Top 10 Cryptocurrency Terms You Should Know
If you are a beginner in cryptocurrencies, you may come across many alien terms. We have compiled a list of the top ten cryptocurrency terms that every cryptocurrency investor and trader should know. Let’s get started.
White paper – constitution in the world of cryptocurrencies
This document describes how cryptocurrency works. For example, a nine-paged document by the semi-legendary Bitcoin founder Satoshi Nakamoto, in which he outlined the essence and principles of the functioning of this currency.
ICO – an easy way to get funding for any company
Funding takes place in cryptocurrency. The company collects money and issues tokens, and investors buy them. It’s like a stock offering and a Kickstarter fundraiser at the same time because anyone can become an investor. Usually, to invest your money in a company, you need to put in more effort.
Altcoin – any cryptocurrency except for bitcoin
Now there are more than 1000 cryptocurrencies. New ones are constantly appearing.
Ether / Ethereum – the coolest altcoin
Ethereum is Bitcoin’s main competitor with more features. In particular, Ethereum allows you to enter into smart contracts.
Smart contract – a contract that is executed by itself, whether you like it or not
A smart contract is a program that records the terms of a deal. Lawyers, who will have to master the work of a programmer in a couple of years, write agreements in the program code, and the program is automatically executed when the agreed conditions are met.
The company «XYZ» took out the garbage from the yard. A video camera recorded this fact, information about this event was automatically entered into the blockchain – a vast database and «XYZ» was automatically transferred money for cleaning.
Mining – You Can Issue Money Too
When mining, a computer solves mathematical problems associated with finding a specific sequence of code, and if they are completed, cryptocurrency is «mined.»
ASIC – a device for mining
When you fix a nail, you usually use a hammer, although you can do this with a slipper. The most efficient farms use no ordinary computers for mining cryptocurrency, but specially designed integrated circuits called ASICs. Unlike general-purpose integrated circuits, they are designed for a specific application and perform more efficiently and with less power.
Farm – increase the yield of crypto money
Mining equipment, high-performance computers that perform the computations necessary for crypt mining. A farm requires an excellent cooling system and a lot of electricity. The latter accounts for most of the fixed costs of the miner.
Proof of work – who does not work, does not mine
The longer and more diligently you write a course or quarterly report, the more likely you are to receive a high mark from a teacher or boss, and subsequently, a scholarship or award.
The situation is similar in the crypto world; «proof of work» is the algorithm by which the system generates coins. It is based on the performance of long-term and complex calculations and the possibility of simple verification of the result. If the estimate is correct, a certain amount of cryptocurrency is generated.
Proof of stake – the more there was, the more it became
This is an automatic exam or an award for past merits; the more «excellent» you have, the higher the likelihood of getting another high mark.
This is another algorithm that calculates the probability of getting a currency. Unlike proof of work, in proof of stake, the likelihood increases in proportion to the amount of money the user already has in the system. That is, the more cryptocurrency coins you own, the higher the probability of earning more.