Cryptocurrency

Cryptocurrency refers to any digital or virtual currency with the advantage of cryptographic security. What it means is that it is very difficult to double-spend or counterfeit cryptocurrencies. Various cryptocurrencies are basically decentralized networks developed on blockchain technology, a type of distributed ledger. The most striking highlight of cryptocurrencies is that they don’t have a central authority for issuing and governing cryptocurrencies.

Cryptography is a vital element in the design of cryptocurrencies and blockchain networks in general. It refers to the method of encrypting and decrypting messages with secret codes to make them incomprehensible for desired receivers. Cryptography is all about creating and analyzing protocols to prevent third parties or the public from accessing certain private messages alongside ensuring data confidentiality and integrity.

Bitcoin is the world’s first cryptocurrency, which directed everyone’s attention towards cryptocurrencies. Based on the Bitcoin blockchain, this cryptocurrency delivers a peer-to-peer electronic cash system that has been the foundation of many other cryptocurrencies. Bitcoin arrived in 2009 with the efforts of Satoshi Nakamoto, the anonymous founder of the first cryptocurrency the world has ever seen.

Burning is an important concept in the world of cryptocurrencies and plays a crucial role in the evolution of the crypto economy. You can burn cryptocurrencies by sending them to a wallet that can only receive cryptocurrencies. The mechanisms of cryptocurrency burning generally bring a deflationary impact. As a result, the lower quantity of tokens in circulation would automatically increase the scarcity of tokens held by investors.

Buying the dip is more of a catchphrase in the world of cryptocurrency trading. It means to encourage an individual to purchase a cryptocurrency when it has dipped to the lowest value. If anyone says ‘buy the dip,’ it implies that you should purchase more of a certain asset once its price has depreciated considerably. For example, a Bitcoin owner could purchase the dip once the price of the cryptocurrency drops by almost $10,000. 

Bear trap is basically a trick by certain traders to manipulate the price of a cryptocurrency. Traders can set the bear trap by selling all of their cryptocurrencies at the same time. As a result, it creates anticipation about a potential dip in the value of the cryptocurrency. Therefore, other traders would sell their assets and drive the price down. The traders setting the bear trap would purchase their assets at a lower price and make profits.

Chain linking is an important concept for any individual interested in capitalizing on the use of cryptocurrencies. All cryptocurrencies have their own blockchain network, which is actually a digital ledger for storing all transaction records. With the help of chain linking, you can easily transfer or exchange two cryptocurrencies for each other. The process supports documentation of the transaction in different blockchains to achieve the desired objectives.

The circulating supply of a cryptocurrency token refers to the total number of coins associated with a cryptocurrency network that are available for public trading. Cryptocurrency creators can determine the number of coins in the circulating supply of cryptocurrencies at given instances of time. The coins that are locked, burned, or reserved will not come into the circulating supply and remain unavailable for trading in public spaces.

A cryptographic hash function is the most critical factor for ensuring the security of cryptocurrencies. It is a process carried out on a specific node in the cryptocurrency blockchain network. The process involves the conversion of an input into a fixed and cryptographic alphanumeric string documented clearly in the blockchain. A hashing algorithm takes control of the conversion, and each cryptocurrency has its unique hashing algorithms.

A deterministic wallet refers to the type of crypto wallet that can be created by generating multiple keys from a particular seed. In case you lose the deterministic wallet, the seed can help in recovering your wallet key. In addition, you can use variants from the seed to make transactions without producing new keys every time. As a result, the deterministic wallet offers improvements in transfer and storage. 

The notion of difficulty in the domain of cryptocurrency refers to the difficulty of mining the concerned cryptocurrency at a given point in time. You can figure out cryptocurrency difficulty by taking note of the cost of mining the cryptocurrency at the concerned moment in time. A difficulty is basically a number of confirmed transactions divided by the total power of nodes in the crypto network at that time. 

A double-spending problem is basically a process in which one specific unit of currency has been spent concurrently more than once. The double-spend problem is responsible for creating a huge gap between the spending record and the amount of available cryptocurrency. Double spending is one of the common issues with cryptocurrencies due to the possibility for manipulation and reproduction of digital information easily. 

Dusting refers to the scenario where some people deliberately attempt to slow down a network by flooding it with minor transactions. The small transactions, known as dust transactions, end up imposing a considerable burden on the network’s computing power. It is basically an offensive method for breaking the privacy of cryptocurrency users by malicious agents sending crypto that is stored in the wallet already. 

ERC is an acronym for Ethereum Request for Comment. It is a simple method tailored for communication about the essential technical notes and requirements relevant to a group of users and developers. For example, the ERC-20 token standard has been a benchmark for creating many new tokens in the crypto space. As of now, there are tens of thousands of different crypto tokens working on the precedents of the ERC-20 standard.

The name of Ethereum is obviously a given in any crypto dictionary, considering that it is the second most popular cryptocurrency network. Ethereum features two important similarities with Bitcoin in that it is open source and relies on a blockchain technology foundation. However, it also differs from Bitcoin considerably by allowing developers to write smart contracts and develop decentralized applications on Ethereum.

