The total number of bitcoins which will ever be available. This limit of 21 million bitcoins is programmed into the protocol and can never be changed. It is projected that the last bitcoin will be mined sometime in the year 2140.
This could be described using the example of a ‘major shareholder’. Once a shareholder owns 51% of shares in a company, they own it. In the bitcoin community, a 51% attack is a single miner or group having a controlling stake of the computing power in a cryptocurrency network.
This could enable them to issue transactions that could conflict with someone else’s, stop transactions going through, spend their currency multiple times over and prevent other miners from mining.
A bitcoin address is the presence that allows you to send and receive transactions as part of the bitcoin network. It also acts as the public key to your bitcoins.
Agreement ledgers are distributed ledgers used by two or more parties to perform negotiations and reach agreement
Altcoin is the name given to the group of ‘alternative’ cryptocurrencies separate from bitcoin. Many altcoins project themselves as better alternatives to bitcoin in various ways, e.g. more efficient, less expensive, etc.
Bitcoin exchanges are subject to Anti-Money Laundering (AML) techniques. This ensures that all transactions on the network are being carried out by genuine traders and not those converting illegal funds.
An Application Specific Integrated Circuit (ASIC) is designed specifically to process the SHA- 256 hashing equation used to mine bitcoins.
An Application Specific Integrated Circuit miner is the holy grail of bitcoin mining – able to calculate the SHA-256 equation far quicker than a CPU or GPU unit. ASIC miners are purpose-built and connect to the network via a wireless link or Ethernet connection.
The name of the Bitcoin network upon which people transact in bitcoin. Not to be confused with the actual currency which is spelled in lowercase as bitcoin.
A type of cryptocurrency created by Satoshi Nakamoto in 2009. It was one of the first digital currencies that enabled instant Peer-To-Peer (P2P) payments. Bitcoins are created through a process known as bitcoin mining which requires a massive amount of computing power. A bitcoin is an asset of value that can be exchanged securely between two parties over the internet, without needing a third-party like a bank, government or other organization. “bitcoin” with a lowercase b is the proper spelling for the cryptocurrency known as bitcoin. Whenever you write about a certain amount of bitcoin, it should be spelled in lowercase, as in “I sent 5 bitcoins to my friend Bob.”
A cryptocurrency born out of the August 1st, 2017 hard fork in the Bitcoin blockchain. Bitcoin
Cash increases the block size limit to 8 Megabytes (8 MBs) as well as implementing two new features:
1) Replay and wipeout protection which enables Bitcoin and Bitcoin Cash to co-exist as distinct and separate cryptocurrencies on separate blockchains, and
2) New SigHash Type – which is a new way of signing transactions. This new SigHash Type was implemented to further reduce the risk of conflicts between the Bitcoin main blockchain and the Bitcoin Cash blockchain.
BITCOIN INVESTMENT TRUST
A sort of bitcoin syndicate, the Bitcoin Investment Trust invests exclusively in this cryptocurrency, and uses secure protocols to keep them safe on behalf of members. This is one way to invest in bitcoin without purchasing the hardware required yourself.
BITCOIN PRICE INDEX (BPI)
The Bitcoin Price Index, devised by Coin Desk, shows the average bitcoin prices across the leading global currency exchanges.
BITCOIN SCRIPTING LANGUAGE
All Bitcoin transactions have scripts embedded into its input and outputs which are written in a very simple programming language called Script. This Bitcoin scripting language is purposefully not Turing Complete and does not allow loops.
The bible of the bitcoin network, this whitepaper was written by the currency’s ‘founder’, Satoshi Nakamoto, in 2008. It gives a comprehensive description of the bitcoin protocol and is a good read for newbies and experienced bitcoin traders alike.
One of the payment channels that processes bitcoin transactions on behalf of merchants.
BITCOIN WHITE PAPER
The origins of bitcoin can be found in this paper that was posted on bitcoin.org back in 2008. The paper, titled ‘Bitcoin: A Peer-to-Peer Electronic Cash System’, described the peer-to-peer approach for generating ‘a system of electronic transactions without relying on trust’. This was the genesis of the cryptocurrency.
BitStamp is one of the fastest-growing bitcoin exchange platforms around.
Transaction data is recorded on a Blockchain in files called Blocks. As new transactions are created and added to a Blockchain, they are grouped into Blocks and added chronologically to the end of the chain. Once a block is added to a Blockchain, it is added permanently, and can never be changed or removed.
A decentralized, digital ledger where transactions made in Bitcoin or other cryptocurrencies are recorded chronologically and can be viewed publicly. A cryptocurrency’s blockchain records all the individual ‘blocks’ that have been mined since the inception of the currency. The chain is designed so that each block contains the ‘DNA’ of the one preceding it, which secures the chain against fraudulent mining activity. It becomes part of the permanent and immutable database, connecting to other blocks in the blockchain like the links in a chain.
