The Cryptocurrency Dictionary

A

A Satoshi

The smallest unit of bitcoin possible. There are 100 million satoshis in a single bitcoin.

AML

Anti-Money Laundering techniques are used to stop people converting illegally obtained funds, to appear as though they have been earned legally. AML mechanisms can be legal or technical in nature. Regulators frequently apply AML techniques to bitcoin exchanges.

Address

Cryptocurrency addresses are used to send or receive transactions on the network. An address usually presents itself as a string of alphanumeric characters.

Altcoins

A name coined as the merger of the words bitcoin and alternative. These concern all coins that came after the initial release of the famous Bitcoin, the first decentralized cryptocurrency

Application Specific Integrated Circuit (ASIC)

A specific computer chip which has been created for the sole purpose of, for example, mine data blocks.

Asymmetric Key Algorithm

The algorithm used to generate public and private keys. These keys are needed to support cryptocurrency transactions. Both sender and receiver have this key, and can send secure information.

B

BIP

An acronym for “Bitcoin Improvement Proposals” which can be submitted by anyone who wants to improve the Bitcoin network.

BIP148

BIP148 is a User Activated Soft Fork (UASF) that was designed to cause the existing SegWit MASF deployment to cause activation in all existing SegWit capable node software (which currently is 80% of the network nodes)

BTC

An acronym for bitcoin. A single unit of the bitcoin currency.

Bitcoin

Bitcoin can refer to the protocol, network or the unit of currency. Strictly, Bitcoin with a capital “B” refers to the protocol & the network, whilst bitcoin with a lowercase “b” is the currency.

Bitcoin (unit of currency)

100,000,000 satoshis. A unit of the decentralized, digital currency which can be traded for goods and services. Bitcoin also functions as a reserve currency for the altcoin ecosystem.

Bitcoin ATM

A cash point where people can trade fiat currency and bitcoins

Bitcoin Cash (BCH)

A hard fork of Bitcoin led by Bitcoin mining pool ViaBTC that supports ‘big blocks’ of up to 8MB and removes SegWit. It’s launch date was 1 st August 2017 to coincide with the BIP148 SegWit signaling activation.

Bitcoin Network

The decentralized, peer-to- peer network which maintains the blockchain. This is what processes all Bitcoin transactions.

Bitcoin Protocol

The open source, cryptographic protocol which operates on the Bitcoin network, setting the “rules” for how the network runs.

Bitcoin Transaction

A transaction is a file that says, “Bob gives X Bitcoin to Alice“ and is signed by Bob‘s private key. After signed, a transaction is broadcasted in the network, sent from one peer to every other peer. The transaction is known almost immediately by the whole network. But only after a specific amount of time it gets confirmed. As long as a transaction is unconfirmed, it is pending and can be forged. When a transaction is confirmed, it is set in stone.

Block Explorer

Block explorer is an online tool to view all transactions, past and current, on the blockchain. They provide useful information such as network hash rate and transaction growth.

Block Reward

A form of incentive for the miner who successfully calculated the hash in a block during mining. Verification of transactions on the blockchain generates new coins in the process, and the miner is rewarded a portion of those.

Block Timestamp

Each block contains a timestamp in Unix. They help to make it more difficult for someone else to manipulate the blockchain.

Blockchain

A digital ledger in which transactions made in bitcoin or another cryptocurrency are recorded chronologically and publicly.

C

Cold Storage

The safest way to store your private keys is by keeping them offline in “cold storage”. This could be in the form of a hardware wallet, USB stick or a paper wallet. These wallets are known as “cold wallets”.

Confirmation

The incorporation new transactions into the blockchain. For bitcoin, this occurs on average every 10 minutes when a miner solves a block.

Consensus

Consensus is achieved when all participants of the network agree on the validity of the transactions, ensuring that the ledgers are exact copies of each other.

Consortium blockchain

A blockchain where the consensus process is controlled by a pre-selected set of nodes; for example, a consortium of 15 financial institutions.

Crowdsourcing

The pooling of resources such as information or money contributed by the general population, to a goal. This is usually done online via websites where people can donate.

Cryptocurrency

A digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. In essence they are limited entries in a database no one can change without fulfilling specific conditions.

Cryptography

Is the practice and study of techniques for secure communication in the presence of third parties called adversaries. Cryptocurrencies are built on cryptography. They are not secured by people or by trust, but by math. It is more probable that an asteroid falls on your house than that a bitcoin address is compromised.

