Glossary Term: Cryptocurrency

“Last trade” in the context of financial trading refers to the most recent price at which a security (such as a stock, bond, or futures contract) was bought or sold. It provides a snapshot of the latest market activity for a specific asset.

The last trade price is important because it’s the most up-to-date valuation of an asset until the next trade occurs. It helps set the reference point for the next trading prices and provides an indication of the market sentiment towards the asset’s value.

However, it’s worth noting that the last traded price might not always reflect the true intrinsic value of a security. It only reflects the value at which the most recent buyer and seller agreed upon, and the next trade could be executed at a higher or lower price based on supply and demand in the market.

In trading, the term “spread” refers to the difference between two prices. It’s most commonly used in one of two contexts: the bid-ask spread or the spread in yield.

1. Bid-Ask Spread: In the context of the stock market or forex market, the “spread” usually refers to the difference between the bid price and the ask price for a given security or currency. The bid price is the highest price that a buyer is willing to pay for an asset, while the ask price is the lowest price at which a seller is willing to sell the asset.
2. Spread in Yield: In the context of bonds, the “spread” often refers to the difference in yield between two different bonds. For instance, you might look at the spread between a corporate bond and a government bond with the same maturity date to gauge the perceived riskiness of the corporate bond.

The term can also be used in options trading to refer to a “spread strategy,” which involves simultaneously buying and selling two or more options contracts.

The spread can serve as a measure of liquidity, with a smaller spread suggesting higher liquidity, and it can also serve as a source of profit for market makers, who aim to buy at the bid price and sell at the ask price.

Another way to say “best ask”.

“Best Ask” is a term often used in financial markets. It refers to the lowest price that a seller is willing to accept for a particular security, asset, or commodity. Buyers in the market look for the best ask price when deciding to purchase a security or asset.

This term is part of a larger system known as the “bid-ask” or “buy-sell” spread. The bid price is the highest price a buyer is willing to pay for a security, while the ask price is the lowest price at which a seller is willing to sell. The difference between the two is the spread.

In an efficient and liquid market, the spread is typically quite small. This means that the bid price and the ask price are very close together, which signifies a healthy market with plenty of buyers and sellers. However, in a less liquid market, the spread can be much larger, indicating less activity and potentially higher transaction costs.

It’s worth noting that the best ask is not always the price at which a transaction will occur. The actual transaction price could be higher or lower depending on market conditions and the negotiation between the buyer and the seller.

In the context of finance and investing, “best bid” refers to the highest price that a buyer is willing to pay for a specific security, commodity, or asset at a particular time. The opposite of the best bid is the best ask (or best offer), which is the lowest price a seller is willing to accept for a security.

In a market order book, you’ll see both the best bid and best ask prices listed. These are also known as the highest bid and lowest ask prices. The difference between these two prices is known as the bid-ask spread, which is a key indicator of the liquidity of the asset. The narrower the spread, the more liquid the market.

It’s important to note that the “best bid” and “best ask” can change rapidly in a liquid and active market as buy and sell orders are executed and new orders are placed.

A Hierarchical Deterministic (HD) Wallet is a kind of digital wallet used in the blockchain and cryptocurrency world. The “hierarchical deterministic” part refers to the way in which the wallet is able to generate new addresses.

Here are the main characteristics of HD Wallets:

1. Deterministic: This means that they generate new addresses using a specific method that is repeatable. This means that instead of randomly generating new addresses for each transaction (which would require backing up the wallet frequently), the same list of addresses can be regenerated from a specific seed.
2. Hierarchical: This feature allows the wallet to create “child” addresses from “parent” addresses. This hierarchical structure can be useful for organizational purposes. For instance, you can have a top-level address for savings, and then create child addresses for different savings goals.

The specification for HD wallets is described in BIP 32 (Bitcoin Improvement Proposal 32).

The main benefit of using an HD Wallet is that it allows for secure in-app backups. Since all the addresses can be regenerated from the initial seed, you can recover all of your funds even if you lose your device. This seed usually comes in the form of 12 or 24 words, which needs to be kept in a secure place. As long as you have this seed, you can restore your wallet and all its associated addresses and funds.

Another benefit is the ability to generate a new address for each transaction, which is a practice that can enhance privacy. Because all the addresses are deterministically linked to the seed, they can all be recovered even though they are different from each other.