An exchange in the domain of cryptocurrency points towards crypto exchanges. The platforms help in exchanging cryptocurrencies with one another as well as with fiat currencies. At the same time, crypto exchanges can also facilitate crypto exchanges among different entities. You can find different types of crypto exchanges depending on the type of currency conversions supported by them and their pricing mechanisms. 

A fork refers to the creation of a new version of a blockchain, thereby creating two distinct variants of a single blockchain running in parallel with each other. In the case of forking, a single blockchain would divide into two, albeit running on the same network. You can find two distinct categories of forks such as a hard fork and a soft fork. Many cryptocurrency variants have evolved as forks from top crypto networks such as Bitcoin. 

A futures contract is basically a pre-approved contract among two entities to complete a transaction in the event of the cryptocurrency value reaching a specific price. The futures contract is different from limit orders as the buyer and seller are already selected and bound to the contract. Applications of a futures contract are highly feasible and relevant when buyers want to go short, and sellers want to go long on the crypto asset. 

Miners can earn Bitcoin by approving transactions on the Bitcoin blockchain network. Filling up each block on the Bitcoin blockchain with transactions often leads to the entry of a specific amount of Bitcoin in the marketplace. On the other hand, the specific amount of supply for Bitcoin at 21 million coins is also an important concern. Therefore, the amount of Bitcoin earned for filling one block is reduced by half upon completion of the block.

A lightning network is basically a peer-to-peer system that ensures cryptocurrency micropayments. The major focus of the lightning network would rest on ensuring faster payments with lower latency. Most importantly, lightning networks are highly scalable and low cost, alongside ensuring interoperability across multiple chains. In addition, a lightning network also allows the flexibility to choose between public and private transactions. 

Liquidity is the general term used in financial markets for defining the ease of converting an asset into cash. In the case of cryptocurrencies, liquidity refers to the ease of converting a crypto coin to other coins or fiat currencies. Liquidity is a vital aspect for all assets suitable for trading, such as cryptocurrencies. Lower liquidity would imply higher market volatility, thereby resulting in the fluctuation of crypto prices. 

The concept of lock time is applicable in the case of Bitcoin transactions. It is simply the time in which you can add a specific transaction to the blockchain. Lock time indicates the earliest instance when miners can incorporate a concerned transaction in the hashing of Merkle root. Subsequently, it involves attaching the transaction in the latest block to the blockchain. You can find two distinct types of lock time for crypto transactions.

Margin trading is a riskier crypto trading strategy leveraged by experienced traders through risking the existing coins and magnifying the intensity of trading. As a result, they can buy more of an asset than they can afford by capitalizing on the leverage provided by a crypto exchange. Generally, margin trading involves assets borrowed from a third party or intermediary and is more frequent in markets with low volatility.

Mining is an important aspect of the operation of cryptocurrencies as it is essential for the verification of transactions on a blockchain. Crypto miners take on the task of solving complex mathematical puzzles by using advanced computing hardware and massive volumes of electricity. The task of miners is to solve the puzzles and add transactions to the crypto network. In return, miners get a specific portion of crypto as their reward.

In many cases, multiple miners can come together to combine their computing power to attempt the completion of transactions needed to start new blocks on the blockchain. The group of miners is known as a mining pool. All rewards in the mining pool are distributed proportionately among miners according to their contributions. Mining pools can ensure better possibilities for successful hashing and sizable crypto rewards from mining. 

Oracles are a powerful tool for empowering crypto networks and exchanges with information. They are basically the bridge between smart contracts on a crypto blockchain network and the external world. Oracles help in collecting data from the external world and providing the necessary information required for carrying out specific tasks. You can find oracles commonly on the Ethereum network. 

Relative strength index refers to the technical analysis approach for determining the momentum of price variation over the course of time. It considers the latest exponential changes in pricing with the recent changes offered priority over the older ones. The relative strength index for a cryptocurrency showcases its overall movement trend, thereby providing a clearer impression of the market. 

Selfish mining is a scenario where miners find or develop a new block in the blockchain and don’t share the same information with the network. The selfish miner can easily get a head start for the new block. As the other miners continue to spend their computational power on mining an old block, the selfish miner could move towards the next block and reap the rewards earlier than other miners in the network.

Liquid Proof-of-Stake or Liquid PoS is a consensus mechanism that enables token holders to delegate their validation rights to other users without giving up their token ownership. The concept of liquid PoS can appear similar to that of delegated PoS, albeit with some vital differences. In liquid PoS, token holders can make decisions on staking their own tokens or delegating their validation rights to other users. 

Rug pulls are one of the most common types of attacks in the cryptocurrency space. Instances of rug pulls are evident when a specific cryptocurrency creator vanishes without any trace of the user’s funds. Most recently, a fraudulent Squid Game coin demonstrated that rug pull schemes in crypto are not rare. Developers launch a new cryptocurrency in an ICO and then disappear without any trace after raising a hefty capital.