Crypto Frontline

Glossary

Bitcoin

the world’s first and most valuable digital currency on the planet. Bitcoin was originally created in 2008, by an assumed person named Satoshi Nakamoto. Bitcoin had revolutionized the monetary system, by offering for the first time a more transparent and free alternative to fiat money. The blockchain technology had enabled the appearance of bitcoin, an invention that was possible due to recent technological development. Basically, the bitcoin system represents a distributed database of all the financial transactions that are made in the system. By using this type of structure, there is no single person that stores all the information, so the risk of losing all the information is very small. Bitcoin had come with a much greater level of security than the traditional monetary system and that is why it managed to gains so much momentum.

Block

When it comes to digital currency, a block is a file that permanently records financial transaction data. Blocks are also structured in a linear time sequence, which is also known as the block chain. The process goes the following way: as transactions are taking place on a constant basis, the miners process them into new blocks and the blocks are added at the end of the chain and no one can change them once accepted by the network. When it comes to the block structure, it has the following components: a magic number, the blocksize, the blockheader, the transaction counter and the actual transaction.

Cryptocurrency

a digital currency, which compared to traditional or fiat money, is not issued by a central bank or any public agency. Most of the cryptocurrencies are created through the process of mining. Mining usually represents transaction processing and finding a proof-of-work. Depending on the cryptocurrency, both activities have a certain way of operating and the miner, or the person that wants to generate that certain type of cryptocurrency, has to obey the rules of the system. Cryptocurrencies are used as an alternative for fiat money, but so far, there is a limited number of places where people can use them in exchange for goods and services. Some people also like to call cryptocurrencies “digital gold”, due to the fact that gold is also obtained as a result of a mining process.

Ether

A unique piece of code from the ethereum system that is used as a payment for the computational resources needed to run a program or application. It basically represents a digital asset, but it does not work as a digital currency, instead it aims to provide “resources” for the decentralized programs in the system. One of the positive aspects of ether is that is does not have a hard cap. Bitcoin, for example has a cap of 21 million, meaning only that amount could even be mined. In case of ether we do not have that cap. Current statistics point that around 18 million ether are being mined every year and 5 ether every 12 seconds. The sole negative aspect of that is no one knows the exact number of ether in the market and ethereum wants to move to a new proof-of-stake consensus algorithm, which will change the way ether will be created.

Ethereum

the main rival of Bitcoin, in terms of market share and valuation. Even though ethereum is knows just as a cryptocurrency, the ethereum system has a much broader use and it does not serve just as digital money. It can facilitate most of the exchange activities, that have a commercial purpose and that is possible with smart contracts. In terms of the mining process, since ethereum had appeared a few years after bitcoin, the level of difficulty is much smaller, thus requiring less hardware capacity. However, since the market valuation is lower, as compared with bitcoin, each ethereum coin will represent a smaller profit.  It uses the blockchain technology, like bitcoin, meaning all the information from the system is stored in a data base that is distributed among all hardware from the system.

Faucet

A digital currency reward system, designed as a website or app, which offers rewards in the form of satoshi or any other crypto currency, for completing different kinds of activities like: completing a captcha or any other tasks that are mentioned in a particular website/app. The goal of faucets are to get traffic, make money and introduce new users to digital currency. New users can earn digital coins by completing simple tasks and can experience the use of them.

Hash

An algorithm that turns arbitrary large amount of information into a fixed length one (also called as hash). Like any other computer information, hashes are big numbers and are generally written as hexadecimal.

ICO

Initial Coin offering is an unregulated process that enables startups to raise funds in cryptocurrencies. This process is used to bypass the traditional fund raising process, which is rigorous and regulated. When a new cryptocurrency startup want to obtain funds via an ICO, it needs to firstly create a plan on a whitepaper, a plan that will contain all the details about the project. During the ICO campaign, supporters of the startup project literally buy some of the distributed cryptocoins with traditional money or digital currency. These coins are also called tokens and are similar to the well-knows shares of a company. If the money raised won’t be enough to get the project started, all the funds will return to the people that backed the project, thus the ICO will be unsuccessful.

