Blog

A hardware wallet is a physical device that securely and isolates a user’s cryptocurrencies from computer or smartphone vulnerabilities. These wallets have a few key advantages over traditional software wallets:

1. Private keys are often stored in a protected area of a microcontroller, and cannot be transferred out of the device in plaintext. This makes them immune to computer viruses that steal from software wallets.
2. They can be used securely and interactively. They can make secure digital payments. They are immune to keyloggers because the private key can be generated on the hardware wallet and never reaches the computer.
3. Immune to the risk of “Zero-day” exploits. A zero-day vulnerability refers to a hole in software that is unknown to the vendor. This security hole is then exploited by hackers before the vendor becomes aware and hurries to fix it. This exploit is called a zero-day attack. Hardware wallets aren’t exposed to this risk if used correctly.
4. Control over your money. With a hardware wallet, you own and control your keys. This ensures that you have full control over your cryptocurrency.

Examples of hardware wallets include Trezor, Ledger Nano S, and KeepKey. These wallets often support multiple cryptocurrencies and have interfaces for managing and trading your assets.

“L2” in the context of cryptocurrency and blockchain generally refers to “Layer 2” solutions.

Layer 2 solutions are protocols that increase the throughput of transactions on a blockchain without affecting the security of the underlying Layer 1 (L1). L1 is the main blockchain (like Ethereum or Bitcoin), while L2 is a secondary framework or protocol laid on top of an existing blockchain.

Layer 2 solutions are designed to help scale blockchains by handling transactions off the main chain. They use the main chain for security but perform many functions, like transactions, off-chain. This decreases congestion and increases transaction speed, making the blockchain more scalable.

Examples of Layer 2 solutions include Lightning Network for Bitcoin, and Optimism, zkSync, and Arbitrum for Ethereum.

Optimistic Ethereum (OΞ) is a Layer 2 scaling solution for Ethereum. It utilizes a technology known as Optimistic Rollup to provide faster transaction times and lower fees compared to the Ethereum mainnet, while still preserving a high degree of security.

Optimistic Rollups are Layer 2 solutions that execute transactions on a sidechain. The state of this sidechain is periodically “rolled up” and included as a single transaction on the Ethereum mainnet. In essence, Optimistic Ethereum uses the Ethereum network as a kind of court system – most of the time, the sidechain operates independently, but in case of a dispute, the main Ethereum chain is used to arbitrate and settle conflicts.

Optimistic Ethereum gets its name from the Optimistic Rollup technology. It’s “optimistic” because it assumes that most transactions are honest. Only in cases of suspected fraud are transactions closely scrutinized, which saves a lot of computational resources.

Bitcoin Cash is a cryptocurrency that was created in August 2017, from a fork of Bitcoin. This means that anyone who held Bitcoin at that time has the same amount of Bitcoin Cash, and any decisions about Bitcoin’s future are separated from Bitcoin Cash’s future.

The reason for the fork was a disagreement in the Bitcoin community about how to scale the Bitcoin network. Transactions were becoming slower and more expensive as the network grew, and different solutions were proposed to solve this.

Bitcoin Cash was a solution proposed by a faction of the community that wanted to increase the block size in the Bitcoin blockchain. A “block” in the blockchain is a record of some or all of the most recent Bitcoin transactions that have not yet entered any prior blocks. In Bitcoin, the size of a block is limited to 1MB, which was causing congestion on the network as Bitcoin’s popularity increased.

Bitcoin Cash increased this limit to 8MB (and later to 32MB) to allow more transactions to be processed in each block, theoretically making transactions faster and less expensive. This is a more “on-chain” solution, keeping all transactions in the Bitcoin Cash blockchain.

However, increasing block size has its own set of challenges. Larger blocks can make it more difficult for some users to participate in the network, leading to more centralization. It can also increase the requirements for storage, computational power, and bandwidth for nodes that are maintaining the blockchain.

Since its creation, Bitcoin Cash has remained a separate cryptocurrency from Bitcoin, with its own market price, development team, and user base. It’s one of many examples of how the open-source nature of Bitcoin allows different groups to propose their own solutions to problems and create new cryptocurrencies based on those solutions.

MakerDAO is a decentralized organization built on the Ethereum blockchain. The main goal of MakerDAO is to manage and control a pair of cryptocurrency tokens: DAI and MKR.

DAI is a stablecoin, which means it’s pegged to a stable asset, in this case, the US dollar. This means that 1 DAI equals approximately 1 USD. This is a key factor in the DeFi (Decentralized Finance) space because it provides a stable medium of exchange, in contrast to other volatile cryptocurrencies.

The value of DAI is kept stable using smart contracts and mechanisms that automatically adjust the total supply of DAI in response to changes in demand. If the demand for DAI goes up (pushing the price up), new DAI is minted. If the demand for DAI goes down (pushing the price down), DAI is taken out of circulation.

MKR is the governance token of MakerDAO. People who hold MKR can vote on proposals for changes to the system. These proposals can cover a wide range of topics, including changes to the risk parameters of the system, changes to the type of collateral accepted, or changes to the system’s upgrade processes.

