Cryptocurrency Glossary / dictionary

Central Bank-Issued Digital Currencies - also called Digital Fiat Currency or Digital Base Currency is fiat money in digital form. This is a type of digital currency that the government recognizes and establishes as money. Unlike other digital currencies or cryptocurrencies, governments accept CBDC as a legitimate currency which can be used for transactions with the government. Governments and central banks all over the world as still experimenting with this type of currency, testing whether its theoretical benefits, such as technological efficiency, will work in real time.

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Centralized exchanges require middlemen to facilitate transactions between two digital currency users. Middlemen or intermediaries usually collect trading fees for their service. Those interested in trading cryptocurrencies usually come into contact with these currencies via centralized exchanges. The process is straightforward if one wishes to buy a coin, he would have to go to the order book (the middleman) to specify his requirements, such as price and amount of coins. The book will then match his requirements with a selling user that meets the requirements.

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Contract for difference is a type of trading that anticipates the rise or fall of the value of fast-moving global markets, such as currencies, shares or treasuries, to determine whether one should sell or buy stocks or coins. If one thinks that the value of his respective market drops, he can go short (sell) or go long (buy) if he thinks the value will rise.

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Child keys - In HD wallets, child keys are derived from parent keys. These can be either private or public. These should not be confused with public keys which are derived from private keys.

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Client - The cryptocurrency client is the end-user software meant to facilitate the generation of a private key and its security. Clients may also send payments on behalf of a private key, provide useful data about how the state of the network and its transactions. Many different clients provide many different types of services, such as reviewing how well protected one's private keys are or making sure that the entire safety protocol is implemented every time there is a transaction.

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Client Side Encryption - All encryption is done on the user's computer and not transmitted to the internet. This makes for a safer encryption process than the server side encryption. To put broadly, it is the process of encrypting data before it is sent to the internet from the user's device. This method removes the possibility of the data being stolen or compromised in any way while in transit to any server.

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A Coin (as opposed to a Token) is a cryptocurrency used for general purpose payments. A Coin is also the underlying fundamental cryptocurrency of its own blockchain. See also "How a coin is different from a Token"

Coinjoin - This is a transacting security measure in which multiple spenders combine their multiple payments into one transaction towards multiple recipients. This prevents outside parties from determining who pays and receives what amount. All concerned spender must agree to the amount of output each provides and the amount of input each receiver gets. When everything is agreed upon, everyone involved must sign the transaction.

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Commodity Currency - a currency that co-move with the prices of commodity products due to the reliance of some countries to their export of raw materials. Commodity currency is most often popular in developing countries. However, some developed countries also use such currency. In the foreign exchange market, commodity currencies refer to Australian, Canadian, New Zealand, Norwegian, South African, Brazilian, Russian and Chilean currencies.

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A consensus algorithm is what keeps each block of transaction that transpires within a digital network. There are different types of consensus algorithms, each one serving a specific purpose. In computer science, consensus algorithm is a process that is used to achieve agreement on a single data among multiple systems. The main purpose of these algorithms, where cryptocurrency is involved, is that they make sure that the next block in the blockchain is a legitimate part of the network, not added by outside parties to derail the system.

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Cryptocurrency is a term for digital (virtual) currency which uses cryptography for security. Cryptocurrency, as we know it today, was first created in January 2009. Bitcoin is a type of cryptocurrency.  So is ether, bitcoin cash, litecoin, and over 1000 others. But cryptocurrency is much more than this.  Learn more about the basics of cryptocurrencies here.

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Cryptography - is the method of securing communication among parties from outside parties called adversaries. It can also be referred to as the study of techniques to construct and analyze protocols that prevent third parties from reading private messages or data transfers. In computer terms, it is the process of translating ordinary plain text into unintelligible text so that only the intended recipient can read and process it. The most common cryptography techniques used are symmetric-key cryptography, public-key cryptography, and hash functions.

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Cryptojacking - is a form of malware that steals a device's computing power to mine precious digital coins. It can take over browsers and compromise all kinds of devices from PCs to smartphones and even network servers. Like most malware, its motive is profit. But unlike other malware, it's designed to be hidden from the user. Because building a device capable of effectively mining crypto coins, hackers found a way to use others' devices as a means to mine for them, sparing them the hurt in their pockets.

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Cryptominers - are people who mine cryptocoins. These are people who build special computer hardware designed to effectively mine digital coins. The process of mining coins requires strong computational prowess because of the complex mathematical equations each transaction within the blockchain requires in order to verify transactions. The device which can solve the math problem the fastest gets rewarded with some coins by the network. But because the competition for the coins and the price of decent mining hardware are both high, some miners tend to seek out cheaper and shady methods, like putting software in unknowing people's devices to get those devices to mine for them.

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Currency Exchange - business or an institution that allows the exchange of one currency for another. In the digital world, these are digital marketplaces in which traders can buy and sell cryptocurrencies. These marketplaces also allow traders to spend their crypto coins for other assets such as fiat money or other physical goods.

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Currency Miners - People who devote computer time, space and power to mining crypto coins.

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Currency Mining - The process of adding transaction records to a cryptocurrency's transactions ledger by solving complex math problems. This process will generate brand new currency which is rewarded to the miner who cracks the math puzzle first.

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Currency Wallet - A secure software program used to store, send and receive digital coins. In order to use and trade digital coins, one must own a digital wallet. Some wallets are meant for only one type of coin, while some can be used for a multiple of them. Some wallets the user controls, some are custodial.

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A custodial wallet is any wallet where the private key for controlling your coins is in the hands of a third party. One should choose to trust their chosen third party. In essence, having a custodial wallet is similar to having a bank, you have to trust someone else to manage and protect your assets. In such an arrangement, one only needs an internet connection to make transactions. This also prevents the loss of the private keys that can happen when the keys are printed on a piece of paper. If you are just starting out on cryptocurrency trading, a custodial wallet may be beneficial because you can be sure of the security some of the custodial wallet agencies offer.

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