Cyrptocurrency Terms
Cyrptocurrency Terms are modern knowledge for everyone, and to everyone who wants to understand the new terminology, or for everyone who wants to deepen their knowledge within this world. To start, we can talk about the term Cryptocurrency first. Cryptocurrency can be easily and simply defined as an all-digital and encrypted, virtual currency that can be used in barter transactions.
In our modern world today, cryptocurrencies are a phenomenon that has been heard by many people and has attracted a lot of attention from heads of state to giant companies. Cryptography is used to verify and securely execute swap transactions. without having any for of physical counterpart.
What is Cryptology?
Cryptology is a science of encryption. It is the encryption of data according to a system. Cryptocurrencies are transferred through the creation and decryption of passwords on the medium. Algorithms such as hash functions are used.
History of Cryptocurrencies
Since the 90s, the leap era of technology, many attempts have been made to create a digital currency. Systems such as Flooz, Beenz, and DigiCash have been developed, but these attempts have failed due to fraud, financial difficulties, and internal conflicts. All these studies developed the idea of a reliable, third-hand approach.
The first cryptocurrency, Bitcoin, was developed in early 2009 by the person or people who came up with the code name Satoshi Nakamoto. Although it is said to have been developed by Satoshi Nakamato, it was shared as open source software by an unknown person(s). This network, which can be considered among the most important Cryptocurrency terms, runs on a platform with a similar concept to file sharing platforms with end-to-end encryption.
Security of Cryptocurrencies
One of the most important problems with payment systems is the possibility of spending the same money twice. The traditional method used to avoid this is to put a central intermediary (banks) keeping track of transactions made. However, this method means the intervention of an authority that can control all capital. This reduces reliability.
However, in a decentralized, in other words, distributed network -like Bitcoin – every part of the system must approve in order for the transaction to take place. These transactions are made through the blockchain, so every transaction can be seen by everyone.
All transfer transactions are made with the wallet addresses of the sender and receiver and the amount to be sent. The exchange or shipment transaction must be verified by the sender and then confirmed by the system. Confirmation can only be performed by miners by solving a cryptographic puzzle. Once a transaction is confirmed, it cannot be reversed. The biggest risks for cryptocurrencies are the possibility of hacking and attack.
How is Cryptocurrency Produced?
The production of cryptocurrencies is also carried out through a distributed system like themselves. So it is user based. Cryptocurrencies have a production limit, so as the amount of cryptocurrencies produced increases, the transactions that need to be solved to produce cryptocurrencies become more difficult.
The production process is done by mining, even though there is no physical mining, operations based on solving mathematical problems are made. In other words, if you have the processing power and internet connection, you can undertake the mining task without being assigned by someone.
Is Cryptocurrency Legal?
The legality of cryptocurrencies varies from country to country. Some countries expressly allow its use and trade, while the legal status of others is still unclear or volatile. Some countries have banned or limited the use of cryptocurrencies.
“Is Bitcoin legal?” Questions like these are asked by many people. Currently, there are no laws or restrictions on the use of Bitcoin by the governments in most developed or developing countries, so you are unlikely to be penalized for holding, buying or selling Bitcoin or other cryptocurrencies in your wallet. Bitcoin or cryptocurrency mining is not a crime. There is no illegal situation.
Coins and Tokens
We tend to use the Cryptocurrency terms “coin” and “token” interchangeably when talking about cryptocurrency, but they are different.
A coin is the native currency of a blockchain. For example, Ether is the coin of the Ethereum blockchain. Cryptocoins include Bitcoin, Ripple, Ethereum, Dogecoin, NEO and Litecoin.
Tokens are coins created on another blockchain. For example, dozens of tokens have been created on the Ethereum blockchain, including Enjin Coin, SAND, Radix, and Lotto.
An important difference between the coin and the token is that the gas fee – that is, the “tax” charged on crypto transactions – usually has to be paid using the native currency of the blockchain. So, if you use SAND or Radix or Lotto, your blockchain transaction fees are paid in Ether. Conversion and payment can happen automatically in the background, or you may need to keep some Ether in your wallet depending on the token and app you use.
Is Crypto Safe?
The news makes crypto investors appear to be subject to constant scams and hacking attacks. Some of these losses occurred on crypto exchanges that did not apply modern security measures to the money their customers entrusted years ago.Others are due to software bugs in certain applications, especially DeFi applications.
The Future of Cryptocurrency
Cryptocurrency has the potential to be a populist alternative to the banking system’s monopoly on financial markets and investment. It can include more than a million people without even a bank account in the world economy and ensure that everyone benefits from this contribution.
Governments, banks and investment institutions are now experimenting with their response to the growth of cryptocurrencies. Some see crypto as a threat, while others see it as a technology that can coexist with traditional financial instruments. Some countries encourage the use of crypto, while others discourage it. Regulations change frequently – as an investor you should take such changes into account. While talking about the future, it is critical to keep considering the differenet facts.
51% Attack
In cryptocurrency mining, a single miner or a group of miners producing in a network becomes more than half of the production power. Thus, theoretically, it causes the processes and production to pass to this person or group. This amount of power makes them theoretically the authority in the network. It is assumed that all miners on that network trust the holder of this power. Because whoever holds this power can manage the following operations.
