Glossar – LIOcoin
A – Altcoins
Altcoins is an abbreviation for "Alternative Coins" and includes all other coins in addition to Bitcoin. In 2020 there are currently an estimated 2,000 altcoins that have their origins in the mother of cryptocurrencies, Bitcoin. Litecoin, Monero or Dash are, for example, altcoins.
B -Blockchain & Bitcoin
The blockchain is the system and technology on which Bitcoin and other cryptocurrencies are based. Blockchain technology is called the Internet of the future.
To put it simply, blockchain technology is based on a chain of data records ("block" & "chain") - it is a piece of software that keeps data (such as transactions) stored. Blockchain technology corresponds to a chain of software pieces and the data they contain.
This chaining of the software pieces can be accessed, managed and calculated from all connected computers in the network.
This "distributed database" means that every computer is up to date at all times. This means that data can no longer be falsified or deleted because each computer has an exact copy of the entire database.
When building the blockchain, rules can be defined that are always and without exception implemented. Bitcoin, for example, has the rule of only being able to produce a certain number of coins.
Bitcoin and many altcoins are based on this technology and at the same time fulfill the functions of money, which is why trading in cryptocurrencies corresponds to a normal foreign currency speculation.
In a blockchain, all transactions made are recorded in the ledger (see L).
C – Coins and Cloud Mining
Coins in the crypto world correspond to digital “coins”. So money, with all its functions like the euro, the dollar or the pound.
Cloud Mining (or cloud hashing) is the mining of cryptocurrencies (see M). But not at home, but via hardware in data centers in your own country or abroad (in order to mine the costs for the equipment and at low electricity prices, for which a lot of electricity is required).
D - decentralization
In the context of cryptocurrencies and blockchain, decentralization means distributing the database instead of managing it in a central location. Our current banking system worldwide is based on a central model (keyword EZB).
E – Exchange
An exchange is an exchange for cryptocurrencies where they can be traded.
F - Fiat money and fork
In connection with cryptocurrencies, fiat money corresponds to all common currencies except cryptocurrencies such as the euro, dollar, pound, yen, etc. Accordingly, money with no material equivalent.
From the English, a fork, a "fork" means a split off of the network in the world of cryptocurrencies. The network bifurcates when data from older versions is no longer compatible with data from the latest versions. If both versions of the records match, this is called backward compatibility.
A fork or fork in connection with cryptocurrencies means that the blockchain protocol is no longer backwards compatible.
An amendment to the protocol requires a so-called consensus (see consensus procedure) in which all miners (see miners) vote democratically on this change. If this change occurs (consensus) due to the vote, all miners must update their software.
If there is no consensus, there is a split called Hard Fork (see Hard Fork).
G – Genesis Block
The Genesis block is the basis for every further block in a blockchain (e.g. Bitcoin). Each cryptocurrency that is based on blockchain technology has its own genesis block.
H - hash, hash rate & hard fork
In the crypto world, “hash” is called a mathematical process in which a quantity of data is reduced to one value. This is called the hash value.
If data is changed in the blockchain, the hash value also changes and the system provides information about this change.
For this reason, tampering with or attempting to counterfeit can be quickly discovered.
The hash rate corresponds to the quotient of the calculations carried out in one second. Since a coin has to be calculated and a transaction is technically a computing task, this value is very important. It thus contributes to the security and functionality of the system.
A hard fork is a fork on a larger scale. This split means a very big change in the blockchain protocol, which is not backwards compatible.
A hard fork and thus a blockchain fork arises if there is no consensus due to the democratic decision to change the blockchain.
The network is divided and two networks with two new blockchains are created.
A hard fork happened in 2017 with Bitcoin, which now has Bitcoin (BTC) and Bitcoin Cash (BCH).
I – ICO´s & Identity Management
ICO – Initial Coin Offering
Translated, Initial Coin Offering means something like "Original Coin Offering". In the crypto world, an ICO serves as a new form of financing for a company or a project. This ICO is of course based on blockchain technology and is ultimately a blockchain-based venture capital financing.
