Glossary Term: Cryptocurrency

Proof-of-Spacetime (PoSt) is a cryptographic primitive or protocol used in some blockchain systems. In this protocol, a client (in this case, the system) asks a prover (usually a miner or storage provider) to show that they have been storing some data over a period of time.

The core idea is to enable decentralized networks to verify that a specific amount of information is being stored over time without the need to transmit or check that information. This is crucial in blockchains that incentivize decentralized storage, like Filecoin, where nodes are rewarded for storing data over a duration of time.

It’s an extension to Proof-of-Space (PoS) protocols, which only demonstrate that a prover has a certain amount of disk space available at a certain point in time. Proof-of-Spacetime extends this to ensure that the prover continues to store this data over a period of time.

In the context of blockchain technology and specifically Filecoin, Proof of Replication (PoRep) is a key concept.

Filecoin is a decentralized storage system that aims to “store humanity’s most important information.” In this system, PoRep is a cryptographic proof that a unique encoding of data has been replicated to its own uniquely dedicated physical storage. In other words, it’s a way to ensure that data isn’t being faked or duplicated in the system, but is genuinely being stored as promised.

The goal of PoRep is to make sure that storage miners, who are rewarded for offering storage to the network, are actually providing the storage they claim to be. This helps to prevent various types of attacks and fraudulent behavior.

Filecoin is a decentralized storage system that aims to “store humanity’s most important information”. The project was first described in 2014 as an incentive layer for the Interplanetary File System (IPFS), a peer-to-peer storage network. Filecoin is open-source, and its protocol is designed to provide a foundational layer to support decentralized applications development.

The core function of Filecoin is to provide a blockchain-based cooperative digital storage and data retrieval method. It’s achieved via a decentralized network of computer storage run by ‘miners’ who earn Filecoin cryptocurrency (FIL) by providing storage to clients.

On the flip side, clients pay miners in FIL to store or distribute data. As opposed to traditional cloud storage providers like Amazon S3, in Filecoin, the user has the choice to select any miner worldwide for storage based on the price and reputation instead of being locked into a centralized provider.

Like other blockchains, Filecoin also utilizes a cryptographic system to ensure the security and robustness of transactions and stored data. The integrity, location, and retrievability of the data stored in the network are verifiable without the need for trust in a central authority.

Filecoin’s primary innovations are believed to be in decentralized storage and the economic incentives layer that promotes good behavior among network participants. It aims to be a viable alternative to centralized data storage platforms.

In the context of cryptocurrency, “dust” refers to a very small amount of cryptocurrency that’s left over in a wallet or account. These amounts are usually so small that they don’t meet the minimum network fee required to transfer them.

In the Bitcoin blockchain, for example, if you have a small amount of Bitcoin left in your wallet that is less than the fee required to send a transaction, that small amount is considered “dust”.

This term also applies to other cryptocurrencies as well, not just Bitcoin.

In the context of cryptocurrency, the term “non-custodial” refers to a type of wallet or exchange where the users maintain control of their private keys. In other words, a non-custodial setup is one where you, and only you, control access to your cryptocurrencies.

A fundamental principle of cryptocurrencies like Bitcoin is the ability to hold your own money, similar to cash, without needing a third-party institution like a bank to hold it for you. Your private keys provide access to your crypto assets on the blockchain, and whoever holds those keys effectively controls the assets.

In a non-custodial wallet or exchange:

• You are in control of your private keys and thus your funds.
• Even if the wallet provider or exchange is hacked, your funds should remain safe, as long as your private keys have not been exposed.
• The responsibility of safekeeping the private keys lies solely with you. If you lose access to them, it could lead to a permanent loss of your funds.

This is in contrast to a “custodial” service, where the service provider holds your private keys. This is similar to the way traditional banks operate, where they maintain custody of your money. Custodial services often provide user-friendly interfaces and additional services, but they also present a risk because if they’re hacked, the attacker could gain access to your private keys and thus your assets.

“Custodial” in cryptocurrency terms refers to systems or services where the private keys to a cryptocurrency wallet are held by a third party. This is usually a financial institution like a bank or a cryptocurrency exchange.

When you deposit your cryptocurrencies in a custodial wallet, you essentially trust the custodian to keep your assets secure. This is similar to depositing money in a bank. Just like a bank, the custodian is expected to safeguard your assets and may provide insurance against loss.

