Blockchain Terminologies you need to know.

Blockchain Terminologies you need to know.

Devinda Dissanayake

Blockchain technology isn't going away anytime soon. We've put together this glossary to assist you to understand some of the most common industry jargon you'll encounter as you learn more about this technology. These are the fundamental pillars for understanding the business models of blockchain-based businesses.

What is blockchain technology?

Blockchain technology is a method of organizing data and keeping records, as well as making them immutable (they cannot be altered after being recorded). Blocks store transaction information such as the date, time, participants, and other relevant parameters. Because of these characteristics, blockchain technology is beneficial in circumstances where data integrity is critical. Financial transactions to ensure the integrity of a product supply chain are examples of use cases. One possible example is the use of blockchain technology to track and verify the supply chain of commonly counterfeited medications in order to prevent drug counterfeiting. Using blockchain technology, each stage of the medicine production process may be registered, confirmed, and eventually accessed.

How does it work?

At each step, information such as the date, time, who is involved in the transaction, and other relevant information is recorded. The data is structured into blocks, which are then stacked one on top of the other, beginning with the genesis block. This sequence of blocks can be thought of as data that has been chained together using hashing and cryptography, which are mathematical approaches for ensuring the security of the data being kept.

How does a blockchain work?
How does blockchain work?

Satoshi Nakamoto and other cryptography specialists, including Nick Szabo, created the blockchain. In the cryptocurrency realm, there are several different blockchains, such as Bitcoin, Ethereum, EOS, and Algorand. Each of them has its own set of advantages and disadvantages that make them best suited to specific applications.

bitcoin

The Bitcoin blockchain is a digital currency that is kept and recorded. Bitcoin (abbreviated as BTC) is the most popular digital money (a.k.a. cryptocurrency) at the moment, with a market capitalization of more than 190 billion dollars as of July 27, 2020. It's vital to keep in mind that bitcoin isn't the same as cryptocurrency or blockchain.

On cryptocurrency exchanges like Coinbase, Binance, and many others, bitcoin is traded. It may be used to buy things on hundreds of websites and is frequently used as a "store of value" alternative (similar to gold). Bitcoin was developed in 2009 and became widely popular in 2017 when its price soared to nearly $20,000 per coin. Its strength stems from the fact that transactions are completed without the use of middlemen such as banks and can be completed cross-border.

Cryptocurrency

The word "cryptocurrency" refers to digital currencies generated with the help of blockchain and other distributed ledger technologies. Cryptocurrencies (abbreviated as crypto) get their name from the cryptography used to safeguard the blockchains and other distributed ledgers that these digital currencies are based on. Tokens are a term used to describe cryptocurrency.

Cryptocurrency exchanges

Cryptocurrency exchanges allow users to buy, sell, and trade cryptocurrencies. Blockchain projects using cryptocurrencies might approach exchanges to explore the process of listing their token or coin on the exchange to increase liquidity. Binance, Coinbase, and Bittrex are three of the most popular cryptocurrency exchanges.

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Wallet

A wallet (in the blockchain world) refers to a digital address that stores cryptocurrencies and tokens. Wallets can be used to send, and receive 0r store cryptocurrencies. Wallets come in a variety of styles, including:

Hardware Wallets

Software Wallets

Exchange Wallets

How do crypto wallets work?

A crypto wallet has a public key and a private key. The public key is used to receive funds and is the outward-facing wallet address (usually a string of letters and digits). Someone who wants to send you cryptocurrency will send it to your wallet address, which is also known as your public key. Only the wallet owner has access to the private key, which you need to sign and approve transactions (like sending cryptocurrency to someone else). The public key's counterpart, the private key, is used to prove that the user possesses the public key. Keep in mind that no coins are exchanged physically, and all transactions are recorded on the blockchain.

How do crypto wallets work?
How do crypto wallets work? 

Fiat Currency

Traditional, government-issued kinds of currency, such as the US Dollar, Chinese Yuan, or European Euro, are known as fiat currencies. National governments are the issuers and controllers of fiat currencies. The amount of fiat money that can be created is limitless. Cryptocurrencies are distinct in that the majority of them have a limited quantity (Bitcoin will have a maximum of 21 million coins, for example).

Stablecoins

Stablecoins are a type of cryptocurrency that aims to keep their value constant, and they're usually tethered to a fiat currency like the US dollar. Because of the way they are built economically, these digital currencies are often less volatile than other forms of cryptocurrencies. Other stablecoins try to reduce volatility by limiting the number of coins in circulation.

Smart Contract

A smart contract is a type of 'self-executing' contract that is relatively new to the blockchain world. The conditions of the agreement are stated in code, much like a regular contract. The contract, which is typically carried out by an external third party, can now be carried out by the code of functions and logic (i.e. a broker or an escrow agent). Smart contracts eliminate the need for a mediator to mediate a transaction by using digital code and regulations. In many cases, this can result in lower costs and more efficiency.

Distributed Ledger Technology, Also known as DLT

Distributed Ledger Technology refers to a database that exists in various locations or among multiple individuals. In other words, the transaction database is distributed rather than centralized. DLT, or distributed ledger technology, is a sort of blockchain technology.

Utility Tokens and Security Tokens

A token is a representation of something in its ecosystem, such as value, stake, or voting right, in general. Utility tokens, on the other hand, are not the same as security tokens. Utility tokens are designed to be utilized only within a restricted ecosystem. Some utility tokens, like Sia, can be used to buy storage space on a decentralized computer network, for example.

This blockchain glossary provides key terminologies essential to start understanding the key concept of this revolutionary technology. Let us know if you know anything to know about these in the comments below.