Know these Terms from the Blockchain and Cryptocurrency Arena

The digital currency arena is attracting increasing numbers of investors and traders, as never before! However, like everything else in the business world, this one has its own glossary too. In fact, it is quite a lengthy one. We outline a few of the most common ones for your perusal.

Airdrop

Taken literally, it would mean dropping something from the air! Well, the meaning of airdrop in the crypto world is almost the same!

Suppose a commercial establishment directs a digital currency or an NFT (non-fungible token) towards your digital wallet. The company is airdropping. It is akin to a private gift, for the organization is not operating in public. 

How does the business choose its receivers?

It takes note of people, who have utilized its services in the past. Therefore, when a blockchain brings a novel coin/token into view, the company airdrops it. It could be a marketing strategy to popularize the coin/token. Alternatively, it could be the gifting of governance tokens to people, for a DAO (decentralized autonomous organization).

An example is the ENS (Ethereum Name Service). Users could convert a wallet number into a wallet name. Whoever did so, received the ENS token as a gift. The greater the usage of ENS, the higher the quantity of tokens received. 

Blockchain

You must know this term, since you will be hearing it very often. 

You may refer to it as a distributed database, or a decentralized ledger. Whatever you call it, a blockchain stores important information about virtual business deals. The information goes into digital blocks. 

Miners keep adding new blocks to the existing chain. However, the old data remains as it is. There is no question of altering/tampering with it. Therefore, the public has access to unchangeable data that has been there for years. At the same time, they have access to new information too.

Blockchains are different, with different features. These features are linked to the concepts of efficiency, decentralization, and security. 

Several blockchains even have their own digital currencies. For instance, the Ethereum blockchain is the owner of a cryptocurrency called Ether.

Flash Loan

It refers to a DeFi tool. In turn, DeFi refers to decentralized finance. This means that there is no third-party or intermediary to interfere in monetary transactions concerning two parties. This is smart contract technology coming into play.

A flash loan permits you to borrow money or take a loan, without having to offer any collateral. It could be that you desire to purchase a digital asset urgently. However, if you purchase your asset from a specific block, you must pay the interest within the same one. 

To illustrate, you may wish to purchase a residence worth a million. You may do so, only via a loan. The approval of the loan depends upon the presence of another buyer. This individual must be willing to provide you with sufficient funds for repaying both, the loan, and the interest. In case, you default on repayment, the house goes to this buyer.

Mining

The term refers to a specific process. Here, the miner attaches new blocks to a blockchain, whenever necessary. The miner also verifies monetary transactions in the virtual crypto world. 

Mining brings into play well-functioning and powerful computers. They are the mining rigs. Mining rigs reside in a room/warehouse. It is called the mining farm.

The mining rigs should be capable of handling complex cryptography issues. Only then, can new digital currencies enter the virtual marketplace. You can read mining Bitcoin to know about the efficiency and how they work. 

For example, six bitcoins enter the scenario, whenever a miner adds a new block into the bitcoin blockchain. 

Staking

Only some cryptocurrencies permit staking. What this means is that you may stake a certain quantity of tokens at the same time. In return, you will receive a specific percentage from the same lump sum. However, you will obtain it at pre-decided intervals only. The process continues until the stake is exhausted. 

For example, suppose you stake 5,000 tokens. You desire a monthly return of 10%. Then, you will receive 500 tokens each month. In a way, you are earning passive income. Suppose the value of the concerned token goes up. You may even begin to receive profits for some time, after your stake has run out.

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