This article is about basic terms of cryptocurrencies. You should know them if you want to understand cryptocurrencies.
Cryptocurrency is a digital currency, that uses principles of cryptography for security and validation of transactions.
Bitcoin with big B mostly indicates concept of Bitcoin, its technology, community, protocol etc. It's the first decentralized open source cryptocurrency based on peer-to-peer networks principle.
As a bitcoin with small b we usuallly understand the unit of Bitcoin currency.
Alternative cryptocurrencies are all other currencies except Bitcoin (Ethereum, Litecoin...).
Block is a record in block chain. It contains and confirms more transactions waiting for confirmation.
Block chain is a public record of all sent transactions in network. New block is connected to block chain in scope of process of mining. Blocks of transactions cannot be modified in any way after connecting them to block chain.
Onine tool for browsing block chain.
At most of cryptocurrencies is not necessary to pay any fee for sending a transaction, but height of fee is directly proportional to speed of transaction confirmation. Transaction fee goes to miners, who confirm transactions and preferablly process transactions with higher fee.
When the transaction is made, the attendants of network confirm its validity (mining). Transaction gets the first confirmation, when it's part of block just connected to the end of block chain. Mining and connecting of every another block to block chain means another confirmation. With every another confirmation is risk of reversal of transaction quadratilcally decreases.
Smart contracts mean agreement between two or more sides, converted to programming language in a way, that they automatically enforce its fulfillment. For running of smart contracts serves for example virtual machine of site Ethereum (EVM - Ethereum Virtuall Machine).
Decentralized Autonomous Organizations are organizations or funds based on smart contracts. After start they work automatically and without human lead they comply in advance defined rules.
Initial Coin Offering - prime offer of coins. It is a way of financing nascent cryptocurrencies similar to crowfunding. People financially support founders and they get units of the new currency.
Difficulty gives how difficult is to mine another block. This parameter of site is changing constantly in dependency on computing power of whole site.
A secret alfanumeric string, which is know by owner only. Transactions of cryptocurrencies are signed by private key.
Pubilc key is published alfanumeric string derived from private key. It serves as adress to which could be sent coins with which could be disponed by owner of private key only.
Mining is process when computer hardware does complicated mathematical calculations by which verifies transactions in site and provides security. Mining of cryptocurrency is process using efficient computer hardware for verifying transactions in site. After mining a new block are miners rewarded by newly created coins.
Computer specially designed for mining of certain cryptocurrency is called mining rig.
Peer to Peer / P2P
Peer to peer is decetralized arrangement of site, when two or more attendants communicate directlly amongst each other. The advantage of this model is that disconnection of any node of site cannot endanger its functioning.
Proof of Work
During verifying of transaction (mining) when using Proof of work mode is authority of your voice and reward of mined block unfolds of size of computing power.
Proof of Stake
During voting about which block will be connected to block chain depends on how much of unites of certain cryptocurrency you own, not on computing power.
Hashing algorithm used for example by cryptocurrency Bitcoin.
Scrypt is cryptographic algorithm used in cryptocurrency Litecoin. Unlike SHA-256 is less computationally demanding.
Nickname of anonymous creator of the first version of Bitcoin. In 2008 was under this nickname sent an email with first document describing work of cryptocurrency Bitcoin (Bitcoin: A Peer-to-Peer Electronic Cash System).
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- cryptominded.com, A Glossary of all the Cryptocurrency Terms you need to know [online], ©2017-2019 [cit. 10.4.2019], Available online
- NAKAMATO S., Bitcoin: A Peer-to-Peer Electronic Cash System [online], 31.10.2008 [cit. 10.4.2019], Available online