Welcome back! Today’s article is a continuation of a previous post – 5 Cryptocurrency Words You Should Know.
Let’s continue your cryptocurrency vocabulary journey. Get ready to learn more about the fascinating world of crypto.
More Cryptocurrency Words You Should Know
A block is a bundle of all the transactions that happen during a specific period of time; it is a collection of data records.
If you need a visual, think of filling a box with file folders. Each file folder represents a transaction (i.e., a record).
Every time a transaction takes place, you put a new file folder into the box. Over time, you fill the box with these transactions.
You put a lid on the box and label it with the date and time of the first transaction and the date and time of the last transaction.
You have just created a block of transactions with specific start and end times.
The next step is to fill the next box and the next and the next. After you fill and label each box, you stack it on top of the previous box. You keep the boxes in order by date and time.
You are creating time-based blocks of new transactions.
Chain is both a verb and a noun. As a verb, chain refers to the process of linking things together. When you stack the boxes, you are chaining them together.
As a noun, a chain is the object that is formed when things are linked together. When you stack the boxes, you are creating a chain.
In crypto-speak, a chain usually refers to the noun. However, you may also see chain used as a verb.
In either case, chains represent important links. Chains bind things together in a specific order.
Blockchain is the merger of block and chain. Blocks of data are chained (i.e., linked) together. Like your stacked boxes, each block of transactions is chained to the next block of transactions.
Furthermore, your stacked boxes are chained together in a way that make it difficult to modify files in the previous boxes.
To change an older file, you have to locate the file you want to change, unstack all the boxes of newer files to get to the file you want, change the file, and restack all of the boxes. If you change the date of the file, you may also have to relabel the box and all the boxes that come after it.
It is similarly difficult to modify a blockchain.
While you are in charge of keeping your boxes of files in order, there may be hundreds or thousands of entities (i.e., individuals or groups) keeping the blockchain in order, secure, and uncompromised.
Blockchains operate via distributed ledgers.
To modify the blockchain, an entity would have to locate the block of transactions, modify the transaction, then modify all of the transactions that came afterwards.
Furthermore, they would have to do this without being caught. The entity would have to make all of the modifications so quickly that the other entities in the distributed, decentralized network would not notice the change.
Meanwhile, new transactions are continuously being added to the blockchain, and the entity must modify the new transactions as well. The speed at which an entity would have to modify the blockchain while remaining undetected is one reason for the blockchain’s popularity.
The use of cryptography, decentralization, and the speed at which transactions occur make it difficult for any one entity go back and modify the blockchain.
MINER | MINING
Who are the mysterious entities that add blocks to the blockchain and keep the system secure?
If you answered miners, you are correct.
Mining is the process of generating new blocks by solving computationally difficult, cryptographic puzzles, verifying transactions, and adding those transactions to the blockchain.
Miners can be individuals, groups, professional organizations, crypto mining businesses, or a network of computers.
No matter their configuration, miners are important contributors to the blockchain. Collectively, miners manage blockchains and distributed ledgers. They use their computing power to process and record transactions on the blockchain.
Miners aren’t sitting in front of screens solving cryptographic problems by hand. They use computers to solve those problems.
Machines are faster than humans. They can work nonstop. And once properly configured, machines can solve problems quickly without human intervention.
In mining, the goal is to solve the problem first. Therefore, speed and computational power are important to miners.
The miner who solves the problem first is rewarded. More accurately, the miner is rewarded if their machine solves the problem first.
After the machine solves the problem and broadcasts the solution to the majority of the network, the miner receives a block reward.
Miners are motivated by rewards. A reward is compensation for performing work.
Miners perform work when they complete transactions and add blocks to the blockchain. For their work, miners receive a block reward.
A block reward is a payment. It is the digital asset miners receive for using their computing power (i.e., hardware, software, and equipment) to verify and record transactions on the blockchain.
Miners usually receive their rewards in cryptocurrency. However, depending on the platform, other types of digital assets or fiat currencies may be used as compensation.
A transaction fee is the fee users pay for having their transactions recorded on the blockchain.
You can think of a transaction fee as a processing fee. If you want your transaction to receive higher priority (i.e., be processed faster), you can pay a higher fee.
A portion of your transaction fee goes to the miners (see block reward above).
Transaction fees pay for the computing power that is necessary to complete transactions and functions on the blockchain.
GAS | GAS FEE | GAS PRICE
On the Ethereum platform, transaction fees are called gas, gas fees, or gas price.
Gas is the price you pay for a transaction. It is the fuel that drives the Ethereum network.
Gas is a measurement of the amount of computational power required to conduct transactions on the platform.
It is a transaction fee. A portion of the payment goes to miners for completing work on the platform.
Satoshi Nakamoto is the person or persons who created Bitcoin. The mysterious Satoshi may be one person or a group of people.
Although there is a lot of speculation, the true identity of Satoshi has not been confirmed.
Satoshi was actively involved in the development of Bitcoin until December 13, 2010, when Bitcoin version 0.3.19 was released.
On April 26, 2011, Satoshi turned the Bitcoin project over to the Bitcoin community and was never heard from again.
Bitcoin is the first cryptocurrency to use a decentralized ledger (i.e., a blockchain).
Development of the Bitcoin platform began in 2008 after Satoshi wrote a white paper entitled Bitcoin: A Peer-to-Peer Electronic Cash System.
On October 31, 2008, Satoshi posted an announcement about the white paper on an online mailing list that was favored by cryptography lovers.
On January 3, 2009, the first Bitcoin client was launched and the first Bitcoin block was mined. The first block is called Block 0, or the genesis block.
Block 1 was mined nearly a week later on January 9, 2009.
BTC is the abbreviation, and ticker symbol, for bitcoin. A ticker symbol, also called a stock symbol, is the abbreviation used to identify a publicly traded asset. Similar to stocks on the stock market, cryptocurrencies are identified by their ticker symbols.
Note: Use a capital B when discussing the Bitcoin network, protocol, or system. Use a small b when talking about individual bitcoins as a unit of value. For example, I am a miner on the Bitcoin network. I mine bitcoin for fun. I have one bitcoin and 400 satoshis.
Satoshis are to bitcoins as cents are to dollars.
In this example, USD refers to the US dollar and BTC refers to bitcoin.
Just as one dollar can be split into 100 cents, one bitcoin can be split into 100,000,000 satoshis.
Yes, you read that correctly. One bitcoin is divisible to eight decimal places.
A penny is one hundredth of a dollar (i.e., 0.01 USD).
In comparison, a satoshi is one hundred millionth of a bitcoin (i.e., 0.00000001 BTC).
This small unit of BTC is called a satoshi, sat or sats for short.
Congratulations on finishing the second installment of Cryptocurrency Words You Should Know. If you missed the first article, go here to gain more crypto knowledge. Enjoy!