Blockchain for Beginners: Part II

Investing Guides

Last Updated: December 19, 2022

Blockchain for Beginners: Part II

We continue explaining the most used terms in the blockchain world.


In the simplest terms, cryptocurrency arbitrage is the process of selling a cryptocurrency purchased on one exchange almost simultaneously on another, where its price is higher. This way investors take advantage of small price differences in a cryptocurrency across multiple markets or exchanges.


An airdrop is a distribution of a cryptocurrency token or coin, usually for free, to multiple wallet addresses. This is often done to increase the adoption and circulation of the cryptocurrency. In some cases, the airdrop is offered as a way to reward the holders of a particular blockchain-based asset, such as bitcoin, for their support of the project.


The term cross-chain refers to the ability of different blockchain networks to interact with each other and exchange information or value. This can be accomplished through the use of atomic swaps, which allow for the direct exchange of one type of cryptocurrency for another without the need for a third party. Cross-chain technology has the potential to greatly increase the interoperability and flexibility of the overall cryptocurrency ecosystem.


Cryptocurrency is a digital or virtual asset that uses cryptography for security and is decentralized, meaning it is not controlled by a single authority or institution. Cryptocurrency relies on blockchain technology, which is a distributed ledger that records transactions on multiple computers. This makes it difficult for anyone to cheat the system or alter the record of transactions. Cryptocurrencies are often used as a medium of exchange and can be bought and sold on online exchanges.


Cryptography is the practice of using mathematical algorithms and other techniques to encrypt and decrypt information. This allows for the secure transmission of data between parties, and helps to prevent unauthorized access or tampering with the information. Cryptography has been used for centuries to protect sensitive information, and it forms the basis of modern computer security. In the context of cryptocurrency, cryptography is used to secure the transactions that take place on the blockchain network. This helps to ensure that only authorized users are able to access and transfer cryptocurrency.

Crypto mining

Cryptocurrency mining is the process of using computer hardware to perform complex calculations in order to verify and add transactions to the blockchain, a distributed ledger that is used by many cryptocurrencies. When a transaction is made, it is broadcast to the network and must be verified by miners before it can be added to the blockchain. To verify a transaction, miners must compete to solve a complex mathematical problem. The first miner to solve the problem gets to add the next block to the blockchain and receives a reward in the form of a small amount of the cryptocurrency that was used in the transaction. This process is known as "mining" because the reward that miners receive for their work is similar to the rewards that are given to people who extract valuable resources, such as gold or oil, from the earth.

Decentralized Autonomous Organization (DAO)

DAO is a type of organization that is run using blockchain technology and smart contracts. A DAO is decentralized because it is not controlled by any single individual or entity, but rather is run by a network of participants who follow a set of rules that are encoded in the smart contracts that govern the DAO. These rules determine how the DAO operates, how decisions are made, and how assets are managed. A DAO is autonomous because it is designed to operate without the need for human intervention, relying instead on a set of pre-defined rules and the collective actions of its participants.

Decentralized finance (DeFi)

DeFi is a financial system that is built on top of a blockchain or other decentralized technology. It allows for the creation of financial applications and services that are transparent, open, and accessible to anyone with an internet connection. DeFi aims to democratize finance by making it more inclusive and accessible to a wider range of people and organizations.


A fork in a blockchain is a situation in which the blockchain splits into two separate chains. This can happen for a variety of reasons, such as a disagreement among the members of the network about the rules governing the blockchain, or a change in the underlying technology that the blockchain is built on. When a fork occurs, the members of the network must decide which of the two chains they will continue to support. The chain that is supported by the majority of the network is considered the "main" chain, while the other chain is typically abandoned.


The halving process is related to Bitcoin and takes place on average every 4 years. Once the halving is complete, it is set to halve the block production rewards for miners. The halving process is integrated into the protocol used by Bitcoin’s mysterious inventor, Satoshi Nakamoto.

Hash rate

Hash rate in blockchain and cryptocurrency transactions is defined as the number of "hashes" transactions made in a given time, or the performance rate of a miner. Bitcoin hash rate is a unit used to measure the processing power of the Bitcoin network. The Bitcoin network has to perform a large number of mathematical operations in order to ensure its security. The hash rate is specified in h/s (hash/second) placed next to a suitable numerical abbreviation. For example, a network reaching a hash rate of 10 TH/s indicates that it is capable of performing 10 trillion calculations per second. Hash rate is a very important factor in the logistics of cryptocurrency mining and blockchain operations. Therefore, it is a parameter that is often evaluated and discussed in Bitcoin communities.


Mainnet is a fully operational blockchain, a network that has completed all testing phases, is fully deployed and is in production.

Rug pull

It’s a fraudulent method used to pump up the cryptocurrency value by promoting the project as an investment opportunity to attract investors. After the project owners raise funds, they disappear, and the project is left illiquid.


Testnet is a blockchain used for testing. It has the same elements as mainnet, but its primary function is to find and fix bugs before deployment to production.

Transaction ID (TxID)

TxID is short for transaction hash/ID. Tx is used to identify the transaction, while ID or hash is used to identify the cryptocurrency transaction. The TxID code is a 64-character numerological string of unique characters given to all transactions added to the blockchain network. We can say that it is the identification number of the transaction you have made. You can search your cryptocurrency deposits and withdrawals with this code and check all the details about the transaction.


Validator is an important part of the proof-of-stake mechanism used in the blockchain network. They could be called an analogue to the role of the miner in the proof of work system and, instead of devices, perform block addition and verification operations. Transactions on the blockchain are completed only when approved by the validator. It is the key link of the chain.

Web 3.0

Web 3.0 is a new version of the world wide web based on blockchain technology. It includes such concepts as decentralized finance, cryptocurrencies, DAOs, NFTs and other blockchain elements. It is designed in such a way that it becomes virtually impossible to centralize, capture, and exchange information, money, and transactions.

Zero-knowledge proof (Zk proof)

Zk proof is a digital protocol that allows data sharing between two parties without the use of passwords or any transaction-related information.