Crypto Vocabulary
Like many other financial markets, the cryptocurrency market has evolved its own jargon. Some of the key terms used by market operators are defined below.
- Block: A collection of transactions permanently recorded on a digital ledger that occur regularly in every time period on a blockchain.
- Blockchain: A constantly growing list of blocks in a peer-to-peer network that records transactions.
Cryptocurrency exchanges: Also called digital currency exchanges, these generally consist of online businesses that allow customers to exchange cryptocurrencies for fiat currencies or other cryptocurrencies. - Cryptocurrency wallet: A secure digital account used to send, receive and store digital currencies. Crypto wallets can either be cold wallets that are used for storing cryptos in an offline environment or hosted wallets that are hosted by 3rd parties. Hosted wallets store your private keys and provide security for your digital currency balances.
- Distributed ledger: A network of decentralized nodes or computers that connect to a network where transaction data is stored. Distributed ledgers do not have to involve cryptocurrencies and can be either private or permissioned.
- Fork: Also known as a “chain split,” a fork is a split that creates an alternate version of a blockchain that then leaves 2 blockchains running simultaneously. For example, Bitcoin and Bitcoin Cash came about due to a fork in the original Bitcoin blockchain. Another type of fork is known as a “project” or “software fork.” This occurs when cryptocurrency developers take the source code of an existing altcoin project and create a new project. For example, Litecoin is a project fork of Bitcoin.
- ICO: An initial coin offering (ICO) occurs when a new digital currency or token is sold, typically at a discount, to its first set of investors. An ICO lets issuing cryptocurrency companies raise funds from the public to support their coin’s development and maintenance.
- Mining: A computationally-intensive process performed within a cryptocurrency network where blocks are added to the blockchain by verifying transactions on its distributed ledger. Miners are rewarded with digital coins as compensation for their successful computational efforts.
