What Is a Blockchain Hard Fork?

A hard fork in the context of cryptocurrency refers to a change in the underlying protocol of a blockchain network that makes previously invalid blocks or transactions valid, or vice-versa. This requires all nodes or users to upgrade to the new version of the protocol software. A hard fork can create a new cryptocurrency if the forked blockchain diverges from the original path. A practical example of a hard fork would be the 2017 Bitcoin network split into Bitcoin (BTC)…

What Is a Blockchain Soft Fork?

A soft fork in cryptocurrency is a change to a backward-compatible blockchain network protocol. This means that nodes running the new software version will still be able to communicate and validate transactions with nodes running the old version. This is in contrast to a hard fork, a change to the protocol that is not backward-compatible and requires all nodes to upgrade to the new version of the software. An example of a soft fork would be a change to the…

Cryptocurrency vs. FIAT Money

Cryptocurrency is a digital or virtual currency that uses cryptography for security. It operates independently of a central bank or government. Bitcoin, the first and most widely used cryptocurrency, was created in 2009. FIAT money, on the other hand, is a currency a government has declared legal tender, but a physical commodity (such as gold) does not back it. The value of fiat money is derived from the relationship between supply and demand rather than the value of the material…

What Is the Role of SEC in Crypto?

The SEC (Securities and Exchange Commission) is a government agency in the United States that is responsible for regulating securities markets and protecting investors. In crypto, the SEC plays a significant role in determining whether certain digital assets should be classified as securities, subject to federal securities laws and regulations. An example is the SEC's decision in 2019 to classify Ether (ETH) as a commodity rather than a security. This means that ETH is not subject to the same level of…

What Is the Role of CFTC in Crypto?

The Commodity Futures Trading Commission (CFTC) is an independent agency of the United States government that regulates futures and options markets. In cryptocurrency, the CFTC has jurisdiction over derivatives and other financial products based on digital assets, such as Bitcoin and Ethereum. A practical example of the CFTC's role in cryptocurrency would be its oversight of companies that offer Bitcoin futures contracts. These contracts allow traders to speculate on the future price of Bitcoin and are traded on regulated exchanges…

What is Cryptocurrency Governance?

Crypto governance is the process by which stakeholders in a cryptocurrency or blockchain network make decisions about the network's protocol and operation. This can include decisions about software updates, changes to the network's consensus mechanism, and allocating funds for development and other expenses. One way crypto governance is implemented is through a decentralized autonomous organization (DAO), a digital organization run by code rather than by a central authority. In a DAO, stakeholders can propose and vote on proposals using their…

What is a Hash Time-Lock Contract (HTLC)?

A hash time-lock contract (HTLC) is a type of smart contract that allows two parties to transact on a blockchain network in a trustless manner. It uses a cryptographic hash function and a time lock to ensure that the transaction can only be completed if certain conditions are met. It works because the sender generates a random value (the "preimage") and uses it to create a cryptographic hash. They then send the hash to the receiver along with the transaction…

What Are Crypto Transactions Fees?

Cryptocurrency transaction fees are a small amount of cryptocurrency charged to the user when they initiate a transaction on a blockchain network. These fees are paid to the network's validators, also known as miners or nodes, as a reward for verifying and processing the transaction. The fee is typically a small fraction of the total transaction amount and is paid in the same cryptocurrency as the transaction. The user determines the fee amount, which can vary based on the current…

What Is a Cryptocurrency Mempool?

A mempool (short for "memory pool") is the part of a cryptocurrency's full node software that stores unconfirmed transactions broadcast to the network. These transactions are stored in the mempool until they are included in a block by a miner or validator and confirmed on the blockchain. When a user initiates a transaction, it is broadcast to the network and picked up by full nodes. These nodes will then validate the transaction to ensure that it is valid (e.g., that…

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