D

DAO

An acronym for “Decentralized Autonomous Organization”, a theoretical company that could exist in the cloud and carry out business according to preset algorithms, needing no human management. Also known as “DACs”

DApp

A decentralized application (DApp) is an application that is open source, operates autonomously, has its data stored on a blockchain, incentivised in the form of cryptographic tokens and operates on a protocol that shows proof of value.

Decentralized

A common term in cryptocurrency which means that the currency isn’t issued or regulated by a centralized authority, such as a bank or government.

Desktop Wallet

A wallet that stores the private keys on your computer, which allow the spending and management of your bitcoins.

Deterministic Wallet

A wallet based on a system of deriving multiple keys from a single starting point known as a seed. This seed is all that is needed to restore a wallet if it is lost and can allow the creation of public addresses without the knowledge of the private key.

Difficulty

This refers to how easily a data block of transaction information can be mined successfully.

Digital Asset

Anything that exists in a binary format and comes with the right to use. Data that do not possess that right are not considered assets. Digital assets include but are not exclusive to: digital documents, audible content, motion picture, and other relevant digital data that are currently in circulation or are, or will be stored on digital appliances.

Distributed Denial of Service (DDoS)

A very dangerous threat for cryptocurrency users. Often this comes with a severe attack on the network, creating an army of ‘zombie’ computers who simultaneously flood a targeted website or network with requests. This can cause a sustained downtime on said network or even make them crash completely.

Dogecoin

An altcoin first started as a joke in late 2013. Dogecoin, which features a Japanese fighting dog as its mascot, gained a broad international following and quickly grew to have a multi-million dollar market capitalization.

Double Spending

A common flaw in some cryptocurrency blockchains where the system of rules is not in motion properly, allowing malicious users to try and spend their unique codes in multiple places. This causes coins spent that are already spent somewhere else, making one of the receivers end up with nothing.

E

Ether

Is the native token of the Ethereum blockchain which is used to pay for transaction fees, miner rewards and other services on the network.

Ethereum Classic

A split from an existing cryptocurrency, Ethereum after a hard fork.

Exchange

A place where buyers and sellers can trade bitcoins or other cryptocurrencies.

Exchange Rate

Normally, money issued by the government, such as the Dollar, will have a fluid exchange rate based on the country it is spent in. Cryptocurrency does not have this issue as it is digital. However, the exchange rate is based on two things; how it compares to a traditional currency, or how it stacks up against another type of cryptocurrency.

F

Fiat Currency

Is any money declared by a government to be to be valid for meeting a financial obligation, like USD, EUR or CNY

Fork

A split in the blockchain where there are temporarily two different blockchains which miners can work on. These can occur if software updates to a Bitcoin client are incompatible or if developers decide that changes must be made to the programming of a coin. This deliberate change is called a “Hard fork”. It can also be used to describe a separate cryptocurrency which has been split from the main blockchain, such as Namecoin being a “fork” of Bitcoin.

G

Genesis Block

The very first block in a block chain.

H

Halving

Bitcoins have a finite supply, which makes them a scarce digital commodity. The total amount of bitcoins that will ever be issued is 21 million. The number of bitcoins generated per block is decreased 50% every four years. This is called “halving.” The final halving will take place in the year 2140.

Hardware wallet

A bitcoin wallet which stores a user’s bitcoins offline on hardware devices.

Hash

This is a random and complex mathematical formula used in the verification of blocks of transaction data in the process known as mining.

Hot Wallet

A bitcoin wallet that has an active connection to the internet. These are used for “everyday” transactions and should never hold large amounts of bitcoin, since their connectivity reduces their security.

I

IPFS

The InterPlanetary File System (IPFS) is a hypermedia distribution protocol, addressed by content and identities. It is a peer-to-peer distributed file system that seeks to connect all computing devices with the same system of files.

Initial Coin Offering (ICO)

Happens when someone offers investors some units of a new cryptocurrency or crypto-token in exchange against cryptocurrencies like Bitcoin or Ethereum.

Irreversible

After confirmation, a transaction is unable to be reversed. By nobody. There is no safety net for that situation.

K

KYC

Know Your Client/Customer rules force financial institutions to vet the people they are doing business with, ensuring that they are legitimate.