The MakerDAO system is a complex one with many moving parts, but the overall aim is to create a decentralized stablecoin system that can be used as part of the wider Ethereum DeFi ecosystem.

A Denial of Service (DoS) attack is a type of cyber attack where an attacker attempts to make a machine or network resource unavailable to its intended users by temporarily or indefinitely disrupting services of a host connected to the internet.

In a DoS attack, the attacker typically floods the targeted system with superfluous requests to overload the system and thereby prevent legitimate requests from being fulfilled. The attack essentially works by overwhelming a system’s resources such as its CPU, memory, or network bandwidth, causing it to slow down or crash.

There’s also a variant of DoS attack known as a Distributed Denial of Service (DDoS) attack. A DDoS attack is similar to a DoS attack but involves multiple compromised computers (often forming a “botnet”) to flood the targeted system with traffic. Because the attack traffic originates from many different sources, a DDoS attack is much harder to block than a single-source DoS attack.

It’s important to note that these attacks don’t typically involve a breach of security or data theft, but they can be used as a smokescreen for other malicious activities, or simply to disrupt services as a form of vandalism or protest.

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.

A Distributed Denial of Service (DDoS) attack is a type of malicious act in which multiple systems, which are often infected with a Trojan, are used to overwhelm a targeted system, such as a server, website, or network. The aim is to make the targeted system unavailable to its intended users.

Typically, the attacker tries to interrupt or suspend the services of a host connected to the internet. This is achieved by overwhelming the target or its surrounding infrastructure with a flood of internet traffic. The traffic can consist of incoming messages, requests for connections, or fake packets.

In a DDoS attack, the incoming traffic flooding the victim originates from many different sources, potentially hundreds of thousands or more. This effectively makes it impossible to stop the attack simply by blocking a single IP address; plus, it is very difficult to distinguish legitimate user traffic from attack traffic when spread across so many points of origin.

DDoS attacks can be broadly divided into three types:

1. Volume Based Attacks: These are attacks that aim to overwhelm the bandwidth of a site with sheer volume of data. The aim is to consume all available bandwidth resources. Examples include ICMP floods and UDP floods.
2. Protocol Attacks: These are attacks that focus on exploiting server resources. They aim to overwhelm the actual server machines and intermediate communication equipment (such as firewalls and load balancers) by consuming all available processing capacity. Examples include SYN floods, fragmented packet attacks, and Ping of Death.
3. Application Layer Attacks: These are the most sophisticated types of attacks that focus on particular web applications. They are the hardest to detect and mitigate because they can mimic normal user behavior and require less bandwidth to cause damage. Examples include HTTP floods and Slowloris attacks.

DDoS attacks are a major security threat and are becoming increasingly common due to the proliferation of IoT devices, many of which have poor security, and the availability of DDoS-for-hire services. They are typically motivated by a desire to cause harm to the target rather than personal gain, but can also be used as a distraction for other malicious activities or for competitive advantage.

“Average down” is an investment strategy where an investor buys more shares of a stock as the price goes down. This has the effect of lowering the average price that the investor paid for the shares.

For instance, let’s say an investor buys 100 shares of a company at $10 each. If the price drops to $5, the investor might buy an additional 100 shares. The average cost of the shares is now $7.50, even though the current price is only $5.

The strategy is often used by investors who believe that the price drop is temporary and that the price will eventually rebound. By averaging down, they aim to benefit more from the rebound because they own more shares at a lower average cost.

However, it’s also a strategy that carries considerable risk. If the stock’s price continues to fall or never rebounds, the investor stands to lose more money. In other words, it can lead to “throwing good money after bad.” Therefore, it’s critical to apply this strategy in the context of a well-reasoned belief in the stock’s long-term potential.

“Burning” in the context of cryptocurrency is the process of permanently removing coins or tokens from circulation, effectively reducing the total supply available.

This process is typically accomplished by sending a portion of the tokens to a designated “burn address”—a public address with no known private key. Without a private key, it’s impossible to access or use the tokens sent to the burn address. Hence, they’re effectively removed from circulation, considered “burned.”

Burning can serve a few different purposes in cryptocurrency systems:

1. To manage inflation: By reducing the total supply of tokens, burning can increase the relative value of each remaining token, assuming demand stays constant or increases.
2. To reward holders: Sometimes, projects will burn tokens to increase the value of the remaining tokens, indirectly rewarding those who hold the token.
3. To destroy unsold tokens: After an Initial Coin Offering (ICO) or a token sale, any unsold tokens might be burned to avoid flooding the market.
4. Tokenomics model: Some cryptocurrencies, like Binance Coin (BNB), have a model where a portion of tokens gets burned periodically.
5. Proof of Burn: Some coins use a mechanism called “Proof of Burn,” where miners must show proof that they’ve burned some coins by sending them to a non-retrievable address to create a new block in the blockchain.
6. To pay for transaction fees or other operations: On some platforms, tokens are burned as a means of paying for certain operations, like executing smart contracts.

Remember that the specific implications and purposes of burning can vary widely between different cryptocurrencies, as each can have its own unique rules and systems.