- August 27, 2020
- Posted by: Lara Tlass
- Category: Blog
The Crypto Terminologies you need to know series part three, where you can explore the popular terms and phrases relevant to cryptocurrencies. When reading through cryptocurrency related blogs or whitepaper on the internet and having no clue what people are talking about? Certain phrases and acronyms are highly unique to digital currencies that could prove helpful by simply learning the basic industry terminology. Therefore, we thought it would be useful to have a glossary of some terms you may come across. You can also read Part 1 and Part 2 for more terminologies.
Decentralized Finance (DeFi)
Financial applications that are being developed on top of blockchains such as Ethereum. DeFi is trying to recreate traditional financial systems to be more transparent, permissionless, trustful protocols that run without intermediaries... This has provided “the freedom to finance” to many across the globe with a touch of a few buttons. One of the metrics used to measure the growth of DeFi is the amount of ether locked in smart contracts as collateral, a metric called “ETH locked in DeFi.”
When a new version of a blockchain is created or a radical change to a network’s protocol resulting in two versions of the blockchain running side-by-side, it is termed as fork. As a single blockchain forks into two, they will both run on the same network. Forks are categorized into two categories: soft or hard. Example ETC (Ethereum Classic) to ETH (Ethereum)
This is a pre-approved agreement between two entities to complete a transaction when the price of a certain cryptocurrency hits a certain price. It’s different than a limit order in that the buyer and seller are already nominated and bound. A future contract becomes relevant when a buyer wants to go short and a seller wants to go long on the asset.
A string of numbers and letters that are used to access your wallet. While your wallet is represented by a public key, the private key is the password you should protect (never lose it, as you may lose your funds). You need your private key when selling or withdrawing cryptocurrencies, as it acts as your digital signature.
Know Your Customer (KYC)
A compliance process instituted by regulators for businesses to verify the identity and level of risk of their customers, either before or during the time that they start doing business with you. This verification practice is to assess and monitor customer risk, approves or denies local/global accessibility to the service, verifies age to legally use the facility.
A sandbox or testing environment for a blockchain network that’s typically available before a mainnet launch for development purposes. Developers use testnet to experiment with the blockchain without using real coins to conduct transactions or worrying about breaking the main chain. An example is Ropsten for the Ethereum network.
“Crypt-” means “hidden” and “graphy” stands for “writing.” Which is a method of protecting information and communications with the use of codes, so that only those for whom the information is intended can access it. A method for secure communication using code. Symmetric-key cryptography is used by various blockchain networks for transactions of cryptocurrencies. Blockchain addresses generated for wallets are paired with Crypted private keys that allow transfer of cryptocurrency to be unlocked.
Many cryptocurrencies like Bitcoin, have a limited supply, which makes them a scarce digital commodity. The total amount of Bitcoin that will ever be issued is 21 million. The number of bitcoins generated per block is decreased 50% every four years. This is called “halving.” The final halving will take place in the year 2140.
Any cryptocurrency pegged to a stable asset, like fiat or gold. It theoretically remains stable in price as it is measured against a known amount of an asset not subject to fluctuation. For example, one USDT (Tether) is always equal to a dollar, many traders exchange coins or tokens to Tether as their value drop and rebuy the coins or tokens at a lower price.
If more than half the computer power or mining hash rate on a network is run by a single person or a single group (company), then a 51% attack is taking place. This means that this entity has full control of the network and can negatively affect a cryptocurrency by taking over mining operations, stopping, or changing transactions, and double-spending coins.
“Do Your Own Research”. Learning from crypto influencers or browsing on the internet is typically the first step to be introduced to a coin or a token. The 2nd step is to do your own research, read the whitepaper, read about the team and communicate with them and join the project’s social media channels. Always make your own investment choices. You can check out or blog “5 Elements to Consider Before Investing in Crypto”.
Crypto has its own language, we hope that these terminologies will make it easier for you to dive into the Crypto World. If you are interested to learn more, check out our Knowledge Center videos, where we explore different topics related to the crypto space.