– Cryptocurrencies are digital currencies that use cryptography to secure transactions and control the creation of additional units.
– Cryptocurrencies are usually built upon decentralized networks (i.e., blockchain technology), but cryptocurrencies can also be centralized or distributed in nature.
– Cryptography is the process of using mathematical algorithms to encrypt information so that only those who possess the decryption key can read it.
– Blockchain is a distributed ledger. Its a digital record of transactions, but its also a shared database and an app for uploading data to the internet.
– Smart contracts are agreements that use code to automate the performance of the contract and make sure it’s fulfilled. Smart contracts are part of the blockchain, which means they are stored on a decentralized ledger (the blockchain) and cannot be altered once written into it.
– A cryptocurrency wallet is a safe digital wallet that may be used to store, transmit, and receive digital currencies such as Bitcoin.
– Tokens are the ones that are built on a blockchain. They can be used to represent a digital asset, digital information, digital file, or physical object.
– Distributed Ledger Technology (DLT) is also known as blockchain technology. It is a decentralized system that allows for the verification of transactions without the involvement of any third party.
– Nodes are computers connected to the network. A large number of nodes on a blockchain network makes it more secure and reliable.
– Proof of Work and Proof of Stake are the two most important terms in the cryptocurrency industry. Proof of Work requires miners to find a number called nonce which is smaller than a given threshold value and hash it with the SHA-256 algorithm to produce a valid block hash. Proof of Stake, however, differs from its predecessor as it doesnt require any work (mining) to verify transactions on a blockchain network.
– Mining pools are groups of miners that combine their computing power to increase the chances of mining blocks. This is done because it is significantly more difficult for an individual miner to generate a block on his own.
-Tokens are digital assets that can be used as a medium of exchange or an investment instrument. These tokens represent a stake in the platform and can also provide voting rights over its use and development.