An overview with explanations for selected keywords:
- Altcoins: Short for “Alternative Coins”. Name of all cryptocurrencies that are not Bitcoin. The best-known altcoins include Ethereum and Ripple.
- Blockchain: A database in which information is encrypted in blocks. Blockchain is the fundamental technology of cryptocurrencies.
- Bridge: “Bridges” are interfaces for exchanging cryptocurrencies with one another. For this purpose, the corresponding amount is blocked on the blockchain of the original currency. In return, the user receives another cyber currency of the corresponding value.
- DLT (Distributed Ledger Technology): Basic principle of certain types of blockchain. Copies of the digital “cash book” (ledger) are distributed across multiple computers. After an authenticity check, new transactions are entered into all copies of the “cash book”.
- Halving: The automatic halving of the amount of Bitcoin that can be created through “mining” in a certain period of time and is intended to prevent inflation. This happens approximately every four years.
- Hard Fork: Splitting the blockchain. During the “hard fork” of the Bitcoin blockchain in 2017, one of the two parts served as the basis for the offshoot Bitcoin Cash.
- Hash: Checksum created by each transaction. It is intended to prevent individual blocks of the blockchain from being deleted or changed.
Also read: After Halving: Bitcoin remained relatively stable
- ICO (Initial Coin Offering): A kind of IPO for new cryptocurrencies. Companies or other organizations sell cyber coins or digital vouchers (tokens) to investors. Experts see ICOs more as crowdfunding. In contrast to the classic IPO (Initial Public Offering), ICOs have so far been almost unregulated.
- Mining: When mining or “excavating”, users provide computing capacity for the encryption and authenticity verification of transactions. You will be paid in the respective cryptocurrency. While old PCs were initially sufficient for mining, special high-performance computers are now used, several of which are combined in so-called rigs – similar to the components of a hi-fi system. Multiple rigs form a server farm.
- Mt.Gox: At times the largest Bitcoin exchange in the world. It went bankrupt following hackers stole 650,000 Bitcoin in 2014. Today’s market value: around 37 billion dollars (34.73 billion euros).
- Satoshi Nakamoto: Pseudonym of the inventor(s) of Bitcoin.
- Proof-of-Work/Proof-of-Stake: The “mining” of Bitcoin and many other cryptocurrencies has so far mostly been carried out using the “proof of work” method. Several “miners” begin encrypting and authenticating transactions. The person who finishes the calculation first will be rewarded in the respective cryptocurrencies. The other “miners” have made their computer capacity available for free and are left empty-handed. A less energy-intensive alternative is the “Proof-of-Stake” method, in which a “miner” is automatically selected for validation. Some digital currencies already use this technology. Ethereum switched from “Proof-of-Work” to “Proof-of-Stake” a few years ago.
- Stablecoins: Cryptocurrencies whose price is not determined solely by supply and demand, as is the case with Bitcoin. Stablecoins are usually pegged to a currency or another underlying asset such as gold.
- Token: Digital vouchers that are usually issued as part of an ICO. Tokens come in numerous variants. For example, they can be exchanged for services or secure investors shares in future company profits.