L

Leverage

In foreign or crypto currency trading, leverage multiplies the real funds in your account by a given factor, enabling you to make trades that result in significant profit. By giving leverage to a trader, the trading exchange is effectively lending them money, in the hope that it will earn back more than it loaned in commission. Leverage is also known as a margin requirement.

Light Node

A computer on a blockchain network that only verifies a limited number of transactions relevant to its dealings, making use of the simplified payment verification (SPV) mode.

Lightning Network

Is a decentralized network using smart contract functionality on the blockchain to enable instant payments across a network of participants. The Lightning Network will allow bitcoin transactions to happen instantly, without worrying about block confirmation times. This protocol tries to solve the bitcoin scalability problem.

Liquidity

The ability to buy and sell an asset easily, with pricing that stays roughly similar between trades. A suitably large community of buyers and sellers is important for liquidity. The result of an illiquid market is price volatility, and the inability to easily determine the value of an asset.

Litecoin

Is a peer-to-peer cryptocurrency based on the Scrypt proof-of-work network. Sometimes referred to as the silver of bitcoin’s gold.

M

MASF

Miner Activated Soft Fork - It’s a mechanism by which miners trigger activation of soft forks when a majority signals the readiness to upgrade. This allows for a faster activation time for the soft fork, leaving full nodes to upgrade at their leisure.

Margin call

The act of calling in a margin requirement. An exchange will issue a margin call when it feels that a trader does not have sufficient funds to cover a leveraged trading position.

Market order

An instruction given to an exchange, asking it to buy or sell an asset at the going market rate. In a bitcoin exchange, you would place a market order if you simply wanted to buy or sell bitcoins immediately, rather than holding them until a set market condition is triggered to try and make a profit.

Medium of Exchange

Is an intermediary used in trade to avoid the inconveniences of a pure barter system. Fiat currencies are the generally accepted mediums of exchange. Their most important and essential function is to provide a measure of value.

Mempool

A technical term for a collection of unconfirmed transactions stored by a node until they either expire or get included in the main chain.

Miner

A cryptocurrency needs some kind of mechanism to prevent one ruling party from abusing it. A miner can build a block and add it to the blockchain. As an incentive, he has the right to add a so-called coinbase transaction that gives him a specific number of Bitcoins.

Mining

The process of computers validating transactions in the Bitcoin network, adding blocks onto the blockchain.

Mining Algorithm

The algorithm used by a cryptocurrency to sign transactions, these vary across different cryptocurrencies. Bitcoin’s mining algorithm is SHA256, whilst Litecoin & Dogecoin’s are Scrypt.

Mining Pool

A group of miners who have decided to combine their computing power for mining. This allows rewards to be distributed more consistently between participants in the pool.

Mixing service

A service that mixes your bitcoins with someone else’s, sending you back bitcoins with different inputs and outputs from the ones that you sent to it. A mixing service (also known as a tumbler) preserves your privacy because it stops people tracing a particular bitcoin to you. It also has the potential to be used for money laundering.

Mt Gox

One of the first bitcoin exchanges, and at one time the most popular. Mt. Gox has since gone into administration. Based in Japan, the exchange was started by Jed McCaleb in 2010.

Multi signature transaction

A bitcoin transaction which requires signatures from multiple parties to authorize the sending of bitcoins. This has the potential to improve consumer protection.

N

Node

A node is essentially a computer connected to cryptocurrency network. A node supports the network through validation and relaying of transactions while receiving a copy of the full blockchain itself.

O

OTC exchange

An exchange in which traders make deals with each other directly, rather than relying on a central exchange to mediate between them

Open Source

The practice of sharing the source code for a piece of computer software, allowing it to be distributed and altered by anyone.

Oracles

Oracles work as a bridge between the real world and the blockchain by providing data to the smart contracts.

P

Paper Wallet

A form of cold storage where a private key for Bitcoin address is printed on a piece of paper (with or without encryption) and then all traces of the key are removed from the computer where it was generated

Peer-to-Peer network (P2P)

Any computer network where two or more computers are connected and share resources without going through a separate server. These networks can become massive, allowing for things like file-sharing or cryptocurrency.

Pool

A collection of mining clients which collectively mine a block, and then split the reward between them. Mining pools are a useful way to increase your probability of successfully mining a block as the difficulty rises.

Private Key

This unique identifier code is issued to investors to be used as a digital signature during transactions.

