Part16 - US content creation for blocktrades_US

This is a content creation task authorized by BlockTrades. The crypto glossary content published in this post is currently in concept format, version revision 0.

Original content URL: https://blocktrades.us/support/home/help/glossary

=================================================

Cryptocurrency

A purely digital currency based on mathematics, encryption, cryptography and associated blockchain technologies and mechanisms, for regulating the creation of new and burning of existing currency tokens, to verify the balance and execute the transfer of funds, and to provide access to a wallet containing the cryptocurrency. The first, and still most popular and valuable, blockchain-based cryptocurrency is and was Bitcoin, after which thousands of alternative cryptocurrencies (dubbed as "altcoins") have been created and further developed.

One of the fundamental ideas of cryptocurrencies is to enable the transfer of funds between two parties in a direct transaction, without needing a trusted third party (like a bank, a notary, a commercial payment processor, or a credit card agency). And because the need for such a trusted third party is eliminated, not only does this allow all parties to directly transfer funds but also to manage their funds themselves in a privately held digital wallet to which only they have access to. These ideas cater to the paradigm "Be your own bank", yet do (in the current state and form) require some precautions to keep in mind and rules to honour at all times without risking the loss of access to a wallet or funds being stolen or accidently sent to a wrong address. In case of such an unwanted event, no central authority, government, or corporation can help you recover your funds, which also means - on a positive note - that in principle nobody can seize your cryptocurrency funds nor stop you from transacting.

Cryptography

Cryptography is a mathematical method used to secure, encrypt and decrypt messages. In the context of Bitcoin, the original cryptocurrency and blockchain technology, wallet-generated addresses can be accessed by its owners via private keys that "unlock" the wallet's access and allow to transact funds (to transfer them to another Bitcoin address).

The phrase "cryptography" comes from "crypt", meaning "hidden" or "vault", and "graphy" meaning "writing".

Types of symmetric-key cryptography include "Advanced Encryption Standard" (AES), and "Data Encryption Standard" (DES, DES3). Types of asymmetric-key cryptography include "RSA", "Elliptic Curve Digital Signature Algorithm" (ECDSA), "Digital Signature Algorithm" (DSA), and Diffie-Hellman. Types of cryptographic hash functions include "Secure Hash Algorithm" (SHA-1, SHA-2 and SHA-3).

DAO - Decentralized Autonomous Organization

A DAO is an organization which makes decisions using blockchain technology, stakeholder voting and decentralised public ledgers. A Decentralized Autonomous Organization can thus - provided enough flexibility and consensus mechanisms exist -, function without top-down / centralised managerial supervision and thus operate autonomously.

Delegated Proof of Stake (DPOS) Consensus

Delegated Proof of Stake uses a mechanism of voting and social reputation to achieve consensus. Using Delegated Proof of Stake Consensus, every token holder is able to excercise its voting rights based on the amount of tokens he or she owns, and can vote on "active delegates" (often referred to as "witnesses" or "block producers") which are elected by those voting token holders to produce and validate blocks and transactions.

DPOS also has a variant, to further ensure network security and honest transaction validation, named "Deposit-based Proof of Stake", in which a delegate needs to commit himself to the network by depositing funds into a security account; in case of malicious behavior those deposited funds are confiscated).

DPOS is considered to be a de-centralized consensus protocol, fairly democratic, and inclusive, because everybody owning tokens on the blockchain network is able to excercise their influence and new delegates have an opportunity to become elected by the stakeholders regardless (in theory at least) of their own token holdings.

DEX, Decentralized Exchange

A DEX is a cryptocurrency exchange that itself operates in a trustless and decentralized way, is like a public blockchain itself, and thus doesn't require the need for a central authority, as opposed to a centralized exchange, a "CEX". Because DEX users do not need to transfer their assets to an external exchange, and because a DEX account can be considered a multi-asset wallet for which the wallet's owner manages the wallet's private keys himself, decentralized exchanges facilitate direct and P2P (peer-to-peer) cryptocurrency trading.

One advantage of decentralized exchanges is that users remain in control of both their keys and tokens instead of having to trust a central authority providing them with a hosted wallet. This also reduces the risk of hacks. DEXes currently (mostly) do not require KYC procedures, which some consider to be an advantage and for others it can be considered a disadvantage because in case access to an account's wallet is lost or confiscated it's either very difficult or impossible to contact external help to recover funds and wallet access.

Another downside of decentralized exchanges, potentially caused by a lack of sufficient marketing, is low trading volume and liquidity. One possible solution for this is "0X", a network protocol for integrating multiple decentralized exchanges with interchangeable liquidity. Another one is the Binance DEX, already the #1 decentralized cryptocurrency exchange based on trading volume, building upon the brand name and customer base Binance.com.

Ethereum

Ethereum is described as "a public and open sourced blockchain-based distributed computing platform and operating system featuring smart contracts functionality". Ethereum was created and proposed in 2013 by Vitalik Buterin, a cryptocurrency researcher and programmer. After being funded by a crowd sale in the summer of 2014, the Ethereum network went live about one year later, in the summer of 2015. After an exploit in Ethereum's smart contract software, in 2016, Ethereum was forked (split) into two different versions: ETH (on which the hack / theft was reversed) and ETC (Ethereum Classic).

The native Ethereum cryptocurrency token is called Ether, which is used to compensate miners for their computational work.

ERC-20 Token Standard

The technical standard used for smart contracts on the Ethereum blockchain and for implementing and issuing tokens. "ERC" is an abbreviation for "Ethereum Request for Comment". ERC-20 in essence is a rule set an Ethereum token needs to comply to in order to function within the Ethereum network.