A Block Explorer is a type of tool that can provide information on the contents of individual blocks and transactions that are found on a Blockchain.
The Block Height of a Block refers to how far along on a Blockchain a specific Block is found. A Block Height of 0 would imply that it is the first block on a Blockchain, also known as the Genesis Block.
A reward is given to each miner who completes a transaction block. It can take the form of coins or transaction fees – Bitcoin currently rewards 25 coins for each completed block. Once the threshold of blocks has been mined (which currently stands at 210,000 blocks) the reward is halved.
BTC is the abbreviated version of bitcoin, similar to USD and GBP in traditional currencies.
Buttonwood was a project designed to create a bitcoin exchange in New York’s Union Square. Named after the Buttonwood Agreement (upon which the New York Stock Exchange was formed). It was founded by bitcoin aficionado Josh Rossi.
BYZANTINE GENERALS’ PROBLEM
The Byzantine General Problem is also known as a “Coordinated Attack Problem”. It refers to the problems involved in coordinating the actions of multiple parties communicating over an unreliable link. In Bitcoin, this involves the fact that a malicious participant could attempt to add a fraudulent block of transactions to the blockchain. This problem is solved using “Proof of Work” and the Blockchain keeping track of every single block of transactions previously added to the blockchain.
A ledger maintained by a central agency, as opposed to a decentralized ledger.
An approximation of the number of coins or tokens that are circulating in the public market. See also: total supply and maximum supply.
This is the software program which connects a machine – whether a desktop computer, laptop or mobile device – to the bitcoin network. It may also be the home to your bitcoin wallet.
A confirmation is the successful hashing of a bitcoin transaction into the block. It can take up to ten minutes, although larger transactions may require more than one confirmation, as more blocks need to be hashed and added to the block chain. Once another block is added to the chain the transaction will be confirmed again.
The moment, established as a moment in time or by the set number of records to be added to the ledger, where peers meet and agree on the state of the ledger. In Bitcoin, this is when several nodes, usually the majority of nodes on the network, all have the same
blocks in their locally validated best block chain.
In Bitcoin, the consensus process is commonly referred to as “emergent consensus” and was an
invention by the creator of Bitcoin, Satoshi Nakamoto. Emergent consensus is a decentralized process which develops from four different processes occurring independently across the network.
These processes are:
- Verification of transactions by every full node.
- Aggregating those transactions into new blocks by mining nodes along with the related,
- Verification of the new blocks by every node and assembling into a chain.
- Selection by every node of the chain with the most computation demonstrated through proof-of work.
The creation of colored coins is a proposed new feature for bitcoin, and one which allow users to define their own attributes of the currency. The idea is that users could mark a bitcoin as a physical asset, which could then be traded as a token for other property.
This is the Central Processing Unit of a computer, and one that has been used in the past to mine bitcoin – before it was usurped by ASIC and GPU set-ups. CPU’s are still sometimes used to mine altcoins with less taxing hashing calculations.
CoinBase has two distinct meanings for the bitcoin community:
- A name used for the input of a bitcoin’s transaction. Once a bitcoin has been mined, the reward is recorded as a transaction using this input data.
- The name of a bitcoin wallet operator that offers payment processing for merchants, and acts as a ‘middleman’ in bitcoin exchanges.
A coin’s age can be calculated by multiplying the currency amount by the period of time it’s been owned.
A common usage abbreviation for the word cryptocurrency.
A type of digital currency that is generally decentralized and uses cryptography (i.e. data is converted into a format that is unreadable for unauthorized users) for added security, making it difficult to counterfeit or manipulate.
CRYPTOGRAPHIC HAS FUNCTION
Cryptographic hash function is a hash function which takes an input, or message, and condenses it into an irreversible fixed-size alphanumeric string, or hash. Per the hash definition, no two different inputs or messages should produce the same hash value. As a result, the hash generated from an input be regarded as a unique digital signature as it is practically
impossible to duplicate. If an algorithm produces the same result for different strings of text, the algorithm is not “collision free” and is vulnerable to being cracked.
This is the name given to the process of using math to create the codes used to conceal information. This is the basis of the mathematical equation inherent in bitcoin mining.
DAO / DAC
Decentralized Autonomous Organization (DAO), sometimes referred to as a Decentralized
Autonomous Corporation (DAC) is an organization that is fully maintained on a blockchain and is run through rules programmed as smart contracts on that blockchain. In a decentralized autonomous organization, the organization runs automatically per the instructions and agreements that have been programmed into the smart contracts that establish how the
organization should run.
A decentralized application (DApp) is an application that runs on a decentralized peer-to-peer
network, typically making use of a Blockchain and smart contracts. Popular development platforms for DApps include Ethereum and RSK.
