December 2, 2022

Learn the most common digital currency terms

You’ve probably heard about digital currencies, especially bitcoin, on the radio or on social media these days. This technology will not last long. Because of this, many of you may be interested in it and would like to know more about it. Of course, to get acquainted with any field, you must first learn the terms related to it. In this article, we will talk about some of the most important and basic terms of digital currency.

1. Address

Digital currencies are identified in the blockchain by a unique address. If you want a concrete example, you can consider blockchain like GPS and your digital currency address as the postal address. Without a wallet address, you can not save any currency, because the blockchain can neither verify nor validate its existence; Therefore, you can not own even one digital currency.

Each time a transaction is confirmed, your wallet balance is updated based on your address. Addresses can have different formats depending on the type of digital currency, but most of them are as follows:

17VZNX1SN5NtKa8UQFxwQbFeFc3iqRYhem –

2. Altcoins

Altcoin, one of the most common terms for digital currency, refers to all digital currencies that came after Bitcoin. Any digital currency other than bitcoin is a coin; Atrium, for example, is a type of altcoin. Of course, in this article, we have assumed that you know bitcoin. However, I will give a brief explanation about it:

Bitcoin is the first and most valuable digital currency. Bitcoin was created by Satoshi Nakamoto (an unidentified individual or group of individuals whose identities are unknown) in 2009. Bitcoin transactions are recorded on a “decentralized general ledger”, without the intervention of an intermediary; This means that each transaction between the two parties is done on a peer-to-peer basis and no third party (third party) such as a bank is involved in this process.

However, thousands of altcoins have been created since the launch of the Bitcoin network. Some of them were involved in financial crimes and others disrupted the markets. Most popular altcoins are those used in the real world. Atrium is currently the largest altcoin in the world. However, there are other altcoins that are worth considering (this is not an investment recommendation!): Lightcoin, Cardano, Ripple, Stellar, Theron, Chinlink, Teter, Dash, Monroe.

3. Blockchain

Blockchain is one of those words that you have probably heard, however, I do not know that even half of the people who use it have understood what blockchain is. Maybe you are not one of those people.

Blockchain is a digital notebook, and its content consists of all the transactions that have been made so far with any particular digital currency. Any specified number of these transactions are placed together in a block. When the capacity of a block is full, a new block is created that contains a number of other transactions, and the process continues. Some blockchains are designed to have a limited number of blocks, while others can last indefinitely.

Blockchain technology is designed so that there is no central office or single entity that stores this head office. But it has to be stored somewhere, right? Blockchain is repeatedly stored on various computers and servers around the world. That’s why we call it a decentralized head office, because no centralized body has control over it.

Bitcoin blockchain is quite public, so everyone can see every transaction. Since many people still compare bitcoin to the early days of its inception, which became a hotbed for drug and firearms transactions, this bitcoin transparency may seem a bit ridiculous. This is not to say that this is not the case, because the more bitcoin thrives, the easier it will be to track transactions; Especially in centralized trading platforms where customers must authenticate (KYC) to benefit from their services.

Confidential blocks?
Yes there are. Some blockchains, such as Monroe, are privacy-oriented, so their transactions are conducted in a completely anonymous and confidential manner. It is not possible to associate a transaction with a specific address in this blockchain. This is actually one of the main features of Monroe and users who want to do their transactions in a completely anonymous way are more attracted to this digital currency.

4. Decentralized applications

Decentralized applications (dApps) are open-source applications that developers build on a blockchain that aim to have real-world applications. Atrium is the mother of decentralized applications. Atrium creator Vitalik Butrin originally designed it with the goal of allowing developers to build their own applications on their own blockchain.

There is no single definition for these applications, but it can be said that they all have a few features in common:

The source is lost;
Are decentralized;
Have a protocol (society must agree on a cryptographic algorithm);
They use an incentive system (ie, creditors receive tokens as a reward for participating in the system).
The market value of some decentralized applications built on Atrium is up to millions of dollars. Theoretically, a decentralized application could be as valuable as any other company or product.

5. Decentralized finance or defa

One of the terms of digital currency that may seem a little strange is defa. DeFi is a term used to refer to all decentralized finance that has replaced traditional centralized finance. Banking, money management, payment services, insurance and everything that was done centrally in the traditional financial system will be decentralized.

Defai’s products and services enable us to democratically access an industry that has historically been monopolized by a particular group (including governments).

6. Digital money

In essence, digital currency is the transliteration of the term “digital currency.” However, in our country, both cryptocurrency and digital currency are called “digital currency” (in general, equations such as cryptocurrencies, cryptocurrencies and cryptocurrencies are not accepted for cryptocurrency, and experts prefer digital currency for cryptocurrency). Reason to separate the two, which are obviously different from each other, we used digital currency for cryptocurrency and digital money for digital currency.

Digital money is the electronic model of Fiat currency (the currency of a country); That is, the same banknotes and coins that we physically use in the country also have an electronic form that is stored in a digital wallet; Therefore, they can be converted into cash using a bank or ATM. Basically, digital money is a kind of cash that is not tangible and is just a set of numbers on our bank cards or digital wallet.

Digital money is based on trust, while digital currency does not require trust. This means that we rely on one or more institutions to make a transaction with digital money and we must trust them; But to trade digital currency, we do not need trust from an intermediary or a third party such as a bank. We must immediately validate the transactions and the address records with which we are trading.

For example, consider Shapark or Zarrinpal, which are payment gateways (like PayPal). We can not review the records of these payment gateways, we only trust them and use them to make the transaction safely and securely for us.

7. Distributed head office technology

We have already seen that the General Ledger is where all transactions on a blockchain can be viewed. Distributed ledger (DLT) is another digital currency modification for blockchain technology. Distributed means that the general office is distributed to a large number of computers around the world in order to be decentralized.

8. Fiat

Fiat currency is the common currency of a country. Our own rials, dollars, pounds, euros and yen are examples of Fiat currency. It is backed by the government’s Fiat currency and is not supported by any commodity like gold; So where does the value of the Fiat currency come from? Fiat’s value depends on our faith and our collective acceptance of the institution of government. If the government collapses, the value of Fiat will fall with it.

10. Initial supply of coins

The initial public offering (ICO) or public offering is similar to the IPO. Initial coin offering is a new way that projects and startups use to raise the capital they need to grow and develop. Almost anyone can participate in the initial coin offering. Investors raise the capital they need by buying project tokens and startups.

11. Customer authentication

Customer Authentication (KYC) means matching a person’s true identity. KYC stands for “Knowing Your Customer”. You must authenticate to buy and sell digital currencies at any of the major exchanges or platforms. On some platforms, such as eToro and Coinbase, customer authentication is an integral part of the new customer acquisition process.

Customer identity checks help surveillance agencies identify terrorist financing sources and money laundering activities. There are no specific financial rules for digital currencies yet. For this reason, governments are trying to link blockchain transactions to citizens so that it is clear who is doing the transaction.

12. Extraction

Extraction or mining is the process of validating and approving new transactions in the blockchain. We said that each block contains a batch of transactions. Once a new block is completed, it must be added to the blockchain. To do this, miners who have provided their computer with computing power compete with each other, and each miner tries to solve the complex mathematical problem needed to add a block to a Chinese block sooner than the others. Anyone who does this sooner will be rewarded. This bonus includes part of the transaction fee and part of the new coins.

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