100,000 Questions and Answers about Cryptocurrencies 42

What is a Proof-of-Stake (PoS) consensus mechanism?

Proof-of-Stake (PoS) is a consensus mechanism used by some blockchains where validators are chosen based on the number of coins they stake, rather than computational power. It aims to be more energy-efficient compared to Proof-of-Work (PoW).

How does PoS differ from PoW?

PoS selects validators based on the amount of coins they stake, while PoW requires validators to solve complex mathematical problems using computational power. PoS aims to be more scalable, energy-efficient, and secure against certain types of attacks.

What is a stablecoin?

A stablecoin is a type of cryptocurrency designed to maintain a stable value relative to a real-world asset, such as the US dollar. Stablecoins aim to provide a less volatile alternative to other cryptocurrencies.

What are some examples of stablecoins?

Examples of stablecoins include USDT (Tether), USDC (Circle), DAI (MakerDAO), and BUSD (Binance USD).

What is decentralized finance (DeFi)?

Decentralized finance (DeFi) refers to financial applications and protocols built on blockchains that enable financial services without the need for centralized intermediaries.

What are some examples of DeFi applications?

Examples of DeFi applications include lending protocols, decentralized exchanges, yield farming platforms, and insurance protocols.

What is gas in Ethereum?

Gas refers to the fee required to perform transactions or execute smart contracts on the Ethereum blockchain. It is paid in Ether, Ethereum's native token.

How does gas pricing work in Ethereum?

Gas pricing in Ethereum is determined by the complexity of the transaction or smart contract execution. Users set a gas price (in Ether per unit of gas) that miners can choose to include in a block based on profitability.

What is a halving event in Bitcoin?

A halving event in Bitcoin is when the reward for mining a block is reduced by half. It occurs approximately every four years and is designed to control the supply of Bitcoin and incentivize miners.

What is the Lightning Network?

The Lightning Network is a layer-2 scaling solution for Bitcoin that enables fast, low-fee transactions off-chain. It uses payment channels to facilitate transactions between participants without requiring on-chain confirmations for each transaction.

What is an Initial Coin Offering (ICO)?

An Initial Coin Offering (ICO) is a crowdfunding method used by blockchain startups to raise funds by selling their native tokens or coins to investors.

How does an ICO work?

An ICO works by allowing investors to purchase the startup's native tokens or coins in exchange for fiat currency or other cryptocurrencies. The funds raised are typically used to develop the project and pay for operational expenses.

What is a hard fork?

A hard fork is a change to a blockchain protocol that is not backward compatible, meaning nodes running the old protocol will no longer be able to validate blocks on the new chain. This creates a permanent split in the blockchain.

What is a soft fork?

A soft fork is a change to a blockchain protocol that is backward compatible, meaning nodes running the old protocol can still validate blocks on the new chain. Soft forks are often used to introduce new features or fix bugs without creating a split in the blockchain.

What is a mining pool?

A mining pool is a group of miners who combine their computing power to increase their chances of mining a block and receiving the block reward. The reward is then distributed among the pool members based on their contribution.

What is an airdrop?

An airdrop is a marketing technique where a project distributes free tokens or coins to users, often based on certain conditions such as holding a particular token or participating in the project's community.

What is a 51% attack?

A 51% attack refers to a scenario where a single entity or group controls more than 50% of the mining power on a proof-of-work blockchain. This allows them to double-spend coins, reverse transactions, or prevent other miners from mining valid blocks.

What is a hash rate?

Hash rate refers to the speed at which a miner can perform cryptographic hash functions, which are necessary for mining blocks on proof-of-work blockchains. A higher hash rate increases the chances of mining a block and receiving the block reward.

What is a blockchain fork?

A blockchain fork occurs when two or more blocks are created at the same height in the blockchain, causing the blockchain to split into two separate chains. Forks can be intentional (e.g., hard forks) or unintentional (e.g., due to network issues).

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. The code and the agreements contained therein exist across a distributed, decentralized blockchain network.