Glossary Term: Cryptocurrency

P2SH, or Pay-to-Script-Hash, is a type of Bitcoin address that has been in use since 2012. It was introduced by Bitcoin Improvement Proposal (BIP) 16.

In simple terms, a P2SH address enables you to send bitcoins to an address that is secured in various unusual ways without knowing anything about the details of how the security is set up. All you need to send to an address is the corresponding hash of a script defining the conditions to be met in order for these bitcoins to be spent.

The key idea is that instead of having to provide the recipients’ Bitcoin address (as you would with a traditional Bitcoin transaction), you provide a script, or a set of locking conditions that need to be met for the recipient to spend the coins. These conditions are hashed and the result is a Bitcoin address, starting with a ‘3’ instead of a ‘1’.

One common use of P2SH is for multi-signature addresses, where a transaction requires signatures from multiple private keys to be spent. The P2SH address will encode the conditions that m of n keys must sign the transaction. For example, a 2-of-3 multi-signature P2SH address will require two out of three associated private keys to sign a transaction.

The main advantage of P2SH transactions is that they simplify transactions and improve privacy. By using a hash of the script rather than the script itself, the complexity of the transaction is hidden and only revealed at the time the output is spent. This simplifies the transaction process and saves space in the blockchain.

SegWit, short for “Segregated Witness,” is an important protocol upgrade for the Bitcoin network which was implemented in 2017 to improve scalability, block size limit, and deal with some issues such as transaction malleability.

Here’s how it works and why it’s important:

1. Transaction Malleability Fix: Before SegWit, transaction IDs could be changed before they were confirmed on the Bitcoin network. This “transaction malleability” was problematic for businesses that operated with Bitcoin. By removing certain parts of the transaction data and changing how the transaction ID is created, SegWit provided a fix for transaction malleability.
2. Increased Block Capacity: Bitcoin has a block size limit which, before SegWit, was 1MB. This limited the number of transactions that could be included in each block, and thereby limited the scalability of Bitcoin. SegWit changed the way data in a block is counted; the “witness” data is considered separately, and this effectively increases the block size without a hardfork, allowing more transactions to be included in each block. The theoretical limit is about 4MB, but in practice, blocks tend to be a little over 2MB due to the nature of transaction data.
3. Enabling Future Upgrades: SegWit also made it easier to implement future upgrades to the Bitcoin network, such as the Lightning Network and Schnorr signatures, which require the transaction malleability fix that SegWit provides.

The implementation of SegWit was somewhat contentious within the Bitcoin community, and disagreement over this upgrade was part of the reason for the Bitcoin Cash hardfork. However, since its activation, SegWit has seen increased adoption and has generally been successful in achieving its goals.

In the context of cryptocurrencies and blockchain technology, a bridge is a method or tool that enables the transfer of tokens or data between different blockchains. Essentially, it serves as a connection between distinct blockchain networks, enabling interoperability among them.

The need for bridges arises because not all blockchains can directly interact with each other due to differences in their protocol, consensus mechanisms, and transaction formats. A bridge allows these different blockchains to communicate and transact with one another, enhancing the flexibility and scope of decentralized finance (DeFi) applications.

There are two main types of bridges:

1. Federated Bridges: These are controlled by a group of validators that approve transactions between blockchains. This system relies on trust in these validators, making it somewhat centralized.
2. Trustless Bridges: In this case, smart contracts manage the bridge, eliminating the need for trusted validators. However, trustless bridges are more complex and require more resources to operate.

Each type of bridge has its own advantages and potential security risks, and the choice depends on the specific requirements of a project.

For instance, the Ethereum-to-Binance Smart Chain bridge is a good example that allows users to swap ERC-20 tokens (native to the Ethereum blockchain) for BEP-20 tokens (native to the Binance Smart Chain) and vice versa. Similarly, the Wrapped Bitcoin (WBTC) project uses a federated bridge to bring Bitcoin to the Ethereum blockchain.

In a foreign exchange market, a quote currency is the second currency in a currency pair. It is used to value or price the base currency, which is the first currency in the pair.

For example, in the currency pair EUR/USD (Euro to US Dollar), the quote currency is USD. This means that the pair indicates how many US dollars (quote currency) are needed to purchase one Euro (base currency).

The value or price of the base currency is always quoted in terms of the quote currency. This allows traders to easily compare the value of different currencies relative to each other, facilitating international trade and investment.

So when you see a quote like EUR/USD = 1.15, it means you need 1.15 USD to buy 1 EUR. The quote currency here, the USD, is the currency against which the value of the EUR (the base currency) is being determined.

Base currency in the financial and foreign exchange markets refers to the first currency listed in a currency pair. For instance, in the pair “USD/EUR”, the USD (US Dollar) is the base currency. The value of the base currency is always 1.

When it comes to trading, the base currency serves as the reference for trades. For instance, if a trader buys the USD/EUR pair, they are essentially buying US Dollars and selling Euros. Conversely, if they sell the pair, they sell US Dollars and buy Euros.

The concept of base currency is also significant in the realm of investments and accounting, where it is the primary currency used by businesses or investors to report their financial results or value their portfolios.

