The term Crypto might be a standard term for you but for most people (me) crypto is still very much a new and mysterious concept. I have just started my first week at DefiDive which is a cryptocurrency start-up and I have been busy learning the ABCs of cryptocurrency.
Here are the top 10 essential terms I have learned:
DefiDive is a data terminal that provides all your critical crypto news, prices, and data in one website without ads or distractions. DefiDive is managed by a small team of decentralized finance advocates with plenty of experience in the crypto environment.
Their mission is to empower everyone to find the best investments within decentralized finance by providing accurate, clean, and accessible data for everyone. Discover DefiDive and what they can offer you now!
Cryptocurrencies or crypto such as Bitcoin is digital money that uses distributed databases, known as blockchains, to record transactions. Cryptos are secured with encryptions consisting of public/private keys which allow easy and secure transactions.
These cryptocurrencies can be used just like any other fiat money and can be traded and exchanged between consenting parties. This means banks and centralized financial institutions are cut off which reduces fees on transactions as well.
Cryptos are kept in digital wallets that are accessible from anywhere around the world with access to the internet. Cryptocurrency is an alternative to our current stringent financial services and with time many advocates hope that it will be a global currency that everyone has access to.
3. Digital Signature
A digital signature is a cryptographic output used to verify the authenticity of data. The signatures consist of a public and a private key pair, one you can share with others, the other a secret key only you know.
The private key is used to create a signature, and the corresponding public key is used to verify the signature. Digital signatures are helpful to verify that you signed the data or transactions and signatures cannot be rescinded or revoked.
- Decentralised Finance (DeFi)
The act of taking out the 3rd party in any financial transactions or democratizing finance. Decentralized finance, also known as DeFi, uses cryptocurrency and blockchain technology to manage financial transactions. We can have financial services from everyday banking, loans, and mortgages, without the need to pay fees to banks and brokerage firms. Moreover, we are not limited to an amount or geographical region as cryptocurrency is a currency set by the market. How convenient!
- Mining/ Proof of Work
Proof of work (PoW) is a decentralized consensus mechanism that requires members of a network (a miner) to expend effort solving an arbitrary mathematical puzzle. It is a mathematical process that is designed to be difficult to solve, but easy to verify. Which will then help strengthen the blockchain so that transactions that happened are secured. Proof of work at scale requires huge amounts of energy, which only increases as more miners join the network.
Blockchain is a distributed ledger of transactions made into blocks that are encrypted for security. Each block is linked to prior and subsequent blocks which makes it very difficult to hack or tamper with.
Thus, the longer the chain the more trustworthy it becomes as the work needed to change the chain increases. Miners are what we call people who take all the recorded transactions and encrypt them into blocks.
Crypto miners are incentivized to keep the blockchain secure by receiving a reward for accurately updating the blockchain. Although blockchain takes a lot of energy to be developed, professional mining companies have taken a greener approach to fuel their crypto mining.
NFTs are Non-fungible tokens which are cryptographic assets on a blockchain with unique identification codes and metadata that differentiate them from each other. NFTs are like asset grants as they represent unique objects such as digital art.
Thus, there can only ever be one of that NFTs and that scarcity appeals to collectors and artists alike. The current market excitement is in using this technology to sell digital art which is a great advantage for artists. Some examples of NFTs are Twitter tweets, pictures of objects, GIFs, and in-game skins.
Web 3.0 or Web3 refers to a "decentralized online ecosystem based on blockchain." Web3 is an upgraded version of our current internet environment and has gained popularity in recent years as it puts the power in the hands of individuals rather than corporations.
Web3 decentralization will also give users greater control over their data which helps protect our privacy. Although there is a downside to Web3 such as difficulty in regulation and enforcement of cybercrimes. But many are optimistic about Web3 bringing in more good than bad as Web3 is putting the power in the hands of the people and gives more room for freedom.
9. Decentralised Science (DeSci)
Scientific research of any kind can be limited to where, when, and how much. Whereas, with blockchain technology, scientific research can progress much further and faster.
DeSci is a global, open alternative to the current scientific system where scientists can raise funding, run experiments, share data, and distribute insights that can be accessed by others. A global open source of research information that is shared by all people can create a great environment for these researchers to progress beyond individual means.
10. Decentralised Autonomous Organisation (DAO)
A decentralized autonomous organization (DAO) is a bottom-up organization that has no central governing body that acts in the best interest of everyone as a whole.
DAO is constructed by rules encoded on a blockchain so that proceedings and rulings are often transparent to everyone interested. There are limits such as time wasted on garnering decisions from people from different backgrounds. But in DAO more individuals have their voices heard because of its transparent governance.
And that’s the end of the list of the 10 Crypto Terms that I have learned in the first week at DefiDive. Understanding the terms and phrases used in the crypto space might be challenging but it can be rewarding too.
So let’s face the future and take a deep dive into the world of cryptocurrency.