Let’s face it, just about anything new can be a bit intimidating. At Tokenomica, we realize that trying to make sense of the onslaught of terms and technical lingo is in and of itself a daunting task, and well truth be told, a bit boring.
Blockchain is no exception to having its share of hard to understand terminology. That’s why we’ve taken it upon ourselves to explain blockchain and its terms in a way that is easy to understand.
Smart Contract = an agreement that executes automatically at the same moment as established criteria are met;
Escrow = the arrangement by which one party deposits an asset with a third person who makes a delivery to another party if and when the specified conditions of the contract are met.
Smart Contract is an automated Escrow that eliminates the third party.
|Crypto Term||Financial Synonym|
|Blockchain||An accounting ledger|
|Block||A page on an accounting ledger|
|Cryptocurrency||Digital units of value|
|Centralized Exchange||NASDAQ, NYSE, LSE, Binance|
|Decentralized Exchange (DEX)||No intermediary, peer to peer exchange|
|Tokenization||Digitalization of assets|
|Transaction||Entry on a page|
|Security Token||Securitized digital asset|
|Distributed Ledger||Shared, accessible ledger|
|Hardware Wallet||A safety-deposit box|
|Private/Public Key||Password/Account number|
|Address||Abbreviated account number|
|Virtual Financial Asset (VFA)||Store of value|
|Block reward||Bank transaction fees|
|Stable coins||Pegged digital assets|
|Smart contract||Escrow account|
- Blockchain - a digital recording simultaneously created and maintained by thousands of individuals all at the same time. Every single person has their own copy and they are all recording, verifying, and updating the data at the same time. It is used to prove that a group of people came to an agreement about something. Blockchain records are permanent and very secure, preventing manipulation.
- Block - a single digital record created within a blockchain. Imagine accountants book with all financial records, if you take one entry in this book it represents the block in the blockchain.
- Cryptocurrency - digital cash designed to be quicker, cheaper and more reliable than traditional money. Cryptocurrencies use technology to control how and when it is created and lets users directly exchange it between themselves, similar to cash.
- Centralized Exchange - the idea of centralization refers to the use of a middle man or third party to help conduct transactions. Buyers and sellers alike trust this middle man to handle their assets. This is common in a bank set up, where a customer trusts the bank to hold his or her money.
- Decentralized Exchange (DEX) - an exchange that allows people to place orders and trade cryptocurrencies without an intermediary institution managing the ledger or controlling user funds.
- Distributed Ledger - a database that is consensually shared and synchronized across multiple sites, institutions or geographies. The participant at each node of the network can access the recordings shared across that network and can own an identical copy of it. Any changes or additions made to the ledger are reflected and copied to all participants.
- Hardware Wallet - a device to lock away access to cryptocurrency. The device is extra secure because it is disconnected from the Internet and other computers and is virtually virus-proof. Wallet interacts with the network of recordings and lets users receive, store, and send their digital money.
- Paper Wallet - a piece of paper containing the information needed to access and spend your cryptocurrency
- Private Key - a piece of code that is paired with a public key to set off algorithms for text encryption and decryption. It is created as part of public key cryptography during asymmetric-key encryption and used to decrypt and transform a message into a readable format. Public and private keys are paired for secure communication, such as email.
- Public key - string of letters and numbers that allows cryptocurrency to be received. But don’t get distracted by the word “public”, it isn’t publicly visible until you’ve shared it. Public keys are used to convert a message into an unreadable format. Decryption is carried out using a different, but matching, private key. Public and private keys are paired to enable secure communication.
- Software Wallet - a computer program designed to secure your cryptocurrency while allowing only you to access it.
- Security Token - a crypto token is issued to investors in exchange for their funds. The most accurate description for security token would be "digitized securities”.
- Smart Contract - an agreement that executes automatically at the same moment as established criteria are met.
- Stable coins - a cryptocurrency that is designed to hold a stable value. The coin gets pegged to another stable asset such as gold or the U.S. dollar for example.
- STO/Security Tokens Issuance - The process of fundraising, similar to an IPO. In simplest words, STO is a fully programmable, transparent and simplified IPO. Which makes the fundraising process faster, cheaper and clearer. We don’t want to go deep into specifics here if you want to learn more about the difference between STO and IPO just click here.
- Token - a digital asset that represents value, services, or a product.
- Tokenization - the process of converting physical assets into a token. In this case, a token is a digital representation of an asset that exists on the
- Transaction TX/ TX ID - the transfer of money from one person to another. TX ID is a string of letters and numbers used to identify an exchange of cryptocurrency between two parties. Every transaction has a unique ID.
- Virtual Financial Asset (VFA) - any form of digital medium recordation that is used as a digital medium of exchange, unit of account, or store of value and that is not electronic money, a financial instrument or a virtual token.
- Wallet - a software that interacts with the blockchain and lets users receive and send their digital money. You can compare wallet with a bank account.
- Address - a string of letters and numbers that identify a cryptocurrency wallet.
- Block Reward - money earned by people who are maintaining the blockchain.
- Hash rate - the speed at which a computer can take any set of information and turn it into letters and numbers of a certain length, known as a “hash”. Hash rate is also the combined hash speed of every computer in the network. Hash rate is calculated at hashes per second (h/s).
- Mining - the process of validating information, creating a new block and recording that information into the blockchain.