A – Altcoins
Altcoins is an abbreviation for „Alternative Coins“ and includes all other coins besides Bitcoin. In 2020, there are an estimated 2000 Altcoins so far, which have their origin in the mother of cryptocurrencies, the Bitcoin. Litecoin, Monero or Dash, for example, are 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.
Very simply explained, blockchain technology is based a chain of records („block“ & „chain“) – it is a piece of software that holds data (such as transactions) stored. Thus, blockchain technology corresponds to a concatenation of pieces of software and their contained data.
These concatenations of software pieces are accessible, manageable, and computable by all connected computers on 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 every computer has an exact copy of the entire database.
Already when the blockchain is set up, rules can be defined that are always carried out without exception. Bitcoin, for example, has the rule of only being able to produce a certain number of coins.
The Bitcoin and many Altcoins are based on this technology and at the same time fulfill the functions of money, which is why trading with 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“. In other words, money, with all its functions, just like the euro, the dollar or the pound.
Cloud mining (or cloud hashing) is the term used to describe the mining of cryptocurrencies (see M). However, this is not done at home, but via hardware in data centers in one’s own country, or abroad (in order to reduce the cost of the equipment and when the price of electricity is low, mining requires a lot of electricity).D – Dezentralität
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 centralized model (keyword ECB).
E – Exchange
An exchange („exchange“) is an exchange for cryptocurrencies where they can be traded.
F – Fiatgeld und Fork
In the context of cryptocurrencies, fiat money corresponds to all common currencies other than cryptocurrencies such as the euro, dollar, pound, yen, etc. Accordingly, money without material equivalent.
From the English, a fork means a „fork“, a fork of the network in the world of cryptocurrencies. A fork of the network occurs when data from older version is no longer compatible with data from the latest versions. When both versions of the data sets match each other, it is called backward compatibility.
Accordingly, a fork or bifurcation in the context of cryptocurrencies means that the protocol of the blockchain is no longer backward compatible.
A change to the protocol requires a so-called consensus (see consensus procedure), in which all miners (see miners) vote democratically on this change. If the vote results in this change (consensus), all miners must update their software.
If consensus does not occur, a fork happens, called a hard fork (see Hard Fork).
G – Genesis Block
The Genesis block is the basis for every other block in a blockchain (for example, Bitcoin). Every cryptocurrency based on blockchain technology has its own Genesis block.
H – Hash, Hash Rate & Hard Fork
In the crypto world, „hash“ is the name given to a mathematical process in which a set of data is reduced to a value. This is called the hash value.
If data in the blockchain is changed, the hash value thus also changes and the system thus provides information about this change.
For this reason, manipulation or an attempt at forgery can be detected quickly.
The hash rate corresponds to the quotient of the calculations performed in one second. Since a coin must be calculated and a transaction is technically also a calculation 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 fork means a very large change in the blockchain protocol, which is not backward compatible.
A hard fork and thus a blockchain fork occurs when there is no consensus due to the democratic decision to change the blockchain.
Thus, the network is split and two networks with two new blockchains are created.
A hard fork happened in 2017 with Bitcoin, where there is now 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 type 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.
Thus, investors can directly acquire shares in companies or co-finance projects with a cryptocurrency.
Practically, this works as follows: Companies sell tokens (see Tokens), e.g. to investors, in return for which they receive the amount in other cryptocurrencies (e.g. Bitcoin). Depending on the agreement and design, a fixed percentage of the revenue can be distributed to the investors‘ tokens, for example.
In the future, identity verification could also be based exclusively on a fraud-proof blockchain. This means that you would no longer have to log in with an e-mail address when shopping online, but would have a digital identity with which a purchase can be made securely.
K – Cryptocurrency & Consensus Process
Cryptocurrencies include all new, digital currencies such as the Bitcoin, Ethereum, IOTA and many more.
They are also fiat currencies, i.e. currencies without any material equivalent.
The special feature of cryptocurrencies lies in their digitality and the enabling of a secure, digital and decentralized payment system. Due to their decentralized nature, they are thus not held centrally, as in our current monetary system.
They can thus be traded and used by anyone with a computer, Internet connection and, if necessary, further specific technology.Konsensverfahren
Das Konsensverfahren basiert auf dem Prinzip der Dezentralität und schützt die Blockchain vor Fälschung und Manipulation. Da die Daten dezentral verteilt sind und jeder teilnehmende Rechner eine Kopie dieser Daten besitzt, können sich die Miner (siehe Miner) in der Blockchain miteinander austauschen und sichergehen, dass die Blöcke identisch und alle Daten auf dem neuesten Stand sind. So werden beispielsweise auch Transaktionen validiert oder große Veränderungen in der Blockchain vorgenommen (siehe Fork & Hard Fork).
L – Ledger
The ledger is the transaction directory and the „cash book“ of the blockchain. The ledger contains all the information about the transactions.
M – Mining & Miner, Mining Pool
Mining & Miner
If you’ve ever heard of mining and miners, it’s in the context of producing coins. However, mining was originally intended to ensure a consensus of data in the blockchain.
Thanks to miners and mining, the consensus process can exist, changes can be made in the blockchain. Furthermore, coins can be calculated, transactions can be carried out and validated.
The security of the blockchain increases with the number of miners.
Since mining coins is very costly and power-intensive, several miners join forces to share the profits from 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 performs 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. Thus, the Paper Wallet only exists on the paper where you have noted them and is not used online, because the Paper Wallet is only used for the „storage“ of the Coins.
This is how 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 equal status within the blockchain and there is no central institution that exerts a hierarchical influence on events.
The private key is your private password, which exists only once in this order and gives you access to your wallet (see Wallet). You must not lose it or store it online, otherwise you will no longer have access to your coins or they could be stolen.
S – Steuern, Smart Contracts, Scam & Soft Fork
In Germany, cryptocurrencies are legally considered 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-based contracts that allow two people or companies to enter into contracts with each other without an intermediary. They are completely digital and can be customized and put into effect after verification by both parties. So soon your rental car may only start if your payment has actually been received.
Often you hear about scam, scamcoins and shitcoins – which are either designed to take money out of investors‘ pockets of any kind or ones that don’t really add any value to anything and are pretty much worthless.
Unlike a soft fork, only a small change is made to the blockchain, which likewise requires a consensus process.
T – Token
In ICOs (see ICO), tokens are used for company or project financing to distribute profits or send investment money.
U – Utility Token
Utility tokens are tokens that can be used to purchase a service, such as a service or product.
W – Wallet
The wallet (your digital wallet) is where your coins are stored. It is a software that you can easily download to your phone, laptop or tablet.
Disclaimer: We hope this article has been helpful to you. Please keep in mind that this is my subjective perception and in no way professional investment advice. Do not invest money that you are not willing to lose.