Dash is an open source cryptocurrency that offers instant and private transactions. Dash was
rebranded from “Darkcoin” into “Dash” in 2015 as a short form of saying “digital cash”
DDoS stands for Distributed Denial of Service, and is a cyber-attack used to drain the resources of a target. This is done by sending small amounts of network traffic to tie up the target’s bandwidth – preventing it from providing its services to its clients. Bitcoin exchanges have been subject to sporadic DDoS attacks in the past.
Decentralization is the process of spreading or distributing functions and power away from a
centralized location or authority.
A state where there is no central control, power or function, or in reference to infrastructure, no central point of failure.
DECENTRALIZED APPLICATION / DAPP
A type of software program that runs on a decentralized P2P network rather than on a single computer. Although similar, it differs from smart contracts as it can have any number of participants on all sides of the market and it does not have to be financial. Ethereum is a popular development platform for creating dApps.
A deflation is experienced when the price of something decreases over time. This happens when the supply outweighs demand, or where there is only a finite amount of currency around. DIFFICULTY
Each cryptocurrency has a difficulty ‘rating’, which highlights how difficult it is to hash a new block. The lower the number, the harder it is to produce a hash value that fits the block.
Difficulty is fluid and can change based on the amount of computing power in the network. So, if large numbers of people left the network its difficulty would decrease. If a currency grows in popularity, then its difficulty increases as computing power expands.
Digital signature is a term used to describe the marking or signing of an electronic document through the use of a technology known as public-key cryptography.
The process of reducing or eliminating intermediaries (i.e. “middle-men”) between parties in a
transaction. The fact that Bitcoin enables the exchange of value between two parties directly over the Internet without requiring the services of a bank or some other institution is an example of disintermediation.
Distributed computing is an approach to computing in which components of a software system are distributed, or shared, among multiple computers. The goals of distributed computing are to improve efficiency and performance, as well as eliminate a single point of failure by sharing the tasks across multiple systems.
Collective agreement by various computers in a network and allows it to work in a decentralized, P2P manner without the need of central authority to deter dishonest network participants.
A distributed ledger, also called a shared ledger or replicated ledger, involves having a single set of data items which are replicated and shared across multiple sites. In Bitcoin, the Bitcoin blockchain serves as a distributed ledger as it contains all the transactions that have ever happened on Bitcoin, and it is replicated across all the nodes that form the Bitcoin network.
A type of cryptocurrency that features a dog called “Shiba Inu” as its logo.
This is the immoral act of spending the same bitcoins twice. The user completes a transaction using their bitcoins and then makes a second trade from someone else using the same coins. The user must then convince the network that only one transaction has taken place by hashing it in a block. Therefore zero-confirmation transactions are risky.
This is a transaction that takes up space in the block chain but is ultimately worth very little. The developers of bitcoin are taking steps to minimize the amount of dust transactions that take place by introducing a minimum transaction amount.
ECDSA stands for Elliptic Curve Digital Signature Algorithm and is the formula in the Bitcoin protocol used to sign transactions.
A type of token standard for Ethereum which ensures the tokens perform in a predictable way. This allows the tokens to be easily exchangeable and able to work immediately with decentralized applications that also use the ERC-20 standard. Most tokens released through ICOs are compliant with the ERC-20 standard.
An escrow is a type of online wallet that holds funds securely to protect them during a transaction. It is used where two parties cannot exchange bitcoins in public and want the added reassurance that their currency cannot be ‘stolen’ digitally.
Exchange Traded Fund. An ETF is a security that tracks an index, commodity, bond or other assets. It is traded like a common stock on a stock exchange, hence the name exchange traded fund.
The cryptocurrency transacted through the Ethereum platform. It is the “fuel” used as incentive to run applications on the Ethereum platform.
A decentralized platform that runs smart contracts.
ETHEREUM CLASSIC / ETC
A type of cryptocurrency that is a continuation of the original Ethereum blockchain following the DAO attack in June 2016. Ethereum is essentially a hard fork of the blockchain that was formed to refund the money that was siphoned during the attack (around $50 million). Ethereum Classic assumes no hard fork occurred and is supported by those who believe in complete immutability of the blockchain.
An exchange is where users can come together and swap different cryptocurrencies. A bitcoin exchange will generally see its users swap bitcoin for traditional ‘fiat’ currencies.
A faucet is the method of mining a pre-defined number of coins when launching a new cryptocurrency, and then giving these away in order to kick-start interest.
A popular altcoin based on the Scrypt algorithm, and one that is thus suitable for CPU and GPU rigs.
Refers to currencies that have minimal or no intrinsic value themselves (i.e. they are not backed by commodities like gold or silver) but are defined as legal tender by the government, such as paper bills and coins. The US Dollar (USD) is an example of a fiat currency.
This is the Financial Crimes Enforcement Network, a US Treasury Department agency created to impose regulations on bitcoin exchanges.
