In our previous blog, we went over the cryptocurrency terms related to trading. As a consumer, you may come across a few other terms that are related to cryptocurrency but not necessarily connected with trading. Let’s called this general terms. In this blog, we will explore these terms and their meanings.
Blockchain refers to a decentralized ledger that is protected by cryptography. Blockchain technology is what makes cryptocurrency possible.
A node refers to any computer that has a copy of the specific digital ledger that it needs to help maintain. For instance, a node may contain the blockchain for Ethereum, however it may not manage the blockchain for Bitcoin.
The process of mining is crucial to blockchain. It refers to the process of trying to solve the next chronological block. People offer mining services in order to earn money. More often than not, these services are rewarded with Ether. It takes a tremendous amount of computer processing power in order to do this correctly.
A computer that has been specifically designed in order to perform mining tasks is known as a mining rig. An example of a mining rig is Ethereum.
A fork refers to an event in the blockchain. In this, the blockchain ends up splitting into two chains. This generally occurs when someone builds in new governance rules into the blockchain. The chain splits in order to accommodate these new rules.
PoW stands for proof of work. This is the main algorithm that is used by Ethereum.
PoS stands for proof of stake. It is a proposed algorithm on Ethereum that is meant to measure consensus. In the version of it that is active currently, users will be able to lock their coins and then vote on matters to generate a consensus. They will then be rewarded with ETC.
Software wallets are a form of storage for cryptocurrencies that are mainly files on computers. They can be generate for free. MyEtherWallet is an example of a source that helps people generate a software wallet.
A hardware wallet is a device that is used to store cryptocurrency. These are considered the most secure forms of cryptocurrency storage. Some examples of hardware wallets are Ledger Nano S and Trezor.
In order to prevent their cryptocurrencies from being hacked, some people move them offline. This is known as cold storage. Using a hardware wallet is a form of cold storage. Other ways to move cryptocurrencies offline include printing the QR code of the software wallet and keeping it in a safe place, and moving the files of a software wallet to a pen drive.
These are the most commonly used cryptocurrency terminologies that you will come across while reading up on this industry. Once you gain more familiarity with them, you will feel more confident about investing in cryptocurrencies. If you are wondering what steps you should take to invest in cryptocurrencies, read our blog on the same!