Meet the second part of our series of articles on essential cryptocurrency terms! In this part, we will define terms and concepts that are important for both beginners and experienced crypto users.
Interoperability: The ability of different blockchain systems to work together without any restrictions.
KYC (Know Your Customer): Regulatory compliance measures requiring businesses to verify the identity of their clients.
Layer 2: A secondary framework or protocol that is built on top of an existing blockchain system. The main goal is to solve the transaction speed and scaling issues.
Leverage: Using borrowed capital for (cryptocurrency) investments, enhancing the potential of high returns but also risks substantial losses.
Liquidity: The ability of a cryptocurrency to be quickly bought or sold in the market without affecting its price.
Liquidity Pool: A collection of funds locked in a smart contract that provides liquidity to decentralized exchanges.
Mainnet: The main network where actual transactions of a cryptocurrency occur on a distributed ledger.
Margin Trading: The practice of using borrowed funds from a broker to trade a financial asset, which forms the collateral for the loan.
Market Cap (Market Capitalization): The total market value of a cryptocurrency's circulating supply. It is analogous to the free-float capitalization in the stock market.
Masternode: A server in a decentralized network used to complete unique functions in ways that regular nodes can't. It requires a substantial initial investment to run.
Merkle Tree: A data structure that enhances the efficiency of network verification processes.
Mining: The process by which transactions are verified and added to the public ledger, and new coins are released.
Mining Pool: An aggregation of miners who combine their computational resources over a network to strengthen the likelihood of mining a block.
Mixing Service: A service that improves the privacy of cryptocurrencies by mixing the digital assets with others before reaching the intended recipient.
Multisig (Multisignature): A type of digital signature scheme which allows a group of users to sign a single document.
Node: Any computing device that connects to the blockchain network.
Nonce: A unique number that can only be used once in cryptographic communications, to prevent duplicate transactions.
Oracles: Services that send and verify real-world data to blockchain networks for use in smart contracts.
P2P (Peer-to-Peer): A network framework where two or more computers connect with each other without a central server.
Permissioned Blockchain: A private blockchain where access and activities are controlled by a central entity or consortium.
Private Key: A secret alphanumeric code used to authorize transactions in cryptocurrency networks.
Proof of Authority (PoA): A consensus mechanism in a private blockchain which essentially gives one client (or a specific number of clients) with one vote the authority to generate all of the blocks or validate transactions.
Proof of Burn (PoB): A consensus algorithm where miners can 'burn' virtual currency tokens by sending them to a wallet where they can no longer be spent.
P2P (Peer-to-Peer): A network framework where two or more computers connect with each other without a central server.
Permissioned Blockchain: A private blockchain where access and activities are controlled by a central entity or consortium.
Private Key: A secret alphanumeric code used to authorize transactions in cryptocurrency networks.
Proof of Authority (PoA): A consensus mechanism in a private blockchain which essentially gives one client (or a specific number of clients) with one vote the authority to generate all of the blocks or validate transactions.
Proof of Burn (PoB): A consensus algorithm where miners can 'burn' virtual currency tokens by sending them to a wallet where they can no longer be spent.
Proof of Capacity (PoC): A consensus mechanism that uses a mining node’s available disk space to decide the mining rights, instead of using transaction-confirming computational work or staking.
Proof of Elapsed Time (PoET): A consensus algorithm that randomly chooses the next block based on the shortest time elapsed since the last block.
Proof of Stake (PoS): A consensus distribution algorithm that rewards earnings based on the number of coins you own or hold.
Proof of Work (PoW): A system that ties mining capability to computational power, blocks cannot be modified without redoing the work.
Public Blockchain: A blockchain that anyone in the world can read, send transactions to, and expect to see them included if they are valid.
Public Key: Part of a key pair used in digital currencies for receiving funds.
Pump and Dump: A scheme that attempts to boost the price of a stock or a cryptocurrency by recommending it based on false, misleading, or greatly exaggerated statements.
Ring Signature: A type of digital signature that can be performed by any member of a group of users that each have keys. It provides anonymity for the signer.
Sandbox: A testing environment that isolates untested code changes and outright experimentation from the production environment or repository, in the context of software development including blockchain.
Satoshi: The smallest unit of Bitcoin, worth one hundred millionth of a Bitcoin.
Satoshi Nakamoto: The pseudonym of the person who developed Bitcoin, authored the Bitcoin white paper, and created and deployed Bitcoin's original reference implementation.