A type of investment strategy (popular in real estate investing) where you buy something with the goal of reselling for a profit later, usually in a short period of time. In the context of ICOs, flipping refers to the strategy of investing in tokens before they are listed on the exchanges and reselling them for a profit when they are trading in the secondary market.
An acronym that stands for ‘fear of missing out’ and in the context of investing, refers to the feeling of apprehension for missing out on a potentially profitable investment opportunity and regretting it later.
When one set of miners starts hashing a different set of transaction blocks it is known as a ‘fork’. This can be a malicious tactic or undertaken accidentally. It can even be a deliberate ploy where the bitcoin development team introduces a new version of the client. A fork is considered successful if it goes on to become the longer version of the chain.
A Field Programmable Gate Array is another form of processing chip that can be tailored to bitcoin mining. As these are sold in larger numbers ‘off the shelf’ and then re-configured after sale, they are usually far cheaper to buy than ASIC chips, although they are less effective.
Another type of cryptocurrency created by Silvio Gessell and founded on the principle of being inflation-free.
An acronym that stands for fear, uncertainty and doubt. It is a strategy to influence perception by spreading negative, misleading or false information about something, as opposed to reasoned criticism.
In Bitcoin, any computer that connects to the Bitcoin network is called a node. However, a Full
Node is a type of Node that fully enforces all the rules of Bitcoin and as a result can accept and validate transactions and blocks.
A term used in the Ethereum platform that refers to the maximum amount of units of gas the user is willing to spend on a transaction. The transaction must have enough gas to cover the computational resources needed to execute the code. All unused gas is refunded at the end of the transaction.
A term used in the Ethereum platform that refers to the price you are willing to pay for a transaction. Setting a higher gas price will make miners more incentivized to prioritize and validate that particular transaction ahead of those set with a lower gas price. Gas prices are typically denominated in Gwei.
The first block of data that is processed and validated to form a new blockchain, often referred to as block 0 or block 1.
This is the measurement that determines how quickly your machine can mine – it is the number of hashtag attempts possible per second, measures in a billion hashes (a Gigahash).
This is a graphical processing unit, as found in your standard PC graphics card. As a GPU is designed specifically to render polygons in pixel-heavy computer games, they are also perfect for the calculations required in cryptocurrency mining.
In Bitcoin, the process of halving involves the reduction by half of the reward paid out to Bitcoin
miners. This halving process takes place once every four years, and is part of Bitcoin’s predictable, transparent monetary policy which clearly spells out that there will only be a maximum of 21 million bitcoin ever produced. This halving process ensures that that objective is met.
The maximum amount that an ICO will be raising. If an ICO reaches its hard cap, they will stop collecting any more funds.
A hard fork as related to a cryptocurrency blockchain such as Bitcoin, is a permanent divergence/split in the blockchain. On August 1st, 2017, Bitcoin underwent a Hard Fork at Block 478,558 which effectively split Bitcoin into two separate Blockchains:
1) Bitcoin – The main Bitcoin blockchain which retained a 1MB Block size. This is the main Bitcoin
blockchain and what has been known as Bitcoin since its launch in 2009.
2) Bitcoin Cash – A new cryptocurrency altogether. This Bitcoin Cash cryptocurrency runs on a
separate blockchain, and has its miners running a different, new software client, which is not compatible with the main Bitcoin software. This non-compatibility is what caused the break in the blockchain as all nodes running the previous Bitcoin software would reject the new Bitcoin Cash blocks which allow for the 8MB Block size. Hard forks typically require a change in the protocol that runs the blockchain and are not backwards compatible.
In other words, nodes running older versions of the protocol client will not accept the
new blocks on the fork and will require to be upgraded if they are to participate in the new blockchain generated by the hard fork. This is different from a Soft Fork in which no-one is forced to update their software and nonupgraded transactions will still go through as normal.
In cryptography, a hash is a type of hash function which takes an input and returns a fixed size
alphanumeric string. It is used to create a kind of “digital signature” which cannot be deciphered but will always give that result. An effective Hash function, such as SHA-256 which is the Hash function used by Bitcoin, has three qualities:
- It is very easy to create a hash for a set of data.
- It is extremely difficult (practically impossible) to reverse engineer and determine what was the original data that generated the hash.
- It is extremely unlikely that different inputs may yield the same hash.
The number of hash calculations that can be performed per second. This generally dictates how successful a miner is likely to be.
The act of generating a Hash. Hashing condenses an input into an irreversible fixed length
value. (See Hash)
A type of passive investment strategy where you hold an investment for a long period of time, regardless of market volatility. The term was made famous by a typo made in a bitcoin forum. Also referred to as ‘buy and hold’ or ‘hold on for dear life’.
The opposite of deflation: as the value of money drops, the price of goods and services increases exponentially. This gives consumers less purchasing power, so there’s more motivation to spend a currency quicker.
The quality of an object to remain unchanged. In blockchain, immutability applies to the fact that once a block has been added to a blockchain, it cannot be changed.
