside joke in the form of an image that’s repeatedly altered and shared online. Dogecoin is a memecoin based on this meme.

N

Node – A pc or system related to different computer systems or gadgets that every one maintain a duplicate of a blockchain. Each node helps the community of nodes by sharing data and validating transactions.

NFT – A Non-Fungible Token is a digital collectible that makes use of the identical underlying know-how as cryptocurrencies. Read our information to Non-Fungible Tokens.

P

P2P – Peer to look. Refers to a transaction between two folks with out an middleman or central authority concerned.

Private key – A non-public secret’s basically the password to your crypto holdings. It’s an impossibly lengthy quantity that’s virtually unattainable to guess. You authorise a transaction by signing it with a hash of your personal key that solely you understand. Your corresponding public key can be utilized by others to confirm the authenticity of a transaction.

Public key – The public-facing deal with of your crypto pockets. To obtain funds into your account, you must share your public key. If a personal key is sort of a password, a public secret’s like an e mail deal with or an account quantity.

Proof of labor (PoW) – Proof that you simply’ve performed the computational work to guess the 64-character hash obligatory so as to add a block to the blockchain. Broadcasting your answer permits different nodes to rapidly confirm that your hash is right and that you have to have carried out the work required to get it.

Proof of stake (PoS) – Rather than proving you’ve performed the computational legwork to guess the hash, proof of stake reveals you’ve staked a specific amount of cash for an opportunity to turn into a validator. The extra cash you stake, the higher your possibilities of changing into a validator.

Should you spend your manner into the place with the intention to intentionally approve a fraudulent transaction, you threat shedding your stake – so there’s a disincentive to cheat. 

PoS is healthier for the atmosphere because it requires much less computing energy and makes use of much less power, however favours customers who’ve extra money to stake and makes them richer as they’re extra prone to reap the rewards of validation.

S

Satoshi Nakamoto – The nameless creator(s) of Bitcoin.

Satoshi – A Satoshi is to Bitcoin as a penny is to a pound.

Smart contract – A programme that executes itself on a blockchain when sure situations are met, with out the necessity for human intervention or an middleman. Once executed, the contract can’t be modified or undone. For instance, account 1 will launch asset X  to account 2 as soon as it receives asset Y.

SHA-256 – a hashing algorithm that compresses knowledge of any measurement into an alphanumeric string that can’t be reverse engineered, protecting the unique knowledge secret and safe whereas being helpful for validating enter knowledge. It was developed partly with the US National Security Agency (NSA) and is utilized by Bitcoin.

Seed (phrase) – a random collection of 12-24 phrases generated by your crypto pockets and used to achieve entry to it.

Stablecoin – a cryptocurrency similar to Tether, whose worth is tied to a different forex, commodity or monetary instrument.

T

Tether – a stablecoin pegged to the US Dollar

T

Terahash (per second) – the speed at which a pc or community can guess one trillion hashes per second when mining cryptocurrency.

Token – in crypto, a token is a unit of cryptocurrency aside from Bitcoin or Ethereum – that are technically additionally tokens. Specifically, it’s a approach to confer with a forex that runs on a specific blockchain. For instance, XRP is a token on the Ripple blockchain.

U

Unregulated – Financial companies within the UK are regulated, which implies suppliers need to abide by strict guidelines designed to guard shoppers’ pursuits. Crypto is unregulated within the UK, which implies buyers get no authorized safety.

V

Volume – the overall quantity of forex traded in a 24-hour interval

Validator – somebody who pays for the possibility to validate transactions and earn crypto on a proof of stake blockchain (see proof of stake).

Volatile – a market by which costs ceaselessly and unpredictably rise and fall

W

Wallet – a digital storage system or location for protecting crypto belongings safe. Wallets could be on-line (see scorching pockets) or offline (see chilly pockets).

Wei – a Wei is to Ether as a penny is to a pound.

Whitepaper – a technical doc launched alongside new crypto initiatives that explains how the system works.

X

XRP – XRP is a form of cryptocurrency token that runs on the Ripple blockchain.

Y

Yield – a return on funding, expressed as a share.

Z

Zero affirmation – a transaction that has been confirmed however has but to be recorded on a blockchain.

https://www.forbes.com/uk/advisor/investing/cryptocurrency/crypto-glossary-of-terms-acronyms/

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