A “ticker” is an abbreviation used to uniquely identify a particular coin or token on a trading platform. It is typically a combination of letters representing the cryptocurrency. For instance, Bitcoin is commonly identified by the ticker “BTC”, Ethereum by “ETH”, and Ripple by “XRP”.

These tickers help traders and investors quickly identify and search for different cryptocurrencies on exchanges, news sites, and other platforms. However, it’s worth noting that the same ticker may represent different cryptocurrencies on different platforms, so it’s essential to verify the full name of the cryptocurrency associated with a particular ticker symbol.

The term “metaverse” is often used to describe a virtual reality space where users can interact with a computer-generated environment and other users. It is essentially a collective virtual shared space, created by the convergence of physical and virtual reality. This space is not just limited to the internet as it is now, but is also inclusive of augmented reality and virtual reality.

In this space, users can interact with each other and the environment in real-time. They can form a representation of themselves, often in the form of avatars, to carry out activities similar to those in the real world such as socializing, participating in events, playing games, conducting business, and more.

The idea of the metaverse has been popularized in science fiction and cyberpunk genres, with books like “Snow Crash” by Neal Stephenson and “Ready Player One” by Ernest Cline. In the business and tech world, companies like Facebook (which rebranded to Meta Platforms Inc. in late 2021), Microsoft, and others are investing heavily in technologies that aim to realize the concept of the metaverse.

Cryptocurrency futures are a type of derivatives contract. A futures contract is a legal agreement to buy or sell something at a predetermined price at a specified time in the future. In the case of cryptocurrency futures, the underlying asset is a cryptocurrency like Bitcoin, Ethereum, or others.

The person agreeing to buy the underlying asset, in this case, the cryptocurrency, is said to have a “long” position, while the person agreeing to sell the asset is said to have a “short” position.

Crypto futures can be used for hedging or speculative trading. For instance, if you are a Bitcoin miner and want to lock in a selling price for a future date to protect yourself against potential price drops, you might use futures contracts. On the other hand, a trader might use crypto futures to speculate on price movements and potentially profit from correctly predicting whether prices will rise or fall.

Futures contracts are traded on futures exchanges, which in the world of crypto include platforms like Binance Futures, OKEx, CME Group (which offers Bitcoin and Ethereum futures), and others.

“Crypto space” is a term often used to refer to the entire ecosystem of cryptocurrencies and the technology associated with them. This space includes:

1. Cryptocurrencies: These are digital or virtual currencies that use cryptography for security. The most well-known is Bitcoin, but there are thousands of others such as Ethereum, Ripple, Litecoin, and more.
2. Blockchain Technology: This is the foundational technology behind most cryptocurrencies. It’s a type of distributed ledger that records transactions across many computers so that any involved record cannot be altered retroactively, without the alteration of all subsequent blocks.
3. Decentralized Applications (dApps): These are applications that run on a peer-to-peer network of computers rather than a single computer. They have become popular in the crypto space because they are open source and operate autonomously with the data encrypted and stored in the blockchain.
4. Decentralized Finance (DeFi): This refers to financial applications in cryptocurrency or blockchain geared toward disrupting traditional financial intermediaries.
5. Smart Contracts: These are self-executing contracts with the terms of the agreement directly written into lines of code. They run on blockchain platforms like Ethereum.
6. Crypto Exchanges: Platforms where you can trade one cryptocurrency for another, or for fiat money. Examples include Binance, Coinbase, Kraken, and many others.
7. Initial Coin Offerings (ICOs) and Token Sales: These are ways of fundraising for crypto projects, where investors receive tokens in exchange for other cryptocurrencies or fiat money.
8. Mining and Staking: These are ways of validating transactions on the blockchain network for a reward, either through computational work (mining) or holding and locking up a certain amount of a cryptocurrency (staking).
9. NFTs (Non-Fungible Tokens): These are unique tokens representing ownership of a unique item or piece of content, commonly used for digital art, music, and other forms of creative work in the blockchain.
10. Crypto Wallets: Digital wallets where cryptocurrencies are stored, typically in the form of a digital address and a private key.

And many more. The crypto space is vast and evolving, covering a range of sectors from finance to gaming to art and beyond. It’s worth noting that while the crypto space presents many opportunities, it also comes with risks due to its volatility, regulatory uncertainties, and potential for fraudulent activities. Always do your due diligence before getting involved.

In the context of cryptocurrencies, “multisig” refers to “multisignature,” a type of digital signature scheme that requires multiple keys to authorize a transaction, providing additional security.

Multisig can be used to create a digital equivalent of a joint bank account, where more than one person’s signature is needed to make a transaction. The idea is that if a single private key is compromised, it wouldn’t be sufficient to spend the funds associated with the multisig wallet.

For example, a 2-of-3 multisig wallet would require at least two out of three associated private keys to sign a transaction. This setup is useful for both personal use (for example, if you want to store backup keys in different locations) and for organizations (for example, to prevent any single person from having control over the funds).

By requiring multiple signatures, multisig technology helps to prevent theft, embezzlement, and any other unapproved transactions. It’s a significant innovation in the crypto space, improving security and enabling the creation of more complex ownership and control schemes for digital assets.