In the rapidly evolving world of cryptocurrency, understanding key terms and concepts is essential for anyone looking to delve into this digital realm.
At TechMoran, we present a comprehensive guide to ten crucial crypto terms to help newcomers navigate this exciting domain with confidence.
These terms include:
Node: A node refers to a computer or device connected to a blockchain network. These nodes collectively maintain a complete copy of the blockchain, validate transactions, and share information with other nodes. They play a vital role in the decentralization and security of the network.
NFT: Non-fungible tokens (NFTs) are digital collectables built on blockchain technology. Unlike cryptocurrencies, NFTs represent unique assets such as artwork, music, or virtual real estate. NFTs have gained significant popularity in recent times, with high-profile sales and auctions making headlines.
On-chain: An on-chain transaction occurs directly on the blockchain. It is recorded and verified by multiple nodes, becoming a permanent part of the public ledger. This transparency and immutability are fundamental characteristics of blockchain technology.
On-ledger currency: On-ledger currencies are cryptocurrencies that are native to a specific blockchain. Bitcoin is a prime example of an on-ledger currency, as it is minted and transacted exclusively on the Bitcoin blockchain.
Orphan block: Occasionally, a solved block may not be accepted by the network and fails to become a part of the blockchain. Such blocks are termed orphan blocks or stale blocks. They occur when multiple miners simultaneously solve a block and the network accepts only one solution.
P2P: Peer-to-peer, abbreviated as P2P, refers to direct transactions or interactions between two parties without any intermediary or central authority. In the context of cryptocurrencies, P2P transactions allow users to transfer digital assets directly to one another, enhancing privacy and eliminating middlemen.
Private key: A private key, also known as a secret key, is an encrypted password-like code that provides access to an individual’s cryptocurrency holdings. It is a crucial component of digital wallets and is used to authorize transactions securely. Protecting and safeguarding private keys is of utmost importance to prevent unauthorized access.
Public key: A public key is a publicly shareable address associated with a crypto wallet. It allows others to send funds to the wallet owner. Each public key is paired with a corresponding private key, known only to the wallet owner, ensuring secure and verifiable transactions.
Proof of work: Proof of work (PoW) is a consensus mechanism utilized by many blockchains, including Bitcoin. Miners must solve complex computational puzzles to validate and add new blocks to the blockchain. By proving computational work, miners earn the right to secure the network and receive rewards in the form of cryptocurrencies.
Proof of stake: Proof of stake (PoS) is an alternative consensus mechanism employed by some blockchains. Validators are chosen based on the number of coins they “stake” or lock up as collateral. The more coins staked, the higher the chances of becoming a validator and earning rewards. PoS provides energy efficiency and security benefits compared to PoW.
By familiarizing oneself with these ten essential crypto terms, individuals can gain a solid foundation in the world of cryptocurrencies and blockchain technology. Stay tuned for further updates and developments as the crypto landscape continues to evolve.
