Glossary Term: Cryptocurrency

An altcoin, short for “alternative coin,” is a term used to describe any cryptocurrency that isn’t Bitcoin. Bitcoin was the first established cryptocurrency, and all subsequent cryptocurrencies are generally referred to as altcoins.

Some altcoins are variations (or “forks”) of Bitcoin, built using Bitcoin’s open-source protocol. They introduce changes to Bitcoin’s underlying technology, such as altering the transaction speed, the consensus algorithm, or the privacy features. Examples of these types of altcoins include Bitcoin Cash and Bitcoin SV.

Other altcoins, however, are built from scratch and offer entirely different functionalities and use cases. For example, Ethereum, the second largest cryptocurrency by market cap, introduced smart contracts and decentralized applications (dApps) to the blockchain ecosystem.

Mining, in the context of cryptocurrencies, is the process by which new units of the digital currency are generated and transactions are validated. This is usually done through solving complex computational problems, which is a process known as Proof of Work (PoW).

Let’s look at the process in more detail:

1. Transaction Verification: One of the primary responsibilities of miners is to verify the legitimacy of transactions. This means they confirm that the sender has the necessary amount of currency they want to transfer, and that they haven’t already sent it to someone else.
2. Block Creation: Once a certain number of transactions have been verified, they are bundled together into a ‘block.’ This block also contains a reference to the previous block in the chain (hence the term ‘blockchain’), creating a linked list of all transactions from the beginning of that specific cryptocurrency.
3. Problem Solving: The next step is the actual ‘mining’ part. This involves solving a complex computational problem, often a hash function. The problem is designed to be hard to solve but easy to check. Miners will typically use powerful computers or specialized hardware to solve these problems as quickly as possible.
4. Block Addition: When a miner solves the problem, they broadcast their solution to the network. Other miners then check the solution, and if it’s correct, the new block is added to the blockchain.
5. Reward: As a reward for their work, the miner who solves the problem receives a certain amount of the cryptocurrency. This is known as the ‘block reward’. Over time, this reward will typically decrease, a process known as halving.

Mining not only creates new units of a cryptocurrency, but it also secures the system and verifies transactions. It’s important to note that not all cryptocurrencies use mining; some use alternative consensus mechanisms such as Proof of Stake (PoS). But Bitcoin, the first and most well-known cryptocurrency, uses mining, and many other cryptocurrencies have followed suit.

In the context of cryptocurrency, a wallet refers to a digital means of storing, sending, and receiving cryptocurrencies. It doesn’t actually “store” your money as a real-world wallet does, instead it saves your secure digital codes known as private keys. These private keys prove ownership, allow you to interact with your cryptocurrencies and execute transactions.

Cryptocurrency wallets can come in several forms:

1. Software Wallets: These are programs that can be installed on your computer or mobile device. They’re secured by a password or other authentication measures. There are three types of software wallets: desktop, mobile, and online wallets.
2. Hardware Wallets: These are physical devices designed to securely store private keys offline. They are often regarded as the most secure type of wallet because they are resistant to potential viruses and hacking attempts that could compromise a software wallet.
3. Paper Wallets: These are physical printouts of your public and private keys. They’re considered quite secure because they’re completely offline, but they can be easily lost or damaged.
4. Web or Cloud Wallets: These are wallets that are hosted on a third party’s server. While they provide the convenience of easy access from any location, they also mean you are trusting the third-party service to maintain high levels of security.
5. Metal Wallets: These are very similar to paper wallets, but they’re made of metal that is resistant to many forms of damage, such as water, fire, or corrosion.

The term “wallet” can also refer to an interface in a decentralized application (Dapp) that allows users to interact with blockchain networks and smart contracts. These wallets not only manage private and public keys but also user identities. Examples include MetaMask, Trust Wallet, and Coinbase Wallet.

Remember, the safety of your cryptocurrency wallet depends largely on how you manage it. Using strong passwords and keeping your private keys confidential are paramount to keeping your cryptocurrency safe.

In the context of blockchain and cryptocurrency, consensus refers to the agreement achieved by all nodes (participants) within the network regarding the state of the distributed ledger. This consensus is critical for maintaining the accuracy, integrity, and security of the system.