INITIAL COIN OFFERING / ICO
An unregulated means by which a cryptocurrency venture, typically early stage, can raise money from supporters by issuing tokens. It is often referred to as a crowdsale as ICO participants may potentially earn a return on their investments (as opposed to crowdfunding, where supporters donate money to a project or cause). Ethereum is currently the most popular platform for launching ICOs.
This is where a bitcoin transaction starts and will be denoted by a bitcoin address. That is unless it is a generation transaction of a newly mined bitcoin.
InterPlanetary File System / IPFS
A protocol designed to enable a permanent and decentralized method for storing and sharing files.
IOTA / MIOTA
Refers to the cryptocurrency and the name of an open source distributed ledger founded in 2015 that does not use blockchain (it uses a new distributed ledger called the Tangle). It offers features such as zero fees, scalability, fast and secure transactions, and so on. It is focused on the Internet of Things.
In Bitcoin, Key Management involves the managing of public and private keys to access bitcoin funds. Managing keys in bitcoin involves the proper use and protection of the various keys required to access and transfer funds.
The number of hashes calculated per second in thousands of hashes (a Kilohash).
This is Know Your Client, a regulation that forces financial institutions to thoroughly vet the people they do business with to ensure they are legit.
A ledger is a file which keeps a collection of financial accounts. In Bitcoin, the Bitcoin Blockchain acts as a ledger which keeps track of all the transactions that have taken place on the Bitcoin network.
Utilizing leverage in foreign currency trading enables you to multiply your ‘real funds’ and achieve significant profit. Leverage can be used by a trader to essentially lend another person funds, which they can then earn back in commission.
A former giant of the digital currency processing world, Liberty Reserve was shut down by the US government after it was found to be money laundering.
A low latency, off chain P2P system for making micropayments of cryptocurrencies. It offers features such as instant payments, scalability, low cost and cross-chain functionality. Participants do not have to make individual transactions public on the blockchain, and security is enforced by smart contracts.
LITECOIN / LTC
A type of open source cryptocurrency created in 2011 by a former Google employee Charlie Lee. Although it has some similarities to Bitcoin, Litecoin is a different type of cryptocurrency altogether and it processes a block of transactions every 2.5 minutes instead of every 10 minutes. It offers features such as Segregated Witness and the Lightning Network which allows for faster processing at lower cost.
Liquidity ensures that the price of a good stays similar amongst all trades, ensuring that it is easy to buy and sell. If there’s a decent-sized community of traders, then the price will remain stable and ‘liquid’. An illiquid market results in extreme price fluctuations, ad makes it harder to value a good.
A margin call will take place when an exchange believes a trader does not have enough funds to cover their leveraged trades.
MARKET CAPITALIZATION / MARKET CAP
The market value of a company, market or sector at a point in time commonly used to rank relative size. In equities, it refers to the total market value of a company’s outstanding shares. In cryptocurrency investing, it refers to either price multiplied by the circulating supply (i.e. free float market cap) or price multiplied by the total supply (i.e. fully diluted market cap).
A market order can be placed at an exchange when you want to buy or sell bitcoins instantly, and at the going market rate.
An approximation of the maximum number of coins or tokens that will ever exist for a cryptocurrency or crypto asset.
A miniscule amount: one thousandth of a bitcoin (0.001 BTC).
The number of hashes possible per second measured in millions of hashes (a Megahash).
A Merkle tree is the structure built from the various cryptographic hashes in a blockchain. Since
a hash generated from a certain input will always equal the same, and it will be different from any hash generated from a different input. A Merkle Tree is a very effective way to keep track that all the transactions that build the tree are accurate and haven’t been tampered with.
Paying a minute amount as part of a transaction online, these are hard to carry out under conventional payment systems. Imagine paying for a bag of crisps with your credit card.
A special type of node in a cryptocurrency network which processes and confirms transactions
through what is called “mining.”
Mining in the context of cryptocurrency involves processing and confirming transactions of
that cryptocurrency. This process requires solving advanced math problems of increasing difficulty. For performing these tasks, miners are typically compensated for their work in the form of the cryptocurrency they are mining for. This mining process is how new units of cryptocurrency are created and added to the system.
A mining pool is a mining approach where multiple miners pool their resources together to increase their overall hashing power, and then split equally the rewards they receive.
A Mixer, also known as a Tumbler, is a service which involves a third party in order to break the
connection between a Bitcoin address sending coins and the address they are being sent to.
The art of mixing in your bitcoins with another person’s, and then sending you back the same amount but with different inputs and outputs. This is a measure that helps protect the privacy of your account, as your currency cannot be traced back to you.
A type of cryptocurrency created in 2014 that is focused on privacy and scalability, and runs on platforms like Windows, Mac, Linux and Android. Transactions on Monero are designed to be untraceable to any particular user or real-world identity.
