Terms of the Trade:
An altcoin is any cryptocurrency other than bitcoin. Some altcoins are derivatives of bitcoin, in that they follow the same basic protocols while others run on their own blockchains. Some of the popular altcoins include ether, litecoin, and monero.
A blockchain is the first successful implementation of the Distributed Ledger framework. It consists of transaction blocks linked together by means of cryptographic signatures all the way up to the first block in the chain (the “genesis block”). All permissioned users of the blockchain network have access to the shared distributed ledger and all verified past transactions are immutable.
A block refers to the basic unit of a blockchain which contains a pool of transactions and a header. Block height refers to the number of blocks preceding a block on the blockchain. For a block with height of 35 means that there are 35 blocks preceding it on the blockchain. The block height of the genesis block is zero, since it is the first block on the chain which means there is not preceding block.
This is basically a database that is spread (distributed) across multiple computing nodes in a network. Upon every update to the ledger, the information is updated across all participating nodes.
This stands for Distributed Denial of Service. It refers to a situation where several computing nodes infected with a malicious software like a trojan are used to attack a central server location. One of the biggest selling points of the blockchain architecture is that it is theoretically immune to a DDoS attack.
A cryptocurrency is the native digital currency of a blockchain or blockchain-based application. It operates without a central bank, with regulation of currency volume in circulation and fund transfer achieved by means of encryption technology based on complex mathematical proof.
A fork refers to the situation that arises from a lack of consensus within the participants of a blockchain network which results in the blockchain diverging into two paths. This lack of consensus can be about the transaction history or the implementation of new rules and/or protocols. There are basically 3 types of forks; user-activated forks, soft fork and hard fork.
Hodling in the world of cryptocurrencies is derived from HODL which stands for Hold On for Dear Life! It means to keep hold of your cryptocoins even when the prices drop. It is a term that has been made popular on online cryptocurrency forums and message boards.
ICO, or Initial Coin Offering is a crowdfunding process where startups sell advanced token offers from their total coin base to investors in exchange for capital. These investors become early adopters of the cryptocurrency.
Market capitalization of a cryptocurrency is evaluated by multiplying the price of the cryptocoin by the available supply of the cryptocoin in the market. This use of available supply rather than total supply of coins is in keeping with the traditional “public float” for companies, where the number of unclaimed shares is used, rather than the total number of shares.
Mining is the process of validating transactions before they are added to the public. Cryptographic hashing by means of complex mathematical computations are used to carry out the mining process. Apart from validating transactions, mining also creates triggers the release of new coins.
Multisig stands for multiple signature. Multisig addresses create an authorization framework that requires multiple keys to authorize a transaction. Usually, at the onset of the multisig application, the number of required signatures is agreed upon by the participants. Multisig addresses offer more robust protection from online theft and hacks.
A node is the basic unit of a computer network which is capable of acting as a data point. A defining characteristic of a node is that it has an IP (Internet Protocol) address. A node can be a personal computer, smartphone, or even a printer.
Proof of Stake
Proof of Stake (PoS) is another type of hashing algorithm and is considered by many to be an alternative to the PoW model. The PoS is a deterministic type of mining in which the amount of cryptocurrency currently held by a miner is used to calculate how much cryptocurrency that miner can mine.
Proof of Work
Proof of Work (PoW) is a type of hashing algorithm that is used to validate transactions on a blockchain. It involves difficult to perform but easy to validate complex mathematical puzzles that are solved by a mining node. It is the mining algorithm used on the bitcoin blockchain.
This stands for Peer-to-Peer. It is a network of two or more computing nodes which share a common mediation point, like a blockchain or distributed ledger. P2P networks have no central server and each node is responsible for the operating and maintenance of the network.
Signatures are used in blockchain transactions to verify the identity of a public key. Using cryptographic hashing, the publicly distributed public key can be verified as belonging to the holder of a private key in order to validate the transaction. In summary , signatures are the bridge that links a public key to the corresponding private key.
A smart contract is one in which the terms of the agreement are recorded in computer language instead of legal language. It consists of a set of computer codes capable of facilitating, executing, and enforcing the terms of a contract agreement by means of blockchain technology. Smart contracts can completely automate the contracting process, eliminating the need for third party arbiters and litigation.
When bitcoin and the first few altcoins were still obscure, some people invested heavily and now have vast amount of these cryptocurrencies in private wallets. These people are known as whales. Due to the low liquidity and high volatility of the market, their moves in the market can greatly affect token prices.
This is an attack on the theoretical immutability of a blockchain. It is a situation whereby an individual or organization with 51% of the hashing power (mining power) of a blockchain network can successfully alter the records of past transactions and prevent the authentication of new ones.