Given the decentralized nature of blockchain networks, there needs to be a way to ensure that all nodes agree on the validity and order of transactions. This process is governed by consensus algorithms. The primary types of consensus algorithms in use today include:

1. Proof-of-Work (PoW): This consensus algorithm is used by Bitcoin and other cryptocurrencies. It requires nodes (known as “miners”) to solve complex mathematical problems in order to add a new block to the blockchain. This process requires significant computational power and energy.
2. Proof-of-Stake (PoS): This is a less energy-intensive alternative to PoW. Instead of mining, validators are chosen to create a new block based on their stake (the amount of cryptocurrency they hold and are willing to ‘lock up’ or ‘stake’ for a period of time) and sometimes other factors.
3. Delegated Proof-of-Stake (DPoS): In this system, stakeholders elect representatives, known as “delegates”, to run the network on their behalf. This system is faster than PoW and PoS but can be less decentralized.
4. Proof-of-Authority (PoA): In this consensus model, transactions and blocks are validated by a limited number of approved accounts, known as validators. The validators are trusted not to compromise the integrity of the network, making PoA ideal for private network chains.
5. Byzantine Fault Tolerance (BFT): This type of consensus algorithm can withstand nodes that are unreliable or malicious (the so-called Byzantine Generals Problem). Variations of this model include Practical Byzantine Fault Tolerance (PBFT), Federated Byzantine Agreement (FBA), etc.
6. Proof-of-Elapsed Time (PoET): This algorithm is designed for permissioned blockchain networks. It uses a fair lottery system where each participating node waits for a randomly chosen period, and the one with the shortest wait time gets to create the new block.

These are just a few examples of the many consensus algorithms currently in use or under development in the field of blockchain technology. The choice of a consensus mechanism has a significant impact on the performance, security, and decentralization of the network.

In the context of cryptocurrencies, a transaction refers to the transfer of digital assets (cryptocurrencies) between two parties on a blockchain network.

There are some important elements to consider in a crypto transaction:

1. Sender – The individual or entity that is sending the cryptocurrency.
2. Receiver – The individual or entity that is receiving the cryptocurrency.
3. Transaction amount – The amount of cryptocurrency that is being transferred from the sender to the receiver.
4. Transaction fee – This is the fee paid by the sender for the transaction to be processed and validated by the network. This fee incentivizes miners or validators to include the transaction in the next block.
5. Signature – This is a cryptographic proof that the sender has authorized the transaction. It is created using the sender’s private key.
6. Input and Output – The inputs for a transaction are the records which track the sender’s cryptocurrency balance, and the outputs record the new balance after the transaction. The inputs for a new transaction often come from the outputs of previous transactions, establishing a continuous chain of ownership.
7. Confirmation – A transaction is confirmed when it has been included in a block that has been added to the blockchain.

It’s worth mentioning that all transactions on the blockchain are publicly visible but the identities of the parties involved remain pseudonymous unless they’ve been associated with a real-world identity. That is, you can see the amounts and addresses involved, but not who owns those addresses.

Lastly, the specifics of how transactions work can vary between different cryptocurrencies. The principles remain largely the same, but the exact process and the technology behind it can vary. For instance, Bitcoin transactions function somewhat differently from Ethereum transactions, especially since Ethereum also incorporates smart contracts.

Phishing is a form of cybercrime where attackers impersonate a legitimate organization or person to deceive targets into revealing sensitive information such as usernames, passwords, credit card numbers, or other types of personal financial details.

Phishing can occur in various ways, with the most common being through email. In a typical phishing scenario, the attacker sends an email that appears to come from a well-known company, like a bank, an online payment service, or a social networking site. The email may urge the recipient to take immediate action, such as clicking a link to “verify your account” or “update your password.”

Clicking the link will usually lead to a fraudulent website designed to look like the legitimate one, where the victim enters their login credentials or personal information, thereby unknowingly handing them over to the attackers.

Apart from email, phishing can also occur via phone calls (vishing), text messages (smishing), or even through social media. Advanced forms of phishing include spear phishing, where the phishing attempt is specifically targeted towards a specific individual or organization, and whaling, which targets high-profile individuals.

To protect against phishing, it’s important to be skeptical of any communication that asks for sensitive information, especially if it requires urgent action. Also, keep an eye out for signs of fraud, such as misspelled words, poor grammar, or email addresses that don’t match the name of the company they’re purportedly from. Most importantly, never click on suspicious links. Instead, manually type the URL into your web browser, or use a bookmark you’ve previously created.

