CryptoURANUS Economics: 08/10/18

CryptoCurrencies


Friday, August 10, 2018

TestNet: Defined in CryptoCurrency

TestNet: Defined in CryptoCurrency

TestNet also known as “testnet” is software that is identical to the software used by a cryptocurrency. Because testnets are built to experiment with new ideas without disturbing or breaking the main cryptocurrency software, its digital currency is worthless. Bitcoin’s testnet has been reset several times to stop people who began trading its coins as digital money.

Hash Rate: Defined in CryptoCurrency

Hash Rate: Defined in CryptoCurrency


Hash rate is defined as the speed that a computer can take any set of information and turn it into letters and numbers of a certain length. Hash rate is also the combined hash speed of every computer in the network. Hash rate is calculated at hashes per second (h/s).


Hash rate is important for computers that mine. Mining is the process of recording and verifying information on the digital record known as the blockchain. The blockchain is made up of a sequence of single recordings known as a block.


To keep the blockchain network running smoothly, only one block can be created at a time. To control when blocks are created, users are required to make their computers solve a math problem involving hashing. The first computer to solve this problem can create a new block and record information on the blockchain.

Miners often purchase very expensive specially designed computers that have higher hash rates to increase their chances of solving the math problem first. These mining computers use tons of electricity to power their computers. This expensive process earns miners a reward in brand crypto plus fees paid by each user for their transactions.


Similar to memory size, hash rate is counted like this:

  • 1 kilo hash per second is one thousand (1,000) hashes per second
  • 1 mega hash per second is one million (1,000,000) hashes per second.
  • 1 giga hash per second is one billion (1,000,000,000) hashes per second.
  • 1 tera hash per second is one trillion (1,000,000,000,000) hashes per second.
  • 1 peta hash per second is one quadrillion (1,000,000,000,000,000) hashes per second.
  • 1 exa hash per second is one quintillion (1,000,000,000,000,000,000) hashes per second.

Tangle: Defined in CryptoCurrency

Tangle: Defined in CryptoCurrency


The tangle is a technology created by Iota, a cryptocurrency to record its transactions instead of the blockchain. The tangle is created using directed acyclic graphs or DAG which is a structure built out in one single direction and in such a way that it never repeats.



Here a “graph” is simply a structure of units. “Directed” describes the connection between each unit in the structure, and that they all flow the same way. And “acyclic” means describing something that is not circular or repeating.


A good example of a directed acyclic graph is a checklist. In order to do step 10, you must have done step 9, and before you can do step 8, you must have done step 7 and so on. If you were to list out these steps on a graph, you would see the flow from 1-10 and that it never repeats itself going back to 1. If it did repeat, it would not be a directed acyclic graph.

Another example of a DAG is a family tree. Your grandparents had your mom and her brother. Your mom met your dad and had you. Your mom’s brother met his wife and had their kids. In no way does your grandpa or grandma ever show up again beneath you.

Within the tangle, in order for a transaction to be eligible for recording, the person must first verify two previous transactions. Then his transaction is eligible for recording by others. This system was designed to be quick and allow for much quicker recording time than bitcoin which takes around 10 minutes.

Taint: Defined in CryptoCurrency

Taint: Defined in CryptoCurrency


Taint is the percentage of cryptocurrency in one account that can be traced back to another account. Taint was often used to measure how many coins in a user’s wallet have been related to stolen or fake coins or other negative and illegal activities.

Security Token Offering [STO]: Defined in CryptoCurrency

Security Token Offering [STO]: Defined in CryptoCurrency

A Security Token Offering (STO), is defined as a way for investors to use their money to support a new cryptocurrency project in a way that US Securities and Exchange Commission (SEC) will approve. 


Originally, investors would participate in an Initial Coin or Token Offering (ICO/ITO) and in return received some crypto. The hope was that the team would develop something valuable with the money.