A bitcoin exchange based in Tokyo, Japan started in July 2010 which is the subject of one of the
biggest scandals in Bitcoin history. By 2013, Mt. Gox was the world’s leading Bitcoin exchange, handling 70% of all bitcoin transactions. The company ended operations and suspended trading in February 2014, when they announced that 850,000 bitcoins were missing (a value of over $450 Million USD at the time) and that they were most likely stolen.
MULTISIGNATURE / MULTISIG
In Bitcoin, Multisignature is a type of technology which requires multiple parties to digitally sign a
transaction before it can be accepted and processed. This is done to add additional security to these transactions.
Namecoin is a unique altcoin that provides an alternative to standard Domain Name Systems (DNS). Users can utilize .bit domains – only accessible via proxy servers – by paying with Namecoin.
NEM / XEM
Refers to the cryptocurrency and the name of a platform for management of a variety of assets, including currencies, supply chains, ownership records, etc. It offers additional features to blockchain technology such as multi-signature accounts, encrypted messaging, etc.
Refers to the cryptocurrency and the name of a China’s first open source blockchain that was founded in 2014 by Da Hongfei. It is similar to Ethereum in its ability to execute smart contracts or dApps but has some technical differences such as coding language compatibility.
Each computer that is connected to the bitcoin network and relays transactions to others is considered a node.
A nonce is the random set of data used as an input when hashing a block. The nonce is the part that tries to fit the numerical parameters enforced by the difficulty of bitcoin. A different nonce is used for each attempt at hashing.
Any block that was part of a fork that has since been discarded is known as an orphan block. This is not part of the valid chain.
A trader-to-trader exchange that doesn’t employ the services of a central mediator.
The output is the destination address of a bitcoin transaction. There can often be more than one output for each transaction.
P2P, or Peer-to-Peer, interactions happen between two or more users in a network.
This is a physical recognition of your public bitcoin addresses and their private keys. Your wallet can literally be a sheet of paper and presents a safer way to store bitcoins that cannot be hacked or corrupted.
PEER-TO-PEER / P2P
Peer-to-Peer computing is a type of computing architecture in which peers have the same privileges and authority and can communicate and interact directly with one another.
In a permissioned ledger, transactions can only be validated and processed by participants who are already recognized and have been authorized by the ledger. Permissioned ledgers are usually associated with private blockchains where an overarching entity determines who has permission to access the ledger.
The collective name for a group of miners. These users will work together to mine a block, and then share the reward out accordingly. Mining pools increase your chances of successfully completing a block.
Sometimes known as peer coin or P2P coin, this is an altcoin that uses a ‘proof of stake’ calculation alongside proof of work.
A pre-mine is an operation carried out by a cryptocurrency’s founder prior to it ‘going live’.
A sale that takes place before an ICO is made available to the general public to participate.
An alternative cryptocurrency which uses a proof-of-work calculation to calculate prime numbers and was founded by Sunny King.
A blockchain managed by a centralized authority in which the participants and contents are
determined and overseen by a private entity.
The private key is crucial to keeping your bitcoins safe. This is unique to you, and only you should know your private key. It takes the form of a string that signs a digital communication once hashed with your public key.
Process nodes are present in nanometers, which are produced during the chip fabrication process. The smaller the node the more effective it is.
PROOF OF STAKE
Proof of stake is an algorithm used by some cryptocurrency blockchain networks to achieve
distributed consensus and prevent double spending. It is different from Proof of Work in that rather than basing the odds of successfully mining a new block on the amount of work performed and the computational power of a miner – it focuses instead on the amount of cryptocurrency the miner holds.
PROOF OF WORK
This calculation links mining ability to computer power. It takes a good amount of time and effort to hash a block successfully, and this is seen as a proof of work.
The Payment Service Provider (PSP) offers processing services for merchants who accept bitcoin as a currency.
A blockchain where anyone can read and make transactions. Bitcoin is an example of a public blockchain as anyone can read the contents of the blockchain and send transactions.
A public key in the context of Bitcoin is an alphanumeric key which corresponds to a Bitcoin wallet and can be shared with others. It is mathematically related to the Bitcoin address of the corresponding wallet as a Bitcoin address is a hashed version of the public key.
PUMP AND DUMP
This is a naughty tactic that artificially bumps up the price of an asset that has been purchased cheaply, with the aim of selling it on at a profit. The aggressive publicity causes others to buy it, which then of course forces up its value.
A QR Code is a 2D graphic that contains a sequence of data. These codes can be scanned by mobile phones and are used to encode bitcoin addresses and to facilitate physical bitcoin exchanges.
A type of attack to the Bitcoin network where multiple conflicting transactions are sent to the
network in rapid succession with the objective of causing a double spend.