In this way, investors can buy shares in companies or co-finance projects directly with a cryptocurrency.
In practice, this works as follows: Companies sell tokens (see tokens), e.g. to investors for whom they receive the amount in other cryptocurrencies in return (e.g. Bitcoin). Depending on the arrangement and design, for example, a fixed percentage of sales can be distributed to the tokens of investors.
In the future, identity verification could now only be based on a fraud-proof blockchain. You no longer have to log in with your email address when shopping online, but instead have a digital identity with which a purchase can be processed securely.
K - cryptocurrency & consensus process
Cryptocurrencies include all new digital currencies like Bitcoin, Ethereum, IOTA and many more.
They are also fiat currencies, i.e. currencies with no material countervalue.
The peculiarity of cryptocurrencies lies in their digitality and the enabling of a secure, digital and decentralized payment system. Due to their decentralization, they are not kept as central as in our current monetary system.
It can thus be traded and used by anyone with a computer, internet connection and, if necessary, other specific technology.
The consensus process is based on the principle of decentralization and protects the blockchain against counterfeiting and manipulation. Since the data is distributed locally and each participating computer has a copy of this data, the miners (see Miners) can exchange information in the blockchain and ensure that the blocks are identical and that all data is up to date. For example, transactions are also validated or major changes are made to the blockchain (see Fork & Hard Fork).
L – Ledger
The ledger is the transaction directory and the "cash book" of the blockchain. The ledger contains all information relating to the transactions.
M – Mining & Miner, Mining Pool
Mining & Miner
If you've heard of mining and miners, it's about producing coins. However, the mining was originally intended to ensure that the data in the blockchain match.
Thanks to the miners and the mining, the consensus process can exist, changes can be made in the blockchain. Coins can also be calculated, transactions carried out and validated.
The security of the blockchain increases with the number of miners.
Since mining coins is very costly and electricity-intensive, several miners come together to share the profits from the mining. Together, they buy stronger computers that can guarantee more computing power. This is called a mining pool.
N – Node
A computer that is connected to the blockchain is a node.
A full node implements the established rules of the blockchain.
P – Paper Wallet, Peer2Peer & Private Key
A paper wallet fulfills the same function as a normal wallet (see wallet). However, the paper wallet only has a private key and a receiving address, but no sending address. The paper wallet only exists on the paper on which you have noted it and is not used online, since the paper wallet is only used for the "storage" of the coins.
So it is hoped to prevent theft.
Peer2Peer ("Equal to equal") underlines the decentralized model on which a blockchain is built. A blockchain is a Peer2Peer network, because all participants have equality within the blockchain and there is no central institution that has a hierarchical influence in the process.
The private key is your private password, which only appears once in this order and gives you access to your wallet (see wallet). You must not lose this or save it online, otherwise you will no longer have access to your coins or they could be stolen.
S - Taxes, Smart Contracts, Scam & Soft Fork
In Germany, cryptocurrencies are legally viewed as foreign currency speculation, which is why they are taxed at 0-45%. If you don't trade them for a year, they are tax free.
Smart contracts are decentralized contracts with which two people or companies can conclude contracts with one another without a middleman. These are completely digital and can be individually designed and come into force after double-sided verification. So your rental car may soon only start if your payment has actually been received.
You often hear of scam, scamcoins and shitcoins - which are either designed to pull investors of any kind out of their pockets or those that have no real added value for something and are pretty much worthless.
Unlike a soft fork, only a small change is made in the blockchain, which also requires a consensus process.
T – Token
ICOs (see ICO) use tokens for corporate or project finance to distribute profits or send investment funds.
U – Utility Token
Utility tokens are tokens that can be used to purchase a service, such as a service or a product.
W – Wallet
Your coins are recorded in the wallet (your digital wallet). It is software that you can easily download to your mobile phone, laptop or tablet.
Disclaimer: We hope this article has helped you. Please keep in mind that this is my subjective perception and in no way a professional investment advice. Do not invest money that you are not willing to lose.