The problem is, in the near future, ICOs and ITOs may not comply with American SEC laws. That means some cryptocurrencies who have already had an ICO or ITO may have future regulation and penalties applied.

However, an STO complies with many of the rules and regulations expected to be used in the cryptocurrency space.

A security is an investment that is backed by real-world value. In other words, it represents something actually valuable:

  • A security could represent a tiny ownership of a company (like a stock).
  • A security could represent money a government or company borrowed and promises to pay you back (like a bond).
  • A security could also represent ownership of some other asset, profit, or revenue. An STO uses this model.

To invest in an STO, you must be an accredited investor. As an individual that means you must meet one of these two requirements:

  • A single individual needs an income of at least $200,000 or a couple with at least $150,000 for the last two years and expect to earn the same or greater this year.
  • Net worth of over $1,000,000 excluding the value of your primary home.

State Channel: Defined in CryptoCurrency

State Channel: Defined in CryptoCurrency

A state channel is defined as a more affordable, private, and efficient place for interactions to occur and later be recorded onto the blockchain.

Traditional cryptocurrency transactions are recorded onto the blockchain, a digital record book kept by its network of thousands of users. The blockchain allows users to do business directly with each other and avoid hiring a trusted third party.


Because the blockchain is maintained by a network, each new recording in the blockchain needs to first be recorded and then shared and verified to the entire network. With tens of thousands of transactions happening every day, it can take 10-30 minutes for a single bitcoin transaction to be recorded and shared onto the blockchain.

A “state” is defined as the condition or situation of something at a specific time. A “channel” is a place for communication to occur. So a state channel is a safe place where authorized interactions can occur, be recorded, and later published onto the blockchain.

A state channel lets users interact directly, removing the need for all data to be sent to the blockchain. Out of potentially hundreds or thousands of messages, only the final results are sent to the blockchain.

For example, imagine James and Jessica are a couple who want to buy stuff from the local bitcoin mall:
  1. With the blockchain, for every purchase they make, they must wait 10+ minutes after buying so the store can see that the blockchain recorded the sale. That means, if they shopped at 6 stores, they’d waste 10 minutes at each, or a full hour waiting for the blockchain to catch up.
  2. With state channels, James and Jessica can shop at each store as they normally do. There would be no waiting at each store because every transaction is instant. As they leave the mall, they can close their state channel. 10 minutes later, the blockchain would display the results of their shopping trip.
Features of state channels include:
  • The data is private. Only people initially invited into the state channel have access.
  • The interactions are instant. No waiting for the blockchain to catch up.
  • The interactions are nearly free. Instead of paying each time to have your data recorded onto the blockchain, only the results are recorded.
  • The data is trustworthy. Each message is digitally signed by the user to prove they authorized it. If any user tries to cheat or leaves early, the other user(s) can publish the state channel finalizing the latest authorized results.
  • The data is smaller. Only the final results are recorded, not every single message reducing data added to and shared on the blockchain.
  • State channels end. Unlike the blockchain, an end time or end conditions (such as number of transactions) are set at the beginning. Users can end their state channel early.

Stale Block: Defined in CryptoCurrency

Stale Block: Defined in CryptoCurrency


A stale block is a digital recording that is complete with information and no longer needs to be recorded or worked on. 


Because a blockchain is a digital recording and each block is like a page in that recording, new pages are added any time more information needs recorded. 


If everyone were to record new info at the same time, the blockchain wouldn’t work. So the system lets one person record info at a time. 

A stale block is a block that has already had info recorded onto it. There is no need for people maintaining the blockchain to try to record more information on i

Stake: Defined in CryptoCurrency

Stake: Defined in CryptoCurrency

 

Stake is defined as an amount of cryptocurrency deposited and risked by the user to become eligible to record and validate transactions in a cryptocurrency. His incentive is to earn transaction fees, his risk is losing his entire stake.


