Glossary Term: Cryptocurrency

Atomic Cross-Chain Transfer (ACCT) is a technology that enables digital assets (such as cryptocurrencies) to be transferred securely between different blockchains. This process is called “atomic” because it ensures that the entire transaction happens as a single, indivisible operation – it either fully completes or doesn’t happen at all, preventing partial completion which could result in a loss of assets.

In a typical atomic cross-chain transaction, there are two parties: one owning cryptocurrency A on blockchain A, and the other owning cryptocurrency B on blockchain B. The parties agree to swap their cryptocurrencies. This swap occurs directly between the two blockchains, without the need for a trusted intermediary or a third-party exchange.

The general process of an Atomic Cross-Chain Transfer involves smart contracts and cryptographic techniques such as hash time-locked contracts (HTLCs). Here’s a simplified explanation:

1. Party A initiates the transaction by creating a smart contract on blockchain A. The contract locks up the agreed amount of cryptocurrency A and includes a cryptographic hash of a secret number (a “hashlock”) and a time limit for the other party to fulfill their side of the transaction (a “timelock”).
2. Party B, upon receiving proof of this smart contract, creates a similar contract on blockchain B, locking up the agreed amount of cryptocurrency B. Importantly, this contract uses the same hashlock.
3. Party A then unlocks the contract on blockchain B using the secret number, revealing it in the process. This allows Party A to receive cryptocurrency B.
4. Party B is now able to see the revealed secret number and uses it to unlock the contract on blockchain A, thereby receiving cryptocurrency A.
5. If Party A never submits the secret number to unlock the contract on blockchain B, then after the time limit expires, the smart contract allows Party B to reclaim their locked-up cryptocurrency B. Similarly, if Party B never claims the cryptocurrency A on blockchain A, Party A can reclaim it after its time limit expires.

So, these transactions are fully trustless (no need to trust the other party) and secure, as they’re based on cryptographic proofs. Atomic Cross-Chain Transfer technology has the potential to greatly increase the interoperability of different blockchains, allowing for a much more interconnected and efficient ecosystem of cryptocurrencies.

A smart contract is a self-executing contract with the terms of the agreement directly written into code. They exist across a decentralized blockchain network and automatically execute transactions when predetermined conditions are met, without the need for an intermediary. This code not only defines the rules and penalties around an agreement in the same way a traditional contract does, but it can also automatically enforce those obligations.

Smart contracts were first proposed in 1994 by Nick Szabo, an American computer scientist and cryptographer, but they didn’t become a reality until the development of blockchain technology. The most widespread application of smart contracts is in the Ethereum blockchain, but many other cryptocurrencies and blockchain platforms also support them.

The major benefits of smart contracts include:

1. Trust: Since the contract is automated and transactions are transparent and traceable, parties don’t need to trust each other, just the code.
2. Security: Being stored on a blockchain, they are encrypted and distributed among nodes. This makes them nearly impossible to hack.
3. Efficiency and Speed: Automated contracts eliminate the need for intermediaries and reduce time spent on paperwork.
4. Cost Reduction: By removing the need for intermediaries or a third party, smart contracts can also greatly reduce costs associated with those services.

However, they’re not without their challenges, such as legal recognition and handling situations that haven’t been predefined in the code. There’s also the risk of bugs in the code, which could have serious implications due to the immutable nature of blockchain technology.

It’s important to note that as a smart contract is a piece of code, it can only control digital assets and resources. For it to interact with the real world, a reliable and trustworthy source of information, often referred to as an “oracle”, must be used.

Escrow is a legal concept where financial instruments or assets are held by a third party on behalf of two primary transacting parties, with the escrowed goods or funds being transferred only upon the fulfillment of the predetermined contractual obligations.

This system is often used in various types of transactions, such as:

1. Real Estate Transactions: In the case of a house sale, for example, the buyer will deposit the payment into an escrow account, and the seller will deposit the deed to the house. Neither party has access to what the other deposited until both have fulfilled their obligations in the transaction. Once the transaction is complete, the funds and the deed are released from the escrow account and given to the appropriate parties. This ensures that both the buyer and seller are protected during the transaction.
2. Online Transactions: Escrow can also be used in online transactions to protect buyers and sellers. In this case, a buyer will send payment to an escrow account, and then the seller will send the item. Once the buyer has received and approved the item, the payment is released to the seller.
3. Construction Projects: Escrow can be used to ensure that contractors complete their work before receiving full payment. The funds for the project are put into an escrow account and released in portions as the project is completed. This protects the person or organization paying for the project.

The use of escrow reduces the risk of fraud by providing a trusted third party who ensures that all parts of the transaction are carried out correctly. The escrow provider only discharges the funds or assets when all terms of the contract have been met by both parties.