Proof- of- Stake (PoS)

Concept states that a person can mine or validate block transactions according to how many coins he or she holds. This means that the more Bitcoin or altcoin owned by a miner, the more mining power he or she has.

Proof-of-Work

A proof of work is a piece of data which is difficult (costly, time-consuming) to produce but easy for others to verify and which satisfies certain requirements.

Public Address

A public address is the cryptographic hash of a public key. They act as email addresses that can be published anywhere, unlike private keys.

Public/Private Key

In cryptography a public key is a cryptographic key that can be utilized by any party to encrypt a message. Another party can then receive the message and using a key that is only known to that individual or group, decode the message.

Pump and dump

Inflating the value of a financial asset that has been produced or acquired cheaply, using aggressive publicity and often misleading statements. The publicity causes others to acquire the asset, forcing up its value. When the value is high enough, the perpetrator sells their assets, cashing in and flooding the market, which causes the value to crash.

Q

QR Code

A digital representation of a bitcoin public or private key that is easy to scan by digital cameras. QR codes are similar to barcodes found on physical products in that they are a machine-friendly way to embody a piece of data

R

Ripple

Is a payment network built on distributed ledgers that can be used to transfer any currency. The network consists of payment nodes and gateways operated by authorities. Payments are made using a series of IOUs, and the network is based on trust relationships.

S

SPV

Acronym for “Simplified Payment Verification”, this allows mobile clients to make payments without needing a copy of the entire blockchain

Satoshi Nakamoto

The mysterious creator of Bitcoin. Is a person or group of people who created the bitcoin protocol and reference software, Bitcoin Core (formerly known as Bitcoin-Qt). In 2008, Nakamoto published a paper on The Cryptography Mailing list at metzdowd.com describing the bitcoin digital currency. In 2009, they released the first bitcoin software that launched the network and the first units of the bitcoin cryptocurrency, called bitcoins.

SegWit (Segregated Witness)

An optimization proposed by Bitcoin Core developer Pieter Wuille at the end of 2015, SegWit increases the volume of transactions that fit into each block without raising the block size parameter. Specifically, it also removes transaction malleability, an issue that once resolved could lead to a number of network improvements.

SegWit2x

Also knows as the 'The New York Agreement' is proposed as a way to end Bitcoin’s ‘scaling debate’ and was said to be a compromise between the two sides of the debate — those who want to achieve scaling through Segregated Witness (Segwit) and those who prefer to scale by increasing the block size. It consists of two sequential phases — to activate Segwit using BIP 91 (making it compatible with the UASF) and then to hard fork the base block size to 2 MB ninety days later.

Sidechain

These are theoretical, independent blockchains which are “two way pegged” to the Bitcoin blockchain. These can have their own unique features and can have bitcoins sent to and from them

Smart Contract

A two way smart contract is an unalterable agreement stored on the blockchain that has specific logic operations akin to a real world contract. Once signed it can never be altered. A smart contract can be used to define certain computational benchmarks or barriers that have to be met in turn for money or data to be deposited or even be used to verify things such as land rights.

Softfork

A softfork is a change to the bitcoin protocol wherein only previously valid blocks/transactions are made invalid. Since old nodes will recognize the new blocks as valid, a softfork is backward-compatible. This kind of fork requires only a majority of the miners upgrading to enforce the new rules

Solidity

Solidity is a programming language designed for developing smart contracts. Its syntax is similar to that of JavaScript, and it is intended to compile into bytecode for the Ethereum Virtual Machine(EVM)

T

Transaction Block

A group of transactions that are collected and hashed on the Bitcoin network by being added to the blockchain.

Transaction Fee

An amount of money/cryptocurrency users can choose to deduct from their transaction when sending money. This is optional and used to give miners incentive to quickly process their transaction, since they receive the fee as a reward for doing so.

U

USAF

User Activated Soft Fork. It’s a mechanism where the activation time of a soft fork occurs on a specified date enforced by full nodes, a concept sometimes referred to as the economic majority. The UASF concept was combined with SegWit activation in the BIP148 proposal which became active on 1st August 2017.

W

Wallet

Wallets are where public and private keys are stored, they come in many different varieties. See “hot wallet” &“cold wallet”

Wire transfer

Electronically transferring money from one person to another. Commonly used to send and retrieve fiat currency from bitcoin exchanges