A replicated ledger, also called a shared ledger or distributed ledger, involves having a single set of data items which are replicated and shared across multiple sites. In Bitcoin, the Bitcoin blockchain serves as a distributed ledger as it contains all the transactions that have ever happened on Bitcoin, and it is replicated across all the nodes that form the Bitcoin network.
RIPPLE / XRP
Ripple is an open source technology for interbank transactions which uses distributed ledgers.
By using Ripple, users can make payments between each other by using cryptographically signed transactions. These transactions can be in fiat currency or in Ripple’s own internal currency XRP.
RSK / ROOTSTOCK
RSK, also known as Rootstock, is a smart contracts platform which leverages the Bitcoin network.
A satoshi, which is the named for the creator of bitcoin, Satoshi Nakamoto, is the smallest denomination of Bitcoin. It is valued at 0.00000001 BTC.
Satoshi Nakamoto was the original creator of the Bitcoin Protocol back in 2008. He left the project in 2010. Still today, no one knows if Satoshi Nakamoto is/was a real person or a group of people.
Scam coins use pump and dump and pre-mining together in order to make money for the creator. A Scam coin is an altcoin developed purely for its profit-making potential.
A proof of work system designed for altcoin miners, and one that is slightly-less complex and more forgiving than SHA-256; hence why altcoins utilizing Scrypt are more widely mined by those with CPU and GPU set-ups.
SEGREGATED WITNESS / SEGWIT
Segregated Witness, also known as SegWit for short, is a change that was implemented in Bitcoin on August 1st, 2017 to address several perceived deficiencies in Bitcoin, including a 1 MB limit Block size. This 1 MB Block size limit has been a severe limitation to the scalability of Bitcoin, and had been a point of dissent in the Bitcoin community as there have been multiple proposed solutions with different approaches, including the Hard Fork that eventually led to the development of Bitcoin Cash. SegWit was successfully activated on Bitcoin on August 24th with a soft fork at block #481824 and is now live on Bitcoin. Because SegWit has been activated as a soft fork, no-one is forced to update their software and non-SegWit transactions will still go through as normal. The key element of Segregated Witness is a change in the way that transactions are processed, primarily on how digital signatures are used. In SegWit, the Signature Data is removed from the actual Bitcoin transaction and moved to a different part of the block. This signature data is what is known as the “”Witness”” and what SegWit does is effectively “”segregate”” what witness data by moving it to a different part of the block. This effectively frees up space within the block which can be repurposed to fit in more transactions per block. This increase in Block size is one of the primary reasons for the implementation of SegWit. Another stated benefit of SegWit is that it can address and solve Transaction Malleability a vulnerability in Bitcoin, in which an attacker, given the right conditions, could be able to change the unique ID of a Bitcoin transaction before it is confirmed on the bitcoin network. This transaction malleability vulnerability can potentially make it possible for a malicious entity to make it seem as if a transaction had never taken place.
This is the Single European Payments Area; which is an EU-led agreement to make transferring funds between member states easier – and thus make bitcoin exchanges go a bit smoother.
A type of Secure Hash Algorithm (SHA), published by the National Institute of Standards and
Technology (NIST) and used by Bitcoin and other cryptocurrency miners to authenticate blocks of transaction data. SHA-256 generates a fixed size 256-bit (32-byte) hash that is almost unique. A SHA-256 Hash is a one-way function which cannot be decrypted back.
In Bitcoin, a sidechain is a Blockchain where bitcoins can be moved back and forth from the main chain, to be used for specific needs.
A shared edger, also called a replicated ledger or distributed ledger, involves having a single set of data items which are replicated and shared across multiple sites. In Bitcoin, the Bitcoin blockchain serves as a distributed ledger as it contains all the transactions that have ever happened on Bitcoin, and it is replicated across all the nodes that form the Bitcoin network.
When private and public keys are hashed together, they create a digital signature, which proves which address a bitcoin transaction came from.
Silk Road was an online marketplace launched in 2011 that allowed trade of cryptocurrencies for illicit purchases such as drugs, pornography, and firearms. Located in a “hidden” area of the internet, commonly known is the Darknet, Silk Road was shut down by the FBI in 2013 after its owner, Ross Ulbricht, was arrested. It is famous in the history of Bitcoin as many transactions on the site were done using Bitcoin.
Smart Contracts, also known as Smart Code or Smart Property, are computer protocols that can act as a contract. A Smart Contract can handle autonomously the enforcement and fulfillment of a contract without needing a third party to oversee that the contract is executed.
SOFT CAPITALIZATION / SOFT CAP
Generally, refers to the minimum amount that an initial coin offering (ICO) needs to raise. If the ICO is unable to raise that amount, it may be cancelled, and the collected funds returned to participants.
A soft fork is a change to the software protocol where only previously valid blocks and transactions are made invalid. Since old nodes will recognize the new blocks as valid, a soft fork is backwards compatible. As an example, Segregated Witness (SegWit) was activated in the Bitcoin network as a soft fork at block #481824. Since it’s a soft fork, no-one was forced to update their software, and non-SegWit transactions will still go through the network as normal.compatible.
contracts. Solidity is used to compile code for the Ethereum Virtual Machine, and it is also compatible with RSK.
