Crypto Glossary
Hello Myners! Here are more cryptocurrency terms for you to write down this week.
What is a crypto token?
Crypto tokens are digital assets that are built on another cryptocurrency’s blockchain.
Tokens are best described by distinguishing their significance from that of coins. Since they both represent value and can be used in transactions, most people confuse a token with a coin at some point.
Tokens are built on an existing blockchain like Ethereum using smart contracts, whereas coins function on their own blockchain and are the native asset of a blockchain like BTC, RBTC, or ETH.
Tether, BAT, BNT, and numerous stablecoins like the USDC are some available tokens on Ethereum.
Token’s behavior is regulated by smart contracts whereas crypto coins transactions are managed by blockchain. Tokens are a set of codes that allow users to trade or pay one other. Each blockchain uses its smart contract. For example, Ethereum uses ERC-20, and NEO uses Nep-5.
Another significant distinction between tokens and coins is the value they represent. Crypto coins are digital versions of money that act as money. Bitcoin, for example, was developed with the sole intention of displacing traditional currency. Tokens can represent assets or deeds.
It is possible to mine cryptocurrency coins. There are two ways to earn cryptocurrencies. One method is to mine using the Proof of Work scheme. This approach is used by bitcoin hunters to increase their earnings. The issue is that there aren’t many Bitcoins left to mine, therefore the process is becoming more difficult by the day. Proof of Stake, a more current technique of earning coins, is the second option. It uses less energy and is simpler to implement. Cardano is one of the most popular coins to use this technique.
Tokens are simple to make. Some networks, such as Ethereum, give templates for you to customize and trade your tokens. Anyone with little to no technical skills can become a marketer as a result of this. Decentralized exchanges, such as Uniswap, have a high density of this type of activity.
A token is physically moved from one location to another when it is spent. The trading of NFTs is a fantastic example of this (non-fungible tokens.) Because they are one-of-a-kind, any changes in ownership must be handled manually. NFTs are comparable to utility tokens in that they have emotive or artistic value, but you can’t obligate any services with them.
Coins differ from tokens in that they do not move, only account balances change. Your money does not move anywhere when you transfer money from one bank to another. The bank altered both accounts’ balances while keeping the fees. The same thing happens with blockchain: your wallet balance alters, and the transaction records it.
Tokens can be purchased with coins; however, some tokens may be worth more than any of them. Consider a company’s stock. However, because there are frequent constraints on where a token can be spent, it lacks the liquidity of a currency.
Simply put, a token symbolizes what you own, but a coin represents what you have the potential to acquire.
What is decentralization?
Decentralization in the blockchain refers to the transfer of control and decision-making from a centralized entity (person, organization, or group of people) to a distributed network. Decentralized networks aim to reduce the amount of trust that participants must place in one another and deter them from exercising power or command over one another in ways that would compromise the network’s effectiveness.
Consider a corporation that owns a server farm with 9000 machines that is used to keep track of all of its clients’ account information. This corporation owns a warehouse facility that houses all of these computers under one roof, and it has complete control over each of them and the data they hold. However, this creates a single point of failure. What happens if the power goes out at that location? What happens if its Internet connection is lost? What if it all goes up in flames? What if a bad actor uses a single keystroke to wipe everything clean? The data is either lost or damaged in either situation.
A blockchain allows the data in a database to be distributed across multiple network nodes in different places. This not only adds redundancy to the database but also ensures that the data contained there is accurate — if one node of the database is updated, the other nodes are not affected, preventing a bad actor from doing so. If one user tampers with cryptocurrency’s transaction record, all other nodes will cross-reference each other, making it easy to find the node that has the erroneous data. This system aids in the establishment of a precise and visible sequence of events. In this manner, no single node in the network may change the data it contains.
As a result, information, and history (such as cryptocurrency transactions) are irreversible. A blockchain can store a range of information, including legal contracts, state identifications, and a company’s goods inventory, in addition to a list of transactions (such as with a cryptocurrency).
What is a cipher?
In cryptography, a cipher (or cypher) is a set of well-defined procedures that can be followed as a procedure to execute encryption or decryption. Encipherment is a less commonly used term. Encryption or encoding is the process of converting data into a cipher or code. Although “cipher” and “code” are both a sequence of processes that encrypt a message in general usage, the notions are separate in cryptography, particularly classical cryptography.
In the output, codes usually substitute varied length character strings, but ciphers usually substitute the same amount of characters as the input. There are exceptions, and some encryption systems may produce slightly more, or slightly fewer, characters than were input.
