Blockchain: A list of records (oftentimes transactions), linked together by a chain of previously performed cryptographic equations. Each record, or “block” contains a timestamp, hash (cryptographic code), and transaction data. Blockchain provides an open, distributed ledger system where all transactions are secure, final, and verifiable.
Block Reward: The small amount of Bitcoin (or other proof-of-work cryptocurrency) a miner receives for providing hash power (computing power) to the network; or the amount of cryptocurrency or GAS a crypto owner receives for holding their coins in a wallet during the solving of a block in the chain.
Censorship Resistant: The state of not being able to choose who can and cannot use a network. A network that is censorship resistant means that nobody can be prevented from using it.
Cryptography: Oxford defines cryptography as the art of writing or solving codes. In modern times, cryptography has evolved to include incredibly complex calculations that only powerful computers can perform.
Cryptocurrency: A digital currency that is secured using complex cryptographically-solved equations.
Decentralization: The process by which the record keepers of the network become increasingly dispersed. Having many record keepers throughout the world will increase the security of the network.
Difficulty: Coins like Bitcoin are produced by solving complex equations that require a massive amount of energy. This energy requirement only increases as time goes on. This is called the “difficulty”. The difficulty level of Bitcoin and some other cryptocurrencies increases at intervals known as “halvings.” Difficulty makes Bitcoin, (and others), harder to acquire over time, and thus more scarce.
Fiat Currencies: This term is used within the cryptocurrency community to describe traditional currencies such as the United States Dollar (USD), British Pound (GBP), etc.
Fork: An update to the original code of a blockchain.
Hard Fork: An update to the original code of a blockchain, that causes a split in the chain from the original network. This results in a new blockchain with updated performance, while the old blockchain continues to function as it did.
Soft Fork: An update to the original code of a blockchain that doesn’t require a split in the original chain.
Hash: A cryptography term that refers to the algorithm, or series of operations required to take an input message and transform it into a string of bytes that is fixed. A hash function is essentially irreversible. A cryptographic hash verifies the previous block on a blockchain.
Hash Power: Each miner will contribute a certain amount of power to the blockchain network, depending on their computing strength. With proof-of-work cryptocurrencies, hash power is required to solve each section of the blockchain. The larger the mining farm, the greater the hash power. The more powerful the computer, the easier it is for it to solve the complex equations needed to move the blockchain forward.
Hot Wallet: This refers to an exchange’s (or individual’s) wallet that is active on the network (connected to the internet). These coins are generally the ones used for trading and liquidity.
Cold Wallet: An exchange’s (or individual’s) wallet that is not connected to any networks. It is only accessible by those who know the private key.
Immutable: The state of being unable to be changed. Meaning transactions performed on immutable networks cannot be reversed.
Liquidity: This term refers to how “liquid” or fluid an asset is, meaning how easily it can be bought or sold. Liquidity is affected mostly by overall trading volume, which is also directly related to the number of exchanges where the asset can be bought or sold, as well as how easy it is to access those exchanges.
Mining: The act of providing computing/hash power to a proof-of-work blockchain, in order to receive block rewards and contribute to both the security and decentralization of the network.
Private Key: A string of numbers and letters that refers to your ownership of coins on a blockchain that is given at the time of your wallet creation. This key can only be generated once, and cannot be recovered if lost. The private key can be used to access your funds, and therefore should be kept private and in a secure location.
Proof-of-work: A mechanism for how users of a blockchain network are rewarded, whereby they receive a small amount of that cryptocurrency for successfully solving a predetermined number of blocks.
Proof-of-stake: A mechanism for how users of a blockchain network are rewarded, whereby they receive a small amount of cryptocurrency for holding a stake in the network. Unlike with proof-of-work, hash power is not required to be rewarded in this case. One only needs to hold the cryptocurrency in their wallet, and they will accrue rewards over time.
Wallet: The location where your cryptocurrency is stored. Each coin has a different wallet, because each cryptocurrency is programmed differently. To access your wallet, the chain will give you a private key at the time of creation. This key is unique and cannot be generated again. Your wallet also has a public address, where you can receive coins from a sender. The public address also allows anyone to view your balance, unless the technology for that specific coin dictates otherwise.
Wallet Address: This is your public address. Each cryptocurrency you own will require a unique wallet for storage, and you will need to send coins to your wallet address to store them. You can also receive coins from others through your address.