The Simplified Payment Verification enables users to verify their transactions without the need to download the significantly sized full block chain. Instead, users simply download the block headers.
Once a bitcoin block has been hashed it becomes ‘stale’, and therefore can’t be hashed again. This name is also given to a hashing job in a mining pool that has already been finished.
Stale shares are shares that are sent after a block of transactions has already been solved. In other words, stale shares have been sent in late and are no longer valid.
A Sybil Attack is a malicious attack on a network that involves creating very large number of
pseudonymous identities in order to gain a large influence on that network. The attack is named after the main character in the book “Sybil” who suffers from multiple personalities. This is one of the security vulnerabilities specific to peer-to-peer decentralized networks.
In Bitcoin, “taint” refers to the level of association of a bitcoin between an address and earlier
addresses which have had transactions of that bitcoin. In other words, given that the Bitcoin blockchain keeps a permanent record of every single transaction ever done, it is possible to know the source and trajectory of a bitcoin throughout its history. The taint of that bitcoin can be measured as it relates to the different addresses it meets.
Hashes per second is a unit which represents the number of double SHA-256 computations
performed in one second and is used to calculate the Bitcoin network’s overall hash rate. A Terahash/Sec (TH/s) translates to 1,000,000,000,000 hashes per second.
This is an alternative block chain used solely for testing.
A token, or digital token, can represent any type of tradable good or asset. As such, it is possible to assign an asset to a token and exchange the ownership of that token securely over the Internet without the need of a third party. Crypto tokens enable the creation of open, decentralized networks, and provides a way to incentivize participants in the network (with both network growth and token appreciation). This innovation, made popular with the introduction of Ethereum, has given rise to a wave of token networks (e.g. prediction markets, content creation networks, etc.) and token pre-sales, or ICOs.
The Onion Router, or Tor, is a free software for enabling online anonymity. Tor directs Internet traffic through a free, worldwide, volunteer network consisting of more than four thousand relays to conceal a user’s location or usage from anyone conducting network surveillance or traffic analysis. Bitcoin traders and miners who want to conceal their identity often use this anonymous routing protocol.
The total number of coins or tokens that are in existence, including those circulating in the public market and those that are locked or reserved.
The transaction block is the record of transactions which are then collated and hashed, and then added to the block chain.
Some bitcoin transactions will have a small fee imposed on them when sent across the network. This fee is awarded to the miner who has successfully hashed the block to make the transaction a possibility.
In the context of Bitcoin, Trustless means that the ability to trust in the Bitcoin network does not
depend on the intentions of any party. Instead, Bitcoin can be trusted because it relies on the network itself, not on a party which could be malicious.
A Tumbler, also known as a Mixer, is a service which involves a third party in order to break the
connection between a Bitcoin address sending coins and the address they are being sent to.
A Turing Complete language is language that can encode any computation that can be conceivably carried out, including infinite loops. The Ethereum Virtual Machine and RSK are both Turing Complete.
Another small denomination of bitcoin; a uBTC is a ‘microbitcoin’ (0.000001 BTC).
A vanity address is the bitcoin answer to a personalized number plate. The string will have a desired patter, such as a recognizable name.
These are bitcoins offered as a reward to miners that have yet to be spent.
The fluctuations in price of an asset such as bitcoin are described as its volatility.
A store of digital assets such as cryptocurrencies, analogous to a digital bank account. Crypto wallets can be divided into two categories: hosted wallets (e.g. wallets store on exchanges or third-party servers) and cold wallets (e.g. hardware wallets such as the Ledger Nano S, paper wallets and desktop wallets). In much the same way as you might store cash in a wallet, so to do bitcoin owners in either an online or paper wallet. The wallet holds the keys to each bitcoin, keeping them safe and free from fraudulent activity.
A list of registered and approved participants that are given exclusive access to contribute to an ICO or a pre-sale.
An informational document that generally informs readers on the philosophy, objectives and technology of a project or initiative. Whitepapers are often provided before the launch of a new coin or token.
A wire transfer is the preferred method of sending and/or receiving currency from a bitcoin exchange. This transfer is conducted electronically and can be secured to a bank account pretty much anywhere on the globe.
The ISO 4217 unofficial currency code for Bitcoin, sometimes used instead of BTC.
A decentralized cryptocurrency that offers a high degree of privacy by requiring a key to view the sender, recipient and value of transactions.
An anonymous protocol designed to keep the identities of cryptocurrency exchangers secret.
Where a merchant agrees the sale of a product or service in return for a bitcoin payment, yet the transaction cannot yet be confirmed by a miner or added to the chain. This is where ‘double spending’ can become a problem.