Staking is used in the Proof of Stake method as a more efficient and affordable way to mine. Mining is the process of recording and validating transactions in a cryptocurrency. With Proof of Stake, you can participate in mining after depositing a certain number of cryptocurrency in a known wallet. This is known as a “stake” or a “staked wallet”.


People who provide a stake are randomly selected to record and verify information on the blockchain. In most Proof of Stake systems, the larger your stake the greater your chances of being selected to record and verify the blockchain and then to receive the reward.

However, if the user records and verifies false information and is caught, his stake is forfeited. His incentive for staking is to earn transaction fees paid by users.

Simplified Payment Verification [SPV]: Defined in CryptoCurrency

Simplified Payment Verification [SPV]: Defined in CryptoCurrency

Simplified Payment Verification or SPV, is defined as software that allows you to confirm a cryptocurrency transaction has been added to the blockchain without having to download the entire blockchain which is larger than 100 gigabytes in size.

Bitcoin transactions are kept on a digital record, known as the blockchain, and it is maintained by thousands of people around the world. This digital record is growing larger every day and in 2016, it exceeded 150 gigabytes.


Because it isn’t easy or fast for everyone to download the entire blockchain just to be able to send and receive bitcoin, simplified payment verification was made. SPV is included in some bitcoin wallets like Electrum with it, you can manage your own bitcoin in a much smaller software package.

Solidity : Defined in CryptoCurrency

Solidity : Defined in CryptoCurrency


Solidity is a computer programming language used for creating smart contracts. There is technology known as blockchain that is made up of publicly available digital recordings managed simultaneously by a network of computers. When you use that technology with contracts and program them to take action on a date, you have a smart contract.

Software Wallet: Defined in CryptoCurrency

Software Wallet: Defined in CryptoCurrency


A software wallet is a computer program designed device to secure your cryptocurrency while allowing only you to access it. A wallet is software that interacts with the network of recordings (blockchain) and lets users receive, store, and send their digital money.

Software Fork: Defined in CryptoCurrency

Software Fork: Defined in CryptoCurrency


A software fork is the action of taking the technology from one group, and changing it to create an entirely new technology. This was done with bitcoin technology to create other cryptocurrencies like litecoin.

Soft Fork: Defined in CryptoCurrency

Soft Fork: Defined in CryptoCurrency

A soft fork is a change made to cryptocurrency technology creating a temporary split in the group of recordings (blockchain).


This change creates all new, valid recordings (blocks) that are slightly different from the original blocks. 


They are just different enough that users of the new technology see blocks from original technology as invalid. But, users of the original technology see no problem with either one.

As a result this means, new blocks will work just fine for all computers including those using the original technology. 


But computers using the original technology will find their blocks are rejected by the rest of the network until they upgrade and rejoin the network. 

Any new fork in the blockchain can fail and if it does, all users will return to the original recording.

Soft Cap: Defined in CryptoCurrency

Soft Cap: Defined in CryptoCurrency


Soft cap is the minimum amount of money a cryptocurrency can receive from investors in its Initial Coin Offering (ICO).  


An ICO is the limited-time process by which new cryptocurrencies make their coins publicly known and begin selling them directly to people. 


People invest their money in these coins in the hopes that they will later be worth many times more that what was paid.

If the soft cap is not met, the money is returned to investors. Usually there is a much larger financial goal known as a hard cap.

Smart Contracts : Defined in CryptoCurrency




Smart Contracts






Smart contracts are self-executing contracts with terms of the agreement between buyer and seller being directly written into lines of code.

The code and the agreements exist across a distributed, decentralized blockchain network.



Smart contracts permit trusted transactions and agreements to be carried out among disparate, anonymous parties without the need for a central authority, legal system, or external enforcement mechanism.

They render transactions traceable, transparent, and irreversible. While blockchain technology has come to be thought of primarily as the foundation for bitcoin​, it has evolved far beyond underpinning the virtual currency.



