Altcoin: A crypto coin other than bitcoin. These are cryptocurrencies launched after bitcoin and piggy-backing on its success. It’s difficult to keep track of them, but there were believed to be about 5 000 altcoins in 2020.
Bitcoin (BTC): The original cryptocurrency, and the grandaddy of them all. It was launched in 2009 in response to the 2008 financial crisis as an effort to remedy the perceived pitfalls of fiat currencies controlled by central banks. The chief pitfall being few restraints on the expansion of money supply (Bitcoin will only ever have 21 million coins in issue). It was developed by the mysterious Satoshi Nakamoto in 2008 and released as open source software. Bitcoin is a digital currency that uses peer-to-peer technology (with no intermediaries, such as a bank) to facilitate payments. More recently it has come to be regarded as a safe have asset, correlated to the gold price.
Bitcoin network: A decentralised peer-to-peer network that allows users to send units of value to each other without any intermediary or bank.
Blockchain: A decentralised public record of transactions, rather like an accounting ledger with full details detailing all transactions. These are used for recording cryptocurrency transactions such as bitcoin. Blockchains are ‘decentralised’, meaning they are stored on multiple computers distributed around the world.
Cold storage: A ‘wallet’ for digital assets that are stored offline, away from the internet, to reduce chances of hacking and theft.
Cryptocurrency: A digital asset, with strong cryptography to prevent theft or counterfeiting, that can be transferred electronically anywhere in the world. Bitcoin’s bitcoin and Ethereum’s ether are examples of cryptocurrencies.
Digital asset: Any form of value reducible to a digital form, such as cryptocurrencies, digital stocks, utility tokens and security tokens. As they are intangible, they are secured using advanced cryptography to prevent theft or hacking.
Double spend: The risk that a digital asset can be stolen or copied. In the case of bitcoin, this risk is largely eliminated by announcing all transactions to all nodes, thereby preventing instances of double spend.
Encryption: A way of scrambling information that can only be unscrambled by authorised users.
Ether (ETH): A cryptocurrency similar to bitcoin.
Ethereum network: A blockchain similar to that used by Bitcoin, but with some added functionality to run smart contracts (which allow transactions, such as life policies or trade shipments, to be effected on the fulfilment of certain conditions, and without the need for third parties).
Exchange: An online market for the buying and selling of assets such as cryptocurrencies. Examples include Luno, VALR, Ovex, Coinbase and Binance.
Fiat: Currencies such as the US dollar and the rand issued and backed by governments rather than by commodities such as gold (which was the case until 1971). Since there is very little control over the ability of central banks to increase fiat money supply, most cryptocurrencies attempt to remedy this by limiting supply of digital coins.
Fork: There are two types of fork: 1. Hard fork, where the blockchain is split – as happened when Bitcoin Cash split from Bitcoin – and two currencies are created out of one. This requires a change in the digital currency’s protocol. The old and the new blockchains exist side byside. 2. Soft fork, which is where there is a change in the computer protocol (rules) but those nodes that have not updated to the new protocols are still able to process transactions. Essentially, you have two sets of rules existing side by side within the same blockchain. Forks, like software updates, are critical to the development of cryptocurrencies.
Initial coin offering (ICO): This is the digital equivalent of an initial public offering (IPO) on a stock exchange. It is a way of raising capital through the issue of coins (also called tokens) to investors.
Litecoin (LTC): An altcoin launched in 2011, similar to bitcoin, with the aim of making payments easier.
Mining: Cryptocurrencies are ‘mined’ using fast computers solving intricate mathematical computations, for which the ‘miners’ are rewarded with new coins.
Multi-signature wallet: A type of wallet requiring multiple signatures before a transaction is allowed. This adds an additional layer of security protection to digital assets.
Node: A computer connected to the cryptocurrency network. All nodes have a full copy of the blockchain and perform the additional function of validating and relaying transactions.
PAX Gold (PAXG): A digital token fully backed by gold on a 1:1 basis. Each PAXG token is backed by one fine troy ounce (t oz) of a 400 oz London Good Delivery gold bar, stored in Brink’s vaults.
Private key: Also called a secret key, used to encrypt and decrypt code so that digital assets can be sent safely anywhere in the world.
Public key: The public key is used to encrypt data, while a private key is used to decrypt it. This is a technology for ensuring the safe transmission of digital assets from one party to another.
Satoshi Nakamoto: The purported developer of Bitcoin and author of the Bitcoin whitepaper setting out the protocols and architecture for the development of the blockchain database on which Bitcoin relies. He has never been officially identified, and remains a mysterious and elusive figure.
Smart contract: A computer protocol that allows for the transfer of digital currencies under certain predetermined conditions, without the need for third parties. For example, Inmusik is a music streaming platform that is able to pay royalties to music creators directly, without having to pay agents and other intermediaries. It does this through a smart contract system known as Inmusic blockchain that is able to verify the owner of the song through a unique tagging system, and pay royalties directly.
Stablecoin: A digital coin offering greater stability than fiat and other currencies. An example is the X8 stable coin, one of several stable coins offering currency stability by spreading assets over the eight top currencies in the world as well as gold.
Token: A unit of a cryptocurrency and resident on the blockchain.
Wallet: A means of storing cryptocurrencies electronically.