100,000 Questions and Answers about Cryptocurrencies 13

What is a DAO (Decentralized Autonomous Organization)?

A DAO (Decentralized Autonomous Organization) is an organization that runs on blockchain technology and is governed by rules encoded in smart contracts. DAOs aim to operate without human intervention and rely on community participation and voting to make decisions.

What is tokenomics?

Tokenomics refers to the economic design and management of a cryptocurrency token. It involves considering factors such as supply, distribution, incentives, and utility to create a sustainable and valuable token ecosystem.

What is initial coin offering (ICO)?

An initial coin offering (ICO) is a fundraising mechanism where a cryptocurrency project sells its tokens or coins to investors in exchange for fiat currency or other cryptocurrencies. ICOs are often used to fund the development and marketing of new blockchain projects.

What is a security token offering (STO)?

A security token offering (STO) is a type of token sale where the tokens sold are considered securities under securities laws. STOs are regulated by financial authorities and require compliance with relevant regulations to protect investors.

What is a wrapped token?

A wrapped token is a token that represents another asset or token on a different blockchain. For example, wrapped Bitcoin (WBTC) is a token on the Ethereum blockchain that represents Bitcoin held in custody elsewhere. Wrapped tokens enable interoperability between blockchains and allow assets to be used in decentralized applications and services.

What is a bridge token?

A bridge token is a token that facilitates the transfer of assets between different blockchains using a cross-chain bridge. Bridge tokens represent the underlying assets on the destination blockchain and are used to settle transactions across the bridge.

What is a liquidity mining?

Liquidity mining is a process where users provide liquidity to decentralized exchanges or liquidity pools in exchange for rewards. Liquidity providers earn rewards in the form of transaction fees or tokens issued by the protocol.

What is yield farming?

Yield farming is a strategy where users deposit funds into liquidity pools or lending protocols to earn rewards. These rewards can come in the form of interest, transaction fees, or tokens issued by the protocol. Yield farming aims to maximize returns by participating in multiple protocols and optimizing rewards.

What is a rebase?

In the context of certain cryptocurrencies, such as Ampleforth (AMPL), rebase refers to the process of adjusting the supply of tokens to maintain a target price. The rebase mechanism automatically increases or decreases the supply based on market conditions, aiming to keep the price stable.

What is a governance token?

A governance token is a type of cryptocurrency token that grants holders voting rights and influence over the decisions and future development of a protocol or decentralized organization. Governance tokens enable a decentralized governance model where the community can vote on proposals and changes to the protocol.

What is NFT (Non-Fungible Token)?

NFT stands for Non-Fungible Token. It is a unique digital asset that represents ownership of a digital item, such as an artwork, collectible, or in-game item. Each NFT is one-of-a-kind and cannot be replaced with another token.

What is the difference between fungible and non-fungible tokens?

Fungible tokens, like Bitcoin or Ethereum, are interchangeable and divisible. They have the same value and can be traded or exchanged for one another. Non-fungible tokens (NFTs), on the other hand, are unique and cannot be replaced or exchanged for another token. Each NFT represents a specific digital asset with its own value and attributes.

What is a smart contract?

A smart contract is a self-executing contract with the terms of the agreement between buyer and seller being directly written into lines of code. Once deployed on a blockchain, the contract automatically enforces those terms. Smart contracts enable trustless transactions and reduce the need for third-party intermediaries.

What is ERC-20?

ERC-20 is a technical standard for tokens issued on the Ethereum blockchain. It defines a common list of rules and functions that all ERC-20 tokens must follow, enabling them to be easily transferred, traded, and integrated into decentralized applications.

What is ERC-721?

ERC-721 is a technical standard for non-fungible tokens (NFTs) on the Ethereum blockchain. It provides a unique identifier for each token, allowing them to be tracked and traded individually. ERC-721 tokens are commonly used to represent digital art, collectibles, and other unique assets.

What is a blockchain explorer?

A blockchain explorer is a tool that allows users to search, view, and analyze the data stored on a blockchain. It provides a user-friendly interface to view transactions, blocks, addresses, and other information on the blockchain, enabling users to track and verify the state of the network.

What is a mempool?

The mempool, or memory pool, is a holding area for unconfirmed transactions waiting to be included in the next block on a blockchain. Nodes on the network maintain a mempool to keep track of pending transactions and determine which ones to include in the next block they mine.

What is a block time?

Block time refers to the average time it takes for a new block to be added to a blockchain. It varies depending on the blockchain and its consensus mechanism but is typically measured in seconds or minutes. Block time determines the transaction throughput and speed of the blockchain network.

What is a sidechain?

A sidechain is a separate blockchain that is pegged to the main blockchain, allowing assets to be transferred between the two chains. Sidechains enable additional functionality and scalability by executing transactions off-chain while maintaining security guarantees through the main chain.

What is atomic swap?

Atomic swap is a peer-to-peer technique that allows the exchange of one cryptocurrency for another without the need for a trusted third party. It ensures that either both transactions occur or neither occur, preventing one party from defaulting on the swap. Atomic swaps enable cross-chain trading and interoperability between different blockchains.