Smart contracts were first proposed in 1994 by Nick Szabo, an American computer scientist who invented a virtual currency called "Bit Gold" in 1998, fully 10 years before the invention of Bitcoin.

In fact, Szabo is often rumored to be the real Satoshi Nakamoto, the anonymous inventor of Bitcoin, which he has denied.



Szabo defined smart contracts as computerized transaction protocols that execute terms of a contract. He wanted to extend the functionality of electronic transaction methods, such as POS (point of sale), to the digital realm.

In his paper, Szabo also proposed the execution of a contract for synthetic assets, such as derivatives and bonds. “These new securities are formed by combining securities (such as bonds) and derivatives (options and futures) in a wide variety of ways.



Very complex term structures for payments can be built into standardized contracts and traded with low transaction costs, due to computerized analysis of these complex term structures,” he wrote.


In simple words, this is referring to the sale and purchase of derivatives with complex terms.Many of Szabo's predictions in the paper came true in contexts preceding blockchain technology.,

Derivatives trading is mostly conducted through computer networks using complex term structures.

Simplified Payment Verification [SPV]: Defined in CryptoCurrency

Simplified Payment Verification [SPV]: Defined in CryptoCurrency

Simplified Payment Verification or SPV, is defined as software that allows you to confirm a cryptocurrency transaction has been added to the blockchain without having to download the entire blockchain which is larger than 100 gigabytes in size.


Bitcoin transactions are kept on a digital record, known as the blockchain, and it is maintained by thousands of people around the world. This digital record is growing larger every day and in 2016, it exceeded 150 gigabytes.


Because it isn’t easy or fast for everyone to download the entire blockchain just to be able to send and receive bitcoin, simplified payment verification was made. SPV is included in some bitcoin wallets like Electrum with it, you can manage your own bitcoin in a much smaller software package.

Silk Road: Defined in CryptoCurrency

Silk Road: Defined in CryptoCurrency


Silk Road was an illegal website that was open from 2011 through October 2013 and allowed people to buy and sell illegal products and services like drugs, weapons, body parts and assassins using cryptocurrencies like bitcoin.

Side Chain: Defined in CryptoCurrency

Side Chain: Defined in CryptoCurrency


A side chain is a group of recordings added to the main group, the blockchain, in such a way that data can travel in either direction between both groups of data.


A blockchain is a digital recording of data publicly available being maintained simultaneously by a network of computers.


A side chain is a separate chain built to upgrade the technology with extra features.

Shorting: Defined in CryptoCurrency

Shorting: Defined in CryptoCurrency


Shorting is the process of borrowing an asset and selling it, in the hopes of later buying it back at a lower cost and keeping the difference in money as a profit.

Shitcoin: Defined in CryptoCurrency

Shitcoin: Defined in CryptoCurrency


Shitcoin is any cryptocurrency that is disliked by the person talking about it. It could be any coin that is not bitcoin, or a coin that lacks any new or advanced technology, or a coin that has become worthless after launch.

Shilling: Defined in CryptoCurrency

Shilling: Defined in CryptoCurrency


Shilling is defined as insincere online talk about something for financial incentive. 

Shilling is a negative word often used when a person promotes something so they can earn money. But shilling can also be used when a person makes negative, sometimes false, accusations about something.


With cryptocurrencies, shillers tend to promote the crypto so that interest grows, people buy it, and the price increases.

Here are 3 potential reasons a person may shill a crypto:

  1. A shiller may be an influencer and was paid to promote the crypto.
  2. A shiller may be part of the team who helped to develop the crypto and wants to see it succeed.
  3. A shiller may have bought some crypto and hopes to sell it at a profit. He tells many people how great it is so they buy it, which increases the demand, and then the value goes up.
  4. A shiller may want a competing crypto to fail so his becomes more valuable. He tells many people how bad the competitor is which causes them to sell the competitor and buy his crypto.

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