AI Artificial Intelligence

The field of study and development where machines acquire intelligence and become capable of learning from their surroundings and performing increasingly sophisticated tasks.

Altcoin

Any cryptocurrency other than Bitcoin, as Bitcoin is widely recognized as the first and primary cryptocurrency.

Algorithm

A method used in blockchains to verify transactions and solve mathematical problems.

Genesis Block

The genesis block refers to the initial block in any blockchain.

More specifically, the Genesis Block is commonly recognized as the very first block to be mined in the Bitcoin blockchain.

In 2009, Satoshi Nakamoto, the enigmatic and anonymous creator of Bitcoin, first crafted the Genesis Block. This foundational block serves as the bedrock upon which the entire Bitcoin blockchain is constructed.

The Genesis Block holds immense significance for Bitcoin enthusiasts and supporters, much like the reverence they have for Satoshi Nakamoto. Some devoted individuals have even made small donations of bitcoin (BTC) to the Genesis Block as a tribute to Nakamoto, viewing it as a symbolic act of sacrifice. Once coins are sent to the Genesis Block, they remain there permanently, as no bitcoins can ever be moved from this inaugural block.

Interestingly, the original Bitcoin client was unable to locate the first 50-BTC transaction within its database, resulting in the rejection of spending transactions from that block. This has sparked curiosity regarding Nakamoto’s intention behind this design. While some question whether it was a mistake, many believe it was a deliberate choice, as the bitcoin code, including that of the Genesis Block, is highly precise and flawless. The true motive remains unknown.

Moreover, the Genesis Block conceals a hidden message placed by Nakamoto in its raw data: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” This phrase represents a headline from an article published in The Times newspaper on January 3, 2009. The article discusses the British government’s struggles in revitalizing the economy following the 2007–08 financial crisis and its plans to inject more money into prominent banks.

The message within the Genesis Block is open to interpretation, with many perceiving it as a mission statement for Bitcoin. It signifies the aspiration of Nakamoto and numerous others involved in Bitcoin’s creation to differentiate it from traditional financial systems, ensuring that Bitcoin would never require a bailout.

Staking Rewards

Staking rewards refer to a form of reward that can be obtained by holding a specific cryptocurrency. This concept and technology are relatively new but rapidly gaining traction.

The term “staking rewards” stems from the emergence of a novel method for securing blockchains called Proof of Stake. In the traditional method known as Proof of Work, users were required to purchase specialized hardware capable of performing complex calculations to validate transactions, and they were subsequently rewarded.

In Proof of Stake, such hardware is typically unnecessary. Instead, users generally “stake” a portion of the cryptocurrency as collateral to ensure the accuracy and validity of transactions. As the staking system processes these transactions, it also rewards the individuals who have staked their cryptocurrency.

The rewards obtained through staking are referred to as staking rewards. These rewards can be reinvested by increasing the amount of cryptocurrency being staked, thereby earning even more staking rewards. Alternatively, users have the option to withdraw, store, or sell the rewarded amount.

Due to its minimal hardware requirements compared to Proof of Work, Proof of Stake has attracted many users seeking to earn rewards through staking. Consequently, coins and cryptocurrencies that offer staking rewards have gained significant popularity.

In 2021, Ethereum is expected to commence its transition from Proof of Work to Proof of Stake. Currently, individuals holding 32 ETH or more have the opportunity to earn staking rewards by staking their coins on a staking system once it becomes available.

Provably Fair

The term “provably fair” is commonly associated with gambling sites, particularly those that accept deposits, withdrawals, and bets using Bitcoin and other cryptocurrencies.

For reputable Bitcoin betting sites, ensuring provable fairness is crucial for attracting and retaining users, as well as achieving scalability. It is a fundamental requirement: by demonstrating that they operate fairly, these sites can encourage players to join their platforms.

So, what does provably fair mean?

“In a provably fair gambling system, … The service operator will publish a method for verifying each transaction in the game. This is usually by using open source algorithms for random seed generation, hashing, and for the random number generator. Once a game has been played, the player can use these algorithms to test the game’s response to his in-game decisions and evaluate the outcome by only using the published algorithms, the seeds, hashes, and the events which transpired during the game.”

In essence, a provably fair Bitcoin betting site allows you to examine the mathematical outcome of the game you played. You have the ability to verify that the game was conducted fairly. This transparency builds trust in the site, as you can independently verify the results and assess the odds for each game.

It’s important to note that all online gambling sites, regardless of whether they involve cryptocurrencies, typically have a house edge to generate profits. However, if a site does not offer provably fair games that allow you to verify their fairness, there’s a possibility that they might be excessively stacking the odds in their favor. It’s advisable to be cautious and only engage in games that are provably fair. Even if you personally don’t verify them, rest assured that someone will.

Cryptographic Hash Function

A cryptographic hash function is a mathematical tool used in cryptography to enhance the security of funds and information.

These functions take inputs of varying lengths and produce fixed-length outputs.

By combining the capabilities of hash functions with specific security properties, cryptographic hash functions are commonly employed in computing systems to verify message integrity and authenticate information.

