Perplexed by the world of cryptocurrencies? Here’s a quick primer of the industry terms.
The world’s first so-called digital currency. The concept for bitcoin was published online in 2009, written under the still-unidentified pseudonym Satoshi Nakamoto. Bitcoin was groundbreaking because it can be sent or received without the need for a central administrator, such as a bank. The underlying technology that allows people to transact with one another directly is called the blockchain.
Unlike traditional banks or financial institutions, where account balances and transactions are kept within a centralized system, blockchain uses a “distributed ledger” on which transactions are recorded and maintained by multiple parties simultaneously.
With blockchain technology, all historical transactions are recorded on the same ledger and can be mutually monitored by trade participants, which makes it almost impossible to falsify the data.
Since the blockchain is simply a sophisticated way to keep track of transactions, the technology could potentially be applied to other activities or industries, such as energy trading, health care or voting.
A blockchain ledger is maintained, and new transactions are added, through the work of individual “miners.” Miners are incentivized to lend their computing power to the task of updating the blockchain because doing so puts them in competition with other miners to solve complicated mathematical proofs that reward them with newly issued bitcoins.
Using a distributed ledger allows people to exchange currency on a peer-to-peer basis instead of relying on a traditional centralized system. Yet in practice, as most stores and people do not accept cryptocurrency as payment, there is demand to exchange cryptocurrencies into fiat currencies. Cryptocurrency exchanges fill this gap by acting as intermediaries.
Alternative coin (alt-coin)
This term refers to any cryptocurrency other than bitcoin. While some cryptocurrencies use almost the exact same technology as bitcoin, others are built on entirely new platforms. Bitcoin once dominated the market, but its share has dropped drastically over the past year to as low as 33 percent on Feb. 1, according to the website coinmarketcap.com.
The cryptocurrency stolen during the ¥58 billion ($533 million) hack of Japanese exchange Coincheck. NEM — an acronym for “new economy movement” — rewards miners based not only on computing power, but also on actual usage of the cryptocurrency. XEM is the official name of the currency and NEM refers to the organization responsible for its development and for updating the software.
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