Examples of custodial services in the cryptocurrency world include exchanges like Coinbase or Binance, which hold users’ assets on their platforms.

On the flip side, a non-custodial wallet is one where the user maintains control of their private keys and thus, maintains full control over their cryptocurrencies. These types of wallets provide more autonomy and are considered more secure against certain types of attacks, but they also require the user to be responsible for the secure storage of their private keys.

The choice between custodial and non-custodial wallets depends on a user’s needs, their technical proficiency, and the level of control and responsibility they desire over their digital assets.

Initial Exchange Offering (IEO) is a variant of Initial Coin Offering (ICO), but instead of the developers running the fundraising process, a cryptocurrency exchange manages the process.

In an IEO, the creators of a new cryptocurrency token will sell it directly on a cryptocurrency exchange platform. This process bypasses the need for the creators to deal with regulatory compliance and marketing. In turn, the exchange platform takes a percentage of the tokens sold during the IEO as a fee for their services.

Participants in an IEO purchase the new tokens directly from the exchange, usually using the exchange’s native token or another major cryptocurrency such as Bitcoin or Ethereum.

Key features of IEOs include:

1. Security: The exchange verifies the project conducting the IEO, which adds an additional layer of security for investors.
2. Convenience: IEOs provide an easy way for investors to acquire new tokens. They just need to be registered users of the hosting exchange.
3. Liquidity: Tokens sold in an IEO are immediately available for trading on the hosting exchange, providing instant liquidity.
4. Marketing: The exchange often markets the IEO to its existing user base, potentially saving the project a lot of marketing costs.

As with all investments, it’s important to note that investing in an IEO can be risky. Always make sure to do your own research before investing in any new cryptocurrency project.

In the context of cryptocurrencies and blockchain technology, a “mainnet” is the term used to describe a fully developed and operational blockchain network. The mainnet is where actual transactions take place in a live environment, and it’s where the cryptocurrency becomes fully usable by the public for real-world purposes.

This is in contrast to a “testnet”, which is a separate blockchain network used for testing and development purposes. Developers can use testnets to run experiments and make changes without risking the integrity of the mainnet. The tokens on a testnet have no real value because they are simply for testing purposes.

Once a cryptocurrency project has been thoroughly tested and vetted, its mainnet launch is typically a significant event. It represents the project’s transition from a mere idea or prototype to a live, functioning product. The release of the mainnet is often anticipated by investors and participants in the community because it signifies that the token is moving from a conceptual stage into a practical, usable asset.

Mainnets can have various structures and use different consensus mechanisms depending on the specific project. Examples of different types of mainnets include Bitcoin’s proof-of-work mainnet, Ethereum’s proof-of-stake, and Cardano’s Ouroboros proof-of-stake mainnet, among others.

A Testnet in the context of cryptocurrencies is a separate blockchain used solely for testing.

Similar to the main network (mainnet), where real transactions occur on the blockchain, a testnet is a replica of this environment but with one significant difference: the coins or tokens used on a testnet do not have any real-world value.

Developers use testnets to experiment with the blockchain’s functionality and to test new features, smart contracts, and dApps, before deploying them on the mainnet. This helps identify any bugs or issues, and test performance, without risking real assets.

The specific characteristics of a testnet can vary depending on the cryptocurrency. For example, Bitcoin has a testnet that developers use to test network upgrades or new applications before deploying them on the actual Bitcoin blockchain.

Similarly, Ethereum has a variety of testnets such as Ropsten, Rinkeby, and Goerli, each of which simulates the Ethereum network under different consensus algorithms and conditions.

Overall, testnets are an essential tool for development and testing in the cryptocurrency and blockchain development landscape.

Charlie Lee is a well-known figure in the field of cryptocurrencies. He is the creator of Litecoin, which is often considered the silver to Bitcoin’s gold. Lee, a computer scientist by training, developed Litecoin in 2011 as a spinoff of Bitcoin, with some key differences. He designed Litecoin to have a faster block generation time and to use a different cryptographic algorithm (scrypt instead of SHA-256).

Before working on Litecoin, Lee worked at Google on projects such as YouTube and Chrome OS. He later worked as the Director of Engineering at Coinbase, one of the largest cryptocurrency exchanges in the world.