However, it’s worth noting that some cryptographic hashes are considered “weak” as they can be efficiently solved by future quantum computers.

Cryptographic hash functions offer several properties: collision-free, where no two inputs produce the same output; hiding, making it difficult to determine the input from the output; and puzzle-friendliness, where selecting an input from a wide distribution yields a challenging output to predict.

Cryptocurrencies often rely on these hash functions to transmit transaction data as anonymously as possible. For instance, Bitcoin utilizes the SHA-256 cryptographic hash function, which provides a high level of encryption resistant to current technologies.

In everyday scenarios, cryptographic hash functions play a significant role:

Password Verification: Passwords are stored as hashes to protect user data. The hashed input is compared to stored hash values for authentication.

Signature Generation and Verification: Digital signatures rely on cryptographic processes to validate the authenticity and integrity of digital documents or messages.

File and Message Integrity: Hashes are employed to ensure messages remain unaltered during transmission, preventing unauthorized access or modifications.

While MD5 and SHA-1 have been widely used, ongoing progress led to the development of the SHA-3 hash function, initiated by the National Institute of Standards and Technology (NIST) in 2007, aiming to establish a new standard for secure hashing.

Kimoto Gravity Well

No, this term does not belong to the realm of science fiction. Instead, it refers to the process of adjusting the difficulty of mining cryptocurrency to ensure fairness.

Bitcoin mining is a challenging task, and its difficulty is modified every 2,016 blocks. Given that each block takes approximately ten minutes to mine, adjusting the difficulty of Bitcoin can take nearly two weeks. Recognizing a potential flaw, other cryptocurrencies have devised methods to dynamically adjust their difficulties and maintain stability when significant amounts of computing power enter or exit the mining pool.

Multipools with a significant amount of computational power, like GHash.io, can significantly improve a cryptocurrency’s hashing power. The block time and the incentive system may both be affected by this abrupt rise.

The Kimoto Gravity Well was developed to address this problem by limiting the impact of multipools and other potent mining techniques on different cryptocurrencies. Instead than waiting for 2,016 blocks, it does it by changing the difficulty with each block.

Another commonly used algorithm for difficulty readjustment combines multiple exponential and simple moving averages. This approach smooths out readjustments and safeguards against potential exploits and workarounds attempted against the Kimoto Gravity Well.

Fortunately, Bitcoin itself is not susceptible to this problem because its difficulty readjustment is limited due to the vast hash power of the Bitcoin network. For instance, it would require around $3 million to increase the mining rate by a mere 10%. Consequently, Bitcoin does not require the Kimoto Gravity Well, although many smaller cryptocurrencies do rely on it to maintain fairness.

Deterministic Wallet

You have a wide selection of bitcoin wallets from which to choose when storing your hard-earned money. A deterministic wallet is one possibility. What it is?

A deterministic wallet will begin generating keys from a seed once you have one.

You may quickly back up and restore a wallet without the need for any additional information by using a deterministic wallet and your seed. In some cases, it’s even possible to permit the generation of public addresses without revealing the private key.

Since 2019, the BIP 0032 standard for Hierarchical Deterministic Wallets has been in use. These days, your seed is typically serialized into human-readable text.

A single copy of the seed in a format that you can read and possibly even memorize has the added advantage of lasting forever, so you don’t have to worry about backups going bad.

For increased security and simplicity, some deterministic wallet types permit the whole separation of private and public key generation.

You might even be able to configure a specific deterministic wallet’s Master Public Key (MPK). In contrast to an attack on your master public key, which would prevent an attacker from using the wallet, this enables the server to generate as many public keys as are required for accepting money.

Users of Electrum and Armory may be able to enable fully offline spending and storage thanks to this bonus feature, where a computer that is offline knows the private key while a machine that is online only knows the MPK.

The fundamental advantage of using deterministic wallets in hardware wallets is that they keep the created private keys offline and shield the computer from them, even if you decide to send or spend your money.

Check to see if your wallet provider utilizes deterministic wallets if this fits your needs.

Utility Token

A utility token refers to a cryptocurrency or token that serves a purpose beyond speculation.

Bitcoin doesn’t fit the definition of a utility token because it is primarily used for speculation and is categorized as a coin rather than a token.

Comparing Bitcoin to gold is interesting because while gold has various uses in circuits, jewelry, and other industries, the majority of its value comes from speculation and protection against economic uncertainties.

In the realm of cryptocurrencies, utility tokens hold value not only in terms of their monetary fluctuations but also in what they can accomplish.

Certain exchanges have developed their own utility tokens, promoting them as a means to reduce fees on their platforms. Other utility tokens may provide security for smart contracts, enable digital signatures, and perform numerous other tasks.

As you venture into the world of cryptocurrencies, it’s important to explore utility tokens since some may eventually gain widespread practicality. Remember that these tokens differentiate themselves by offering more than just speculative value.

Privacy coins are a specific type of utility token that blurs the line between speculation and practicality. They offer the utility of safeguarding transactions from prying eyes while also attracting speculation regarding their potential value fluctuations due to the increasing demand for financial privacy.