- Removing a process that conflicts with someone else’s
- Stop verification of another miner’s transaction
- Spend the generated Cryptocurrency multiple times
- Preventing other miners from extracting valid blocks
2FA
2-Step Verification. It is the security process in which the user performs another verification in addition to the password while logging in to the system. It is recommended for the security of exchanges or wallets.
Anti Money Laundering (AML)
Prevention of money laundering. It’s the term used to stop people converting any form of illegally obtained funds to make it look like it’s been legally earned. There are institutions all over the world that prevent money laundering, not just Bitcoin and Cryptocurrency. Masak in Turkey was established for this purpose.
Arbitrage
It is to trade simultaneously between assets and instruments, including commodities such as gold, silver, oil and cryptocurrencies such as Bitcoin, in different market conditions (to profit from price differences between various exchanges).
ASIC
It is a silicon chip specifically designed to do a single task. It is a processor system that acts with hard-wired instruction sets on unique functions. ASICs are cheaper and faster than general purpose processors that can do the same job. It is designed to handle SHA-256 hash issues in mining bitcoins.
ASIC Miner
It is the general name of equipment with low electricity consumption, high production power, ASIC chip, configured for Bitcoin mining.
ATH
All Time High. An acronym for an asset’s all-time high data.
ATL
All Time Low. An acronym for an asset’s all-time low data.
Bear Market
The term, named after the bear’s claw hitting from above, represents a high rate of decline over a certain period of time. It is the opposite of a bull market. Indicates that investors will sell.
Bitcoin Investment Trust
This private open-ended fund invests specifically in Bitcoin and uses a technological protocol to securely store Bitcoins on behalf of investors and shareholders. It provides a way for people involved in the fund to invest in Bitcoin securely, without having to store and buy their own digital currency.
Confirmation
A transaction that means a transaction has been verified by the network and is unlikely to be reversed. An acknowledgment is secure enough. However, more than one confirmation may be required for larger quantities. Each confirmation can take from 5 minutes to 30 minutes depending on system intensity. “Three approvals” is the number of transactions accepted by the majority. Each new confirmation greatly reduces the risk of backfire. Each confirmation means reconfirmation of the correctness of the transaction.
CPU
It is the processor of the computer. In the early days, these were used in Bitcoin mining, but are no longer used as the difficulty level has increased. It is used in the mining of some new cryptocurrencies.
DDoS
It is a distributed denial of service attack that uses large numbers of computers under an attacker’s control to consume the resources of the central target. They send small amounts of network traffic over the internet to bind up compute and bandwidth resources at the target, often blocking legitimate users from being served. Bitcoin exchanges and mining pool sites are constantly exposed to DDoS attacks.
Deflation
In general, it is the situation in which the prices in the market show a continuous decrease in a certain period of time. In addition, it is the economic policy that aims to stop or slow down the price rise due to the inflation situation or to reduce the prices in the face of the inflation trend.
Dead Cross
Death Crossing. The 50-day moving average falls below the 200-day moving average. Technical indicator pointing to a downtrend and the opposite of the Golden Cross.
Difficulty
As it is close to its literal meaning, this Cryptocurrency Term is a numerical value that indicates how long it will take to produce a block in Cryptocurrency production. The higher the difficulty level, the more time it takes to solve the block problem of that cryptocurrency. The difficulty curve is determined in the software phase of the cryptocurrency protocol. Accordingly, as the producer increases, the difficulty level increases at a certain rate.
Double Spending
It is the act of spending Bitcoin or other altcoins twice. Occurs when the user makes a 2nd transaction with the same cryptocurrency with which they traded Bitcoins. Double spending isn’t easy thanks to the Bitcoin network operation and security system, but it still poses a risk to those who accept zero-confirmation transactions.
Hardware Wallet
It is a physical hardware device that stores the user’s private key. Crypto assets backed by Flash Memory-like devices can be stored.
Dust Transaction
It is a transfer transaction involving extremely small amounts of Bitcoin, which has a very small financial value but takes up space on the blockchain. The Bitcoin developer team strives to eliminate dust transactions by increasing the minimum amount of transfers to be transmitted by the network.
Paper Wallet
It is a printed plate containing one or more public Bitcoin addresses and their corresponding private keys. It is often used to securely store Bitcoins instead of software wallets that can be easily destroyed or web wallets that can be hacked or disappeared. It is a useful form of cold Bitcoin storage.
Private Key
It is a private numeric key that is private and necessary to transact. It can be used to access the wallet.
Proof of Stake (PoS)
It is an alternative to proof-of-work where a current stock of a currency is used to calculate the amount of money you can infer.
Proof of Work (PoW)
It is a system that connects computational power to digging capacity. The blocks need to be excavated with an easy calculation process in itself. However, an additional variable is added to make the digging process more difficult. When a block is successfully extracted, the extraction should have taken some time and computational effort. Thus, the inference block is considered proof of work.
Public Key
Bein one of the most important Cryptocurrency Terms, Public Key refers to the public Bitcoin or cryptocurrency address that is shared with everyone. It cannot be used to access the wallet.