Newcomers to the cryptocurrency industry are often overwhelmed by all of the terminology that comes their way. This industry lingo has a steep learning curve, yet all of these terms are essential knowledge. We will cover all of the most important ones in a series of articles.
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Understanding Common Cryptocurrency Lingo
When taking part in the cryptocurrency industry, there is a lot of industry jargon or lingo to take note of. Sometimes, it can be challenging to make sense of what others are talking about exactly. In this straightforward guide, we help you get acquainted with the basic concepts first before moving on to more complex matters.
Perhaps the essential technology in the cryptocurrency world, a blockchain is akin to a ledger that records all transactions and data transfers of a specific network. Most cryptocurrencies have their blockchain, with their own set of rules and governance models.
A smart contract is an extension of blockchain technology. These contracts are written code that can be validated by the native blockchain to execute specific actions.
Cryptocurrencies flow and move between different addresses on the blockchain. A string of alphanumeric characters represents one’s unique cryptocurrency address. This address is also known as the public key.
Every public key is an address to share with others who use the same cryptocurrency blockchain. Bitcoin’s public keys are different from those of Ethereum or EOS, for example.
For cryptocurrency users, every public key is created through a private key. To access one’s funds, having access to the private key is mandatory. It is often a good practice to store private keys in a designated wallet, controlled only by yourself.
The wallet system of cryptocurrency ecosystems allows users to store funds without exposing their private key. A bitcoin wallet can hold private keys associated with Bitcoin, whereas Ethereum private keys only work with an Ethereum wallet.
The meaning of “Satoshi” is double in the cryptocurrency world. On the one hand, it refers to the creator of Bitcoin, Satoshi Nakamoto. Among Bitcoin enthusiasts, 1 Satoshi represents the smallest unit of one full bitcoin or 0.00000001 BTC.
Every cryptocurrency network is a peer-to-peer network in which users are in control. The term “peer-to-peer” or “P2P” refers to the direct connection between two or more users and their computers. Leveraging the peer-to-peer approach removes the need for intermediaries.
To achieve consensus on the Bitcoin network, Satoshi Nakamoto opts for the Proof-of-Work algorithm. It requires miners (see below) to mine network blocks to help validate and process network transactions. Otherwise, the Bitcoin network grinds to a complete halt.
Bitcoin – and many other cryptocurrency networks – rely on proof-of-work to process transactions and data. The mining concept occurs by letting one’s computer solve tricky mathematical puzzles and validating data blocks on the network.