Hacking, in the context of computers and networks, refers to the act of exploiting system vulnerabilities and compromising security controls to gain unauthorized or illegal access to those systems. These exploits can enable the hacker to perform various activities, depending on their intentions.

Here are a few different types of hacking:

1. Ethical Hacking (White Hat Hacking): These are security experts, often employed by organizations to conduct penetration testing and vulnerability assessments on their systems. They utilize their skills to identify and fix potential vulnerabilities before malicious hackers can exploit them.
2. Cracking (Black Hat Hacking): These individuals hack with malicious intentions, such as theft, vandalism, or other harm. They might create and spread malware, steal personal information, perform financial fraud, or disrupt services.
3. Grey Hat Hacking: These hackers straddle the line between ethical and malicious hacking. They may violate laws or ethical standards, but without the malicious intent associated with black hat hackers. For instance, they might hack a system without permission but then inform the owner about the vulnerabilities instead of exploiting them.
4. Hacktivism: This is hacking carried out for a political or social cause. It can be characterized by the use of hacking techniques to promote, impede, or protest against a person or organization, often by defacing websites or releasing information.
5. Cyber Espionage: This involves hacking carried out by governments to gather intelligence from other nations, organizations, or individuals.

It’s important to note that unauthorized hacking, regardless of intent, is illegal in most jurisdictions, and is generally considered unethical by the larger tech community. In order to conduct ethical hacking, one must usually receive explicit permission from the owner of the system they are attempting to hack.

A bank holiday is a public holiday in the United Kingdom, some Commonwealth countries, Hong Kong, and the Republic of Ireland. On these days, particularly in the UK and Ireland, banks and most businesses are closed for the day.

The term “bank holiday” originated from the practice of banks closing for business, which also meant that other businesses couldn’t operate as normal. This term has since been extended to a wider range of public and private sector services.

Bank holidays may be designated by statute, religious observance, or custom and are typically observed with community-wide activities such as public parades, shows, and sporting events. Different regions within the same country may observe different bank holidays.

In the United States, the term isn’t commonly used; instead, they refer to these days as “public holidays,” “federal holidays,” or simply “holidays.” The concept, however, is the same: a day when most businesses and services are closed due to a public celebration or observance.

“Bailout” is a term often used in finance and economics to refer to the act of giving financial assistance to a failing business or economy. It generally occurs in situations where the collapse of the entity in question could have a disastrous ripple effect on an entire industry or economy.

For instance, during the 2008-2009 global financial crisis, many governments around the world bailed out banks and other financial institutions. They did this because they considered these institutions “too big to fail” – meaning that their failure could lead to a systemic crisis in the financial system.

Bailouts can take several forms, including but not limited to:

1. Direct cash transfers: The government directly provides funds to the troubled organization.
2. Loans or loan guarantees: The government might offer a loan at a low interest rate, or it might guarantee a loan from a private lender, meaning that the government would repay the loan if the troubled organization cannot.
3. Equity stakes: In some cases, the government might take an equity stake in the company as part of the bailout, which might later be sold at a profit if the company recovers.
4. Providing subsidies or tax breaks.

While bailouts can prevent immediate economic harm, they are often controversial. Critics argue that they can create moral hazard, a situation where companies engage in risky behavior knowing that they will be rescued if things go wrong. Others contend that bailouts represent an inappropriate use of taxpayer funds.

“Bail-in” is a term that was popularized following the 2008 financial crisis and refers to a resolution mechanism designed to enable failing banks to continue their operations without having to use taxpayers’ money. In a bail-in, the bank’s creditors are required to bear some of the burden by having a portion of their debts written off. This may include bondholders and depositors with deposits exceeding certain insured amounts.

The goal of a bail-in is to prevent bank insolvencies from spreading panic and chaos within the financial system, a phenomenon known as a “bank run.” This is a departure from the “bail-out” approach, where external parties, usually governments, inject capital into the struggling institution.

The term “bail-in” gained recognition after its introduction into banking regulations by the Financial Stability Board in 2011 and its subsequent implementation in the European Union and other jurisdictions.

However, it’s important to note that the implementation of a bail-in is subject to local laws and regulations. In some countries, insured deposits are excluded from any potential bail-in actions, safeguarding small savers from losing their money.