Litecoin

a peer-to-peer digital currency, that enables cost payments instantly and almost with zero fees. It is a global network that is decentralized open source and has no public agency that controls its value. Litecoin was designed as a lighter alternative for bitcoin. Since the bitcoin system makes the process of mining more and more difficult as coins are mined, the litecoin system has been developed to cover that negative aspect. The litecoin mining process is much easier and does not require huge hardware capacity, making it more attractive for people with lower budgets. Litecoin miners are awarded with 25 coins for each block and this amount gets halved every 4 years. The litecoin system can produce around 84 million coins, which is 4 times more than the bitcoin system. As opposed to bitcoin, the litecoin blockchain is assumed to be able to handle a bigger volume of transactions, due to a more frequent block generation.

Mining

the process that leads to creation of cryptocurrencies. Bitcoin, ethereum, litecoin and many other digital currencies use the process of mining for virtual money creation. In the case of most cryptocurrencies, mining is basically a process of financial transactions verification. Users that take part in a particular system, use their own hardware capacity to verify the transactions that are done inside the system, then need to find a proof-of-work and finally are being rewarded in a particular digital currency. The process of mining has some particularities for each crypto currency, so each users should first study the system in order to understand it better.

Namecoin

at the present time, namecoin is just an experimental open-source technology that aims to improve decentralization, privacy and security of the internet infrastructure, such as identities and DNS. Namecoin can make the web area more resistant to censorship, can record and transfer in a secure way arbitrary names (or keys). Namecoin technology was the first to implement decentralized DNS and merged mining. Namecoin appeared in 2011 and same as bitcoin, it is limited to 21 million units. It is the single digital currency that can be used to buy and sell .bit domains on the internet and also it offers the possibility of data storage in your own blockchain.

PPCoin

also known as PeerCoin, it is a cryptocurrency based on Bitcoin and it used a hybrid implementation of both proof-of-work and proof-of-stake. It uses most of the main features found in Bitcoin and above that it promotes energy efficiency, meaning the hardware requirements for mining the digital currency are smaller. It is also based on the SHA256 algorithm, same as bitcoin. The use of a hybrid system, as stated above, increases the security and efficiency of the system. However, besides all the positive aspects of PPCoin, one negative fact which should be mentioned is represented by the high difficulty. Currently, PPCoin difficulty is around 28,668,514.0426 and it is adjusting every one block. Solving the algorithm could take a while, that’s why in the case of PPCoin pool mining is more suitable.

Public Key

As opposed to the private key system, public key encryption mechanism uses two keys, not just one. One key is public and is distributed and the other is private and is never shared. Public key mechanism is the most used, not just for digital currency, but across the web as well.

Private Key

Part of an encryption system designed to protect confidential data. Private key encryption is a form where only a private key can encrypt and decrypt data. One of its main advantages is speed, since it uses just a key. A negative aspect of private keys is that they still could be stolen or leaked, so a good management is required to prevent those things from happening.

Satoshi

The smallest unit of bitcoin recorded on the blockchain that represents one hundred millionth of a single bitcoin or 0.00000001 bitcoins.

Satoshi Nakamoto

Generic name for the creator of the bitcoin system. Currently, no one knows the exact identity this person, but it is being used since the papers that were published before the bitcoin appearance have this name mentioned. There have been many assumptions in the last few years, but all proved to be false and the exact identity of Satoshi Nakamoto is still a mystery.

SHA256

Cryptographic hash function designed by the NSA. SHA stands for Secure Hash Algorithm and it is basically a series of mathematical operations that run on a digital data. SHA256 hash function is used in the bitcoin system for the mining process as the proof-of-work algorithm and it is also used to improve privacy and security by creating bitcoin addresses.