A paper wallet is a way to store cryptocurrencies offline as a physical document that contains all the data necessary to generate a large number of private keys, forming a wallet of keys. It is considered a form of “cold storage”, which means it is not connected to the internet and thus is less susceptible to online hacking attempts.

A typical paper wallet will generally include the cryptocurrency address and the private key. The private key allows you to access and control that cryptocurrency. Both pieces of information are often presented in a form that is both human-readable and can be scanned by a machine, such as a QR code.

To create a paper wallet, you use a wallet-generating software while being completely offline, generate a new wallet, and print out the credentials. Afterward, any cryptocurrency sent to that address will be accessible only by whoever has access to the physical printout (unless the private key has also been stored digitally).

Despite their security advantages, paper wallets can be risky if not handled carefully. If the paper wallet is lost, destroyed, or degraded, access to the associated cryptocurrency may be lost forever. Therefore, it’s essential to keep it in a safe place and potentially have backups. It’s also crucial to generate and print the wallet securely because if someone else has access to your private key, they also have access to your cryptocurrency.

In the world of cryptocurrency, a “seed” refers to a phrase, string, or list of words that are used to generate or recover a private key or multiple private keys for a cryptocurrency wallet.

This seed is often in the form of a mnemonic recovery phrase, usually 12, 18 or 24 words, that is created when you set up a new wallet. This seed phrase is an encoded version of your wallet’s master private key and is crucial for backup and recovery purposes. If you lose access to your wallet (for instance, if you forget your password or your device gets lost or stolen), you can use the seed phrase to restore your wallet and access your funds.

However, if someone else gets hold of your seed phrase, they can also gain access to your wallet and control over your cryptocurrency assets. Therefore, it’s essential to keep your seed phrase stored securely and privately.

The seed generation and the derivation of keys from it usually follow a standard called BIP39 (Bitcoin Improvement Proposal 39) in the Bitcoin and broader crypto ecosystem. This BIP provides the method for creating the mnemonic sentence (the seed) and converting it into a binary seed used to generate hierarchical deterministic wallets (BIP32), which can generate virtually unlimited cryptographic key pairs from a single seed.

In the world of cryptography, a public key is part of a key pair used in public-key encryption. This key pair consists of a public key and a private key, both of which are mathematically linked.

The public key, as its name suggests, is made publicly available and can be freely distributed. It’s used to encrypt data in a way that only the corresponding private key can decrypt it. This property is fundamental to many cryptographic systems and protocols, including ones used for secure email, secure web browsing (HTTPS), and digital signatures.

Here’s a simple example to illustrate the concept:

Imagine Alice wants to send Bob a secure message. Bob gives Alice his public key, which Alice uses to encrypt her message. Now, this encrypted message can only be decrypted using Bob’s private key, which only Bob has. Even though the public key was used for encryption, it can’t decrypt the message. This ensures the confidentiality of the message from Alice to Bob.

This method is also used in digital signatures where the roles are reversed. Alice can sign a message using her private key, and anyone can verify that Alice indeed signed it by using her public public key. This provides authentication (proving Alice is the one who sent it) and non-repudiation (Alice cannot deny sending it).

Please note that the security of this system relies on the private key remaining secret. If a private key is compromised (i.e., someone else gets hold of it), the security of the system breaks down.

A private key is a cryptographic component that’s used in encryption and decryption methods to secure data in various ways. It is a secret, alphanumeric password or code that is used to decrypt or sign data, while the corresponding public key is used to encrypt or verify the signature.

Here’s a bit more context:

In asymmetric cryptography, also known as public-key cryptography, two keys are used: a public key, which is disclosed to the public, and a private key, which is kept secret by the user. When a sender wants to encrypt a message, they use the receiver’s public key. However, once the message is encrypted, it can only be decrypted using the recipient’s private key.

Private keys are also fundamental to blockchain technology and cryptocurrencies like Bitcoin. In this context, a private key is a sophisticated form of cryptography that allows a user to access his or her cryptocurrency. A private key is an integral aspect of bitcoin and altcoins, and its security make up helps to protect a user from theft and unauthorized access to funds.

It’s extremely important to keep private keys secure, as anyone who has access to the private key essentially has access to the associated data or assets. If a private key is lost, it can be very difficult, or in some cases impossible, to recover the data or assets that it protects.