If there is one thing that has become evident in the last decade or so is that blockchain technology is here to stay. Bitcoin, the first digital currency, brought this technology to light, but now it is being used in a number of industries for different purposes. As you dive deeper into this technology, you will come across some common industry jargon and if you want to gain an understanding of blockchain-based businesses, then you need to be familiar with this jargon. What is it that you need to know? Some of the key terms that newbies need to understand are highlighted below:
Blockchain Technology
The first thing that you need to gain an understanding of is blockchain technology itself. To put it simply, it is a way of organizing data and keeping records and then making these records immutable, which means that there can be no alteration after they have been recorded. Information relating to the transactions, such as time, date, the participants and other related details, are stored in these blocks. Due to these qualities, blockchain technology has become extremely useful for maintaining data integrity.
The use cases for blockchain technology can range from maintaining the integrity of a supply chain to the security of financial transactions. For instance, blockchain technology can be used for tracking and verifying the supply chain of drugs that are counterfeited to combat the problem of drug counterfeiting. It is possible to log every step of the drug manufacturing process, verify it, and then view it using blockchain technology.
How does this technology work? At every step, all relevant data, which includes date, time, and the participants of the transactions is entered and organized into blocks. Starting with a genesis block, all of them are arranged one after the other. This sequence of blocks is like data being chained together through cryptography and hashing, which are mathematical techniques that ensure the security of data that is stored.
It was Satoshi Nakamoto who came up with blockchain technology, along with some other experts in cryptography like Nick Szabo. There are different blockchains that have now become part of the cryptocurrency landscape, such as Bitcoin, EOS, Ethereum, and Algorand. Each of these blockchains boast their own pros and cons that make them suitable for different situations.
Bitcoin
When you want to get to know the world of cryptocurrency and blockchain, you need to know exactly what Bitcoin is. The digital currency that’s tracked and stored on the Bitcoin blockchain is known as Bitcoin. Abbreviated as BTC, it is the first and most popular cryptocurrency in the world, but it should be noted that it is definitely not synonymous with blockchain or cryptocurrency. You can currently trade Bitcoin on crypto exchanges, such as Coinbase and it can be used for buying products on different websites.
Many people have begun to use Bitcoin as an alternative ‘store of value’, just like gold. The cryptocurrency was first introduced in 2009, but it wasn’t until 2017 that it gained widespread popularity because its price skyrocketed to reach a whopping $20,000 per coin. The reason Bitcoin gained recognition was due to the fact that it can be used for conducting transactions without the need of middlemen, such as banks, and it can also be used for making seamless cross-border transactions.
Smart Contract
A ‘self-executing contract called a smart contract has become quite popular in the blockchain world. Similar to a traditional contract, its terms of agreement are written in code. The code of logic and functions allow the contact to be executed, which is done by a third-party in traditional contracts i.e. an escrow agent or a broker. With smart contracts, the digital rules and code eliminate the need for a middleman for mediating a transaction. This can result in increased efficiency and decreased costs in numerous applications.
Distributed Ledger Technology or DLT
This is basically the general term that’s used for a database, which exists amongst multiple participants or across several locations. In simple terms, the database of transactions is not centralized but distributed. Blockchain technology is basically a type of distributed ledger technology (DLT).
Cryptocurrency
Digital currencies that are created through the use of blockchain and other types of distributed ledger technologies are known as cryptocurrencies. The term crypto is used due to the use of cryptography for securing the blockchain and other distributed ledgers that are used for developing these digital currencies. Tokens are also another term that’s used to refer to cryptocurrencies.
Stablecoins
A class of cryptocurrencies that are pegged to a fiat currency, such as the US dollar, for maintaining a certain value is referred to as stablecoins. As compared to the other cryptocurrencies, these tend to be a lot less volatile because of how they are economically structured. Other kinds of stablecoins try to limit their volatility by controlling the number of coins in circulation.
Cryptocurrency Exchanges
Exchanges are platforms that can be used by people for purchasing, selling, and trading cryptocurrencies. Blockchain projects that boast a cryptocurrency can get in touch with exchanges for discussing the processing of listing their cryptocurrency or token on the exchange in order to boost its liquidity. Some of the largest cryptocurrency exchanges that exist nowadays are Coinbase, Binance, and Bittrex, amongst others.
Wallet
In the blockchain world, a wallet is a digital address for storing tokens and cryptocurrencies. These wallets can be used for sending and receiving cryptocurrencies. There are different types of wallets that can be found, such as software wallets, hardware wallets, and exchange wallets. Cryptocurrency wallets have a private and a public key. The latter is the outward-facing wallet address used for receiving funds and is usually a string of numbers and letters. Anyone who wants to send you crypto will need your public key.
The private key, on the other hand, is only known to the owner and it is what is used for signing and approving transactions i.e. sending crypto to someone else. It is used to prove that you own the public key.