A hard fork is a term that originates from blockchain technology and cryptocurrency, and it refers to a significant change to the protocol of a blockchain network that makes previously invalid blocks or transactions valid, or vice-versa. This type of fork requires all nodes or users to upgrade to the latest version of the blockchain software.

In a hard fork, the changed protocol is not compatible with the older version. If not all nodes upgrade, this can result in the creation of two incompatible blockchains: one that follows the old rules, and another that follows the new rules. This scenario could potentially lead to a split in the network, creating two separate cryptocurrencies. For example, the creation of Bitcoin Cash in 2017 was the result of a hard fork from the original Bitcoin network.

Hard forks can be planned or contentious. Planned hard forks are agreed upon by the community and are designed to introduce new features or fix critical security issues. Contentious hard forks, on the other hand, are due to disagreements within the community and can result in a split in the network.

DEX stands for Decentralized Exchange. It’s a type of cryptocurrency exchange that operates without the need for an intermediary authority that conducts transactions.

In contrast to centralized exchanges (CEXs), which operate much like traditional stock exchanges, DEXs allow for direct peer-to-peer cryptocurrency transactions to take place online securely and without the need for an intermediary. The transactions on a DEX are facilitated through smart contracts and automated processes.

DEXs offer several benefits, such as increased privacy and control over one’s funds, reduced reliance on third parties, and often lower transaction fees. However, they may also have downsides, such as lower liquidity and trade volume, slower transaction speeds, and a more complex user interface. They are an essential part of the DeFi (decentralized finance) ecosystem.

Example of DEXs:

Ethereum Blockchain: UniSwap, Sushiswap

Binance Smart Chain Blockchain: PancakeSwap, BakerySwap

OTC stands for Over-The-Counter. In the context of financial markets, this refers to a method of trading that doesn’t take place on a centralized exchange, but rather directly between two parties. Stocks, bonds, derivatives and other financial instruments can be traded this way.

The term “GOXed” comes from the cryptocurrency community and it refers to a situation where a cryptocurrency exchange stops withdrawals, typically due to a hacking incident or bankruptcy.

It’s a term derived from the infamous Mt. Gox Bitcoin exchange, which was once the world’s largest Bitcoin exchange handling over 70% of all Bitcoin transactions worldwide. In 2014, Mt. Gox suspended trading, closed its website and exchange service, and filed for bankruptcy protection from creditors. It was reported that approximately 850,000 bitcoins belonging to customers and the company were missing and likely stolen, an amount valued at more than $450 million at the time.

Hence, “Getting Goxed” or “GOXed” became a slang term in the cryptocurrency community to describe the situation when you’re unable to withdraw your assets from a cryptocurrency exchange due to the exchange’s operational issues, often involving insolvency or a security breach. It’s a stark reminder of the risks associated with storing digital assets on exchanges.

“HODL” is a term used in the cryptocurrency community, which originated from a misspelling of the word “hold.” It was first seen in a post on a Bitcoin forum in 2013, where a user, amidst a crash in Bitcoin’s price, wrote “I AM HODLING,” in an attempt to say that they were keeping their Bitcoin despite the severe drop in value.

The term quickly became a meme within the cryptocurrency community, and now “HODL” is often said to stand for “Hold On for Dear Life.” It signifies an approach to cryptocurrency investment where one buys and holds onto a cryptocurrency long-term, regardless of market fluctuations, with the expectation that it will increase in value over time. It contrasts with more active trading strategies, such as attempting to buy low and sell high based on short-term price movements.

Seems like it originated from the thread below.

https://bitcointalk.org/index.php?topic=375643.0

In the context of Bitcoin (BTC), divisibility refers to the smallest unit into which a single Bitcoin can be broken down. This property is crucial for a currency, as it needs to be exchanged in many different quantities to be useful for commerce.

A Bitcoin is divisible to the 8th decimal place, and the smallest unit of Bitcoin is known as a “Satoshi,” named after Bitcoin’s pseudonymous creator, Satoshi Nakamoto. One Bitcoin is equivalent to 100,000,000 Satoshis. This high level of divisibility is important because it allows for precise transactions even as the value of a single Bitcoin rises.

So, when we say that Bitcoin is divisible, we mean that it can be split into smaller units, allowing for precise, flexible transactions.

“Fungible” is a term that describes a commodity or good that’s interchangeable with another identical item. This quality of interchangeability is crucial for many markets to function efficiently.

For example, in the world of finance, money is fungible because one dollar is identical to another dollar. Similarly, Bitcoin is fungible because any one Bitcoin is identical to any other Bitcoin.

In contrast, non-fungible items are unique and can’t be replaced with something else. A painting, for instance, is non-fungible.

This concept has recently been popularized by the emergence of Non-Fungible Tokens (NFTs) in the digital art world, where each token represents a unique piece of artwork.