100,000 Questions and Answers about Cryptocurrencies 3
What is a stablecoin? A stablecoin is a type of cryptocurrency that aims to maintain a stable value, often pegged to a fiat currency like the US dollar or a commodity like gold. Stablecoins provide a hedge against volatility in other cryptocurrencies.
What is a wrapped token? A wrapped token is a representation of a token from one blockchain on another blockchain. For example, Wrapped Bitcoin (WBTC) allows Bitcoin to be used on Ethereum.
What is an oracle in cryptocurrency? An oracle is a trusted third party that provides external, off-chain data to smart contracts on a blockchain. Oracles are crucial for DeFi applications that rely on real-world data.
What is impermanent loss? Impermanent loss refers to the potential loss of value when providing liquidity to a liquidity pool in DeFi. It occurs when the price ratio between two tokens in the pool changes.
What is an airdrop? An airdrop is a distribution of free tokens or coins to wallet addresses, often as a marketing tactic to increase awareness or reward early supporters.
What is a burn in cryptocurrency? Burning refers to the permanent removal of tokens or coins from circulation, reducing the total supply and potentially increasing the value of the remaining tokens.
What is an NFT (Non-Fungible Token)? An NFT is a unique digital asset that represents ownership of a digital item like art, music, videos, or in-game items. NFTs are stored on a blockchain and cannot be replicated.
What is gas limit in Ethereum? Gas limit is the maximum amount of gas that a user is willing to pay for a transaction. If the transaction requires more gas than the limit, it will fail.
What is the difference between PoW and PoS? PoW (Proof of Work) and PoS (Proof of Stake) are consensus mechanisms used by blockchains. PoW requires miners to solve computational puzzles, while PoS selects validators based on their stake in the network.
What is a halving in Bitcoin? Halving is an event in Bitcoin's protocol where the reward for mining a block is reduced by half. It occurs every four years and helps control the supply of Bitcoin.
What is mining difficulty in Bitcoin? Mining difficulty refers to how hard it is to find a valid block in the Bitcoin blockchain. It adjusts periodically to maintain a target block generation rate.
What is a miner's fee in Bitcoin? A miner's fee is a small amount of Bitcoin that is attached to a transaction as an incentive for miners to include it in a block. The higher the fee, the more likely the transaction will be processed quickly.
What is a mining pool? A mining pool is a group of miners who combine their computing power to increase the chances of finding a block and earning rewards. Rewards are then distributed among pool members based on their contribution.
What is the difference between full nodes and light nodes? Full nodes store a complete copy of the blockchain and verify all transactions, while light nodes rely on full nodes to verify transactions and only store a small part of the blockchain.
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. Sidechains can provide additional features or scalability solutions.
What is a cold wallet? A cold wallet is a cryptocurrency wallet that is not connected to the internet, making it highly secure against hacks. Private keys are stored offline on a hardware device or paper wallet.
What is a soft fork? A soft fork is a change to a blockchain's protocol that is backward compatible, meaning older versions of the software can still interact with the new version.
What is a hash rate? Hash rate refers to the speed at which a miner's computer can solve cryptographic puzzles and generate hashes. It measures the computing power of a miner or mining pool.
What is a coinbase transaction? A coinbase transaction is the first transaction in a new block, which rewards miners with newly minted coins plus any transaction fees. It is the only transaction in a block that can create new coins.
What is a block explorer? A block explorer is a tool that allows users to view and search the contents of blocks on a blockchain, including transactions, addresses, and balances.