Basics concepts about blockchain you should know

Blockchain Technology

Key concepts

  1. Blockchain: a virtual chain of blocks that are stored in decentralized computers. The history of the chain is public to all who can run the software which supports the chain (e.g. BTC, ETH, XLM, etc.). Any block adding to the chain needs consensus agreement from the chain network (e.g. 50% of validators need to agree)
  2. Blockchain token/coin: each block of a blockchain keeps the information about the chain token (or so-called coin) – address and amount. Blockchain validators often have rewards for the work as new-minted tokens and/or transaction fees in tokens. Each token/coin is a virtual proof of ownership of the chain which is confirmed by the whole network of the corresponding blockchain
  3. KYC/AML: Know Your Customer, Anti-Money Laundering
  4. CEX: Centralized Exchange (e.g. Binance, Coinbase). Users need to trust a party to handle transactions and normally need to comply with rules about KYC/AML. Exchange information is not on-chain so users need to trust the exchange operator.
  5. DEX: Decentralized Exchange. No KYC/AML needed, no or very little involvement from a 3rd party. On another side, no recovery support if you lose credentials to log in, the inconsistent fee (up to chain throughput at a certain time), less liquidity
  6. DeFi: Decentralized Finance. As decentralization is the core difference to traditional finance, DeFi refers to blockchain-based protocols to provide financial services to users (e.g. monetary banking services, lending/borrowing, DEX, derivatives
  7. Cryptocurrency: tokens in blockchains in which all tokens are identical, fungible. The use of these tokens is similar to traditional currencies – buying/selling transactions
  8. Stable coin: cryptocurrencies that have a relatively stable price. They can be pegged to a fiat currency or exchange-traded commodities – gold, silver (e.g. USDT, BUSD, BVND).
  9. NFT: Non-Fungible Token. Tokens are non-identical within its blockchain. NFTs represent real-world goods, products, property (land, stock, etc.), services (a piece of artwork, music, video, etc.).

Hope you found some useful information out of the read.

Feel free to leave a comment for any questions.

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