cryptocurrency glossary

“ERC” itself stands for “Ethereum Request for Comments”, and it is meant to improve the Ethereum network. Destination tags are a short numeric string specific to Ripple . Most Ripple wallets will require a destination tag for the funds to be routed to the correct recipient. Hardware wallets – A physical cryptocurrency glossary device that is only online when it is hooked up to a secondary device such as a laptop or desktop. The pseudonym of the developer or a group of developers who created the bitcoin protocol. Nodes on a network that often require a minimum amount of a given coin staked in order to access staking rewards.

BSA requirements include mandatory reporting of certain activities, record keeping for all customers, and limitations on what kind of monetary instruments may be purchased or exchanged. A type of computer processing chip that performs a singular function. We may also ask to see your driver’s license or other identifying documents. There is no assurance cryptocurrency glossary that digital currencies will achieve their objectives. Cryptocurrencies are very speculative investments, involve a high degree of risk, and are not suitable for all investors. Investors must have the financial ability, sophistication, experience and willingness to bear the risks of an investment, and a potential total loss of their investment.

Think of burying an item under dirt instead of covering it with reinforced concrete. The dirt can always be dug back up, whereas the concrete effectively seals it off forever. Layer 2 software builds upon the Layer 1 foundation, making it more functional and composable. It inherits the properties of cryptocurrency glossary the layers it builds upon, yet extends the functionality of the system as a whole. An example of Layer 2 is the Lightning Network, which allows near-instant transfers between two users on the Bitcoin network. “Fungibility” means that units of a currency or commodity are alike and indistinguishable.

Trade popular currency pairs and CFDs with Enhanced Execution and no restrictions on stop and limit orders. Weak Hands An investor prone to panic selling at the first sign of a price decline. Volatility A statistical measure of dispersion of returns, measured by using the standard deviation or variance between returns from that same security or market index. Venture Capital A form of private equity provided to fund small, early-stage firms considered to have high growth potential.

Market Maker

Customers should consult an attorney or tax advisor for specific tax or legal advice. Only a particular file can produce a particular hash, and two different files will never produce the same hash. bitcoin – without capitalization, is used to describe bitcoins as a unit of account. e.g. “I sent ten bitcoins today.”; it is also often abbreviated BTC or XBT. A whitepaper is written by those that are launching a new digital coin. It explains everything about the coin that someone may want to know.

Examples of fungible currencies are $1 bills, each of which is alike and represents the same value. Interoperability is about systems talking to each other — whether devices, networks, or applications.

  • Cryptocurrency obtained as a result of mining is a taxable event.
  • Arbitrage is the simultaneous purchase and sale of an asset to profit from an imbalance in the price.
  • It is a trade that profits by exploiting the price differences of identical or similar financial instruments on different markets.
  • Arbitrage is the process of buying something for a low price in one market and selling it in another for profit in a very short period of time, exploiting inefficiencies in a given market.
  • Arbitrage can be done with virtually any product including cryptocurrencies.
  • You will have to file income tax on mined cryptocurrency, and file gain or loss when you sell the asset.

Decentralized Exchange

Blockchains are distinct from other computer networks because they are permissionless. Any computer, anywhere can become part of this larger virtual computer as long as they follow the consensus algorithm.

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cryptocurrency glossary

A soft fork often occurs during software upgrades to the protocol. This type of “soft” fork does not result in a permanent split of the network and is more akin to a network migration or upgrade. In other words, nodes on the network remain compatible with one another.

The receiving party can use the same key to unlock the message and read the contents. It provides people with a destination so they can make payments and transfer coins. The Address is unique and encrypted so it can’t be altered or uncovered by anyone. Similar to zero-knowledge proofs, homomorphic encryption enables a user to provide useful information to a third party without revealing specific, private details. cryptocurrency glossary A cutting-edge form of cryptography which enables one party to prove that they know the answer to a question, without ever revealing the answer to that question. Fungibility means that each individual unit is interchangeable, as in how we consider two separate dollar bills to be interchangeable. This is powerful because it creates the “network effects” that enable economies to grow to large scale.

Coins

The coinbase of a block is the address to which block rewards are delivered. Closed source software is proprietary software with source code that cannot be accessed by the public. The ability of anetworkto properly reachconsensusat any time, assuming that no more than 1/3 of itsactorsare malicious. Legislation passed in the United States in 1970 that requires financial institutions to assist government agencies in detecting and preventing money laundering.

cryptocurrency glossary

A type of automated trading that involves the execution of a large number of orders in fractions of a second. The characteristic of an asset whose individual units are not unique and are identical in terms of value and functionality. The term describing the moment when Ethereum surpasses Bitcoin in market capitalization. The term describes the moment when Litecoin surpassed Bitcoin Cash in market capitalization. Legal tender, official national currency whose value is backed by the government. A situation where a certain amount of coins is spent more than once, for example as a result of a race attack.

Bitcoin

The increase in mining difficulty in Ethereum because of its migration to Proof of Stake. A period characterized by a strong selling activity, when investors give up their positions and sell their assets as quickly as possible. Sending half of a cryptocurrency glossary block of your ETH from Exchange #1 to Exchange #2 causes a split of one into two. An “investment” or “investment segment” refers to holding a token for a time duration that causes capital gains or losses, and has a definite start and end date.

It is the primary time standard by which the world regulates clocks and time, kept using highly precise atomic clocks combined with the Earth’s rotation. The name is derived from an acronym for the original software project name “The Onion Router.” It consists of a network of volunteer relays cryptocurrency glossary to conceal users’ location and usage. Ring Signature A method of increasing privacy by fusing inputs of multiple signers with that of the original sender to authorize a transaction. Mining Contract Another term for cloud mining, where users can rent or invest in mining capacity online.