Elon Musk’s Tweets on blockchain and the vicious effect it has on the performance of cryptocurrencies has led many people to ask themselves “why do people listen to this guy?”, even those that deal with these volatile daily.
Truth is, just like untouchable and unpredictable tweets from a genius eccentric entrepreneur, blockchain also leave investors thinking “why do I keep doing this?”. But the answer to this one is simpler: blockchain is the future.
Have that been said, if you are not into the crypto universe yet likes to keep up with the news, you are probably approached with some confusing terms that keep you from really digging deep into the blockchain concept.
If that is the case, here you will find 10 terms selected by our specialists that will help you follow up with news from the underground world of blockchain.
Blockchain Explained: Start with the basics
Let us start with key concepts that may sound simple but are incredibly important in blockchain.
Distributed Ledger Technology (DLT)
Blockchain is a distributed ledger. This technological infrastructure allows simultaneous access, update and validation of records kept in multiple locations. DLT allows information to be stored using cryptography and once stored, it is managed completely by the rules of the network it is in. It is also simultaneously shared and synchronized across all sites, institutions, or physical locations.
As blockchain data is not stored in a single place, no one really has full control over data in blockchain. Developers and users will communicate directly with each other, not depending on a third party to do so. Also, every information stored in blockchain is public for everyone to see.
Once a block is verified and added into blockchain, the content and details of the transaction in that block cannot be removed or changed. All data in blockchain is cryptographed, making it difficult to be hacked.
P2P – Peer-to-Peer
This was one of the main reasons why bitcoin was so quickly accepted. In a peer-to-peer payment, there is no need of a third party (such as a bank or other payment institution) to manage the transaction. Without third party institutions, transactions occur directly from one user to another, resulting in faster and cheaper transactions. It is also safer as transfers of digital assets are done through blockchain, with all its unique characteristics previously mentioned.
Blockchain Explained: Common terms
Here are other terms commonly used in discussions and content about blockchain.
Also known as decentralized apps, it is an autonomous entity with open code that may be updated or modified by other users. These apps are built in blockchain, therefore do not require a central authority, such as governments or corporations. Peer-to-peer transactions are done through DApps.
Smart contracts will contain the terms of the transaction between buyer and seller, which are executed in algorithms and verified into blockchain. Smart contracts are a fundamental part of peer-to-peer transactions as all regulation regarding the payment is safely stored in blockchain and, therefore, is immutable. This provides more security to all transactions.
ICO – Initial Coin Offer
Based on the term IPO (initial public offer) common to the stock market, ICO is the first campaign of a cryptocurrency in the market, with the purpose of attracting funding. To do so, one must write a technical article to propose a new network or token based on an existing network. In simple words, let us imagine you have invented a new cryptocurrency Y and wrote an extensive attractive article explaining how it works. In the ICO, people will essentially give you crypto money (like bitcoin) in exchange for an amount of the coin you created, in the hopes that it will eventually grow its value and they will be able to sell it for more than the amount they first paid you.
NFT (Non-fungible Tokens)
NFT uses blockchain to generate a unique token for a digital asset. These tokens contain immutable codes that allow any transaction involving these digital assets to be traceable. This means that one user may own a digital asset, even though it may be freely reproduced across the internet. Assets currently being traded include digital art, music, videos, photos and even tweets. In a sale, the “artist” is paid in cryptocurrency. They are non-fungible because all tokens are different from the other, they cannot be traded. Imagine that 1 bitcoin can be traded by 1 bitcoin (fungible) but 1 NFT cannot be traded by 1 NFT, as they each have different values (non-fungible).
Whales are users that have an important position in the market because they own such an amount of cryptocurrency that their transactions may affect the price of these coins. As cryptocurrencies mature or their market capitalization grows it is predicted that the influence of whales in the price of coins will eventually decrease.
Bull and Bear Market
Bull market is used to describe a long period of growth in a cryptocurrency price, whereas bear market means the opposite, a period of decrease. Bull and bear market are commonly used in financial markets and they come from the understanding that a bull market is optimistic (leading to inevitable growth) as a bear market is pessimistic (resulting in prices decreasing).
Hopefully, these teams will help you keep up with blockchain trends and tweets! Are you a developer looking to get into blockchain? Checkout this article to see how you can learn blockchain development and get involved with the most innovative projects in the tech industry.