Dictionary
Dictionary of concepts on cryptocurrencies and blockchain.
BlockchainA decentralized digital ledger that records transactions across multiple computers in a way that makes it nearly impossible to alter retroactively. CryptocurrencyA digital or virtual currency that uses cryptography for security, making it difficult to counterfeit or double-spend. Examples include Bitcoin, Ethereum, and Litecoin. Bitcoin (BTC)The first decentralized cryptocurrency, created in 2009 by an individual or group under the name Satoshi Nakamoto. AltcoinAny cryptocurrency other than Bitcoin. Examples include Ethereum, Ripple, and Litecoin. MiningThe process by which transactions are verified and added to the blockchain. Mining also creates new coins in many cryptocurrencies. Smart ContractA self-executing contract with the terms of the agreement directly written into code. It automatically executes actions when predefined conditions are met. WalletA digital tool for securely storing, sending, and receiving cryptocurrencies. Wallets can be software-based (hot wallets) or hardware-based (cold wallets). Private KeyA secret number that allows cryptocurrency owners to access and manage their funds. Private keys must be kept secure, as anyone with access can control the associated assets. Public KeyA cryptographic code that allows users to receive cryptocurrencies. It is derived from the private key and shared publicly as an address. DeFi (Decentralized Finance)A financial system built on blockchain technology that seeks to recreate and improve traditional financial systems without intermediaries like banks. NFT (Non-Fungible Token)A unique digital asset that represents ownership of a specific item or content, often on the Ethereum blockchain. NFTs are not interchangeable like cryptocurrencies. Gas FeeThe fee paid to perform transactions on a blockchain, typically associated with Ethereum, to compensate miners for the computational work required. Proof of Work (PoW)A consensus mechanism that requires miners to solve complex mathematical problems to validate transactions and secure the network. Bitcoin uses PoW. Proof of Stake (PoS)A consensus mechanism that selects validators based on the number of coins they own and are willing to 'stake' as collateral to validate transactions. Ethereum has transitioned to PoS. ForkA split in the blockchain network, where the network creates two separate chains. Forks can be soft (backward-compatible) or hard (creating a completely new blockchain). ICO (Initial Coin Offering)A fundraising method where new projects sell their underlying tokens in exchange for Bitcoin, Ethereum, or other cryptocurrencies. HODLA term used to encourage holding onto cryptocurrency investments long-term, regardless of price fluctuations. Originally a typographical error of 'hold.' FOMO (Fear of Missing Out)An emotional response that drives people to buy cryptocurrencies at high prices due to fear of missing out on potential gains. WhaleAn individual or entity that holds a large amount of a particular cryptocurrency, often enough to influence its price through buying or selling. StablecoinA type of cryptocurrency pegged to the value of a stable asset, such as the US dollar, to reduce volatility. Examples include USDT, USDC, and DAI. DAO (Decentralized Autonomous Organization)An organization collectively managed by its members and controlled by smart contracts on the blockchain. TokenA unit of value issued on a blockchain that can represent an asset, utility, or right within a project. ExchangeA platform where users can buy, sell, or trade cryptocurrencies. Examples include Binance, Coinbase, and Kraken. HashA unique code generated from a variable-sized amount of data using a hash function. In blockchain, it is used to represent transactions and blocks. AirdropAn event where a cryptocurrency project distributes free tokens to users, usually to promote the project. ERC-20 TokenA technical standard for fungible tokens on the Ethereum blockchain, enabling interoperability among different tokens and smart contracts. ERC-721 TokenA technical standard for non-fungible tokens on the Ethereum blockchain, used to create and manage NFTs. Liquidity PoolA pool of cryptocurrencies locked in a smart contract to provide liquidity to a decentralized exchange. CryptographyThe art and science of creating codes and ciphers to secure information, fundamental in the operation of cryptocurrencies. SatoshiThe smallest unit of Bitcoin, equivalent to 0.00000001 BTC, named after its creator, Satoshi Nakamoto. FiatGovernment-issued currency, such as the dollar or euro, in contrast to decentralized cryptocurrencies. Algorithmic StablecoinA type of stablecoin whose value is maintained using algorithms and smart contracts instead of being backed by a physical asset. Cold WalletA cryptocurrency wallet not connected to the internet, providing a higher level of security. Hot WalletA cryptocurrency wallet connected to the internet, allowing quick access but with a lower level of security. KYC (Know Your Customer)A process where exchanges and other entities verify the identity of their users to comply with financial regulations. DEX (Decentralized Exchange)An exchange platform that allows users to trade directly with each other without intermediaries. StakingThe act of locking cryptocurrencies in a network to support its operation and earn rewards in return. BurningThe process of permanently destroying cryptocurrencies to reduce the circulating supply, often to increase their value. Yield FarmingAn investment strategy in DeFi where users earn interest or rewards by providing liquidity to pools on decentralized platforms.