Bitcoin and Blockchain are incredibly disruptive technologies that are re-evaluating the way we think about money and transactions. We’ve defined the following terms for you so that you can have a better understanding of the landscape and some of the jargon used by people in the industry.
Address: When you send or receive cryptocurrency, including Bitcoin, you send and receive crypto on the network to and from addresses.
Altcoins: Any cryptocurrency or token that is not Bitcoin.
Andreas M. Antonopoulos: Bitcoin Advocate who puts out excellent content for people new to the cryptocurrency and blockchain world. A powerful lesson from Andreas is: Not your keys? Not your Bitcoin. Andreas’ Introduction to Bitcoin (Click image to play video):
ASIC: Acronym for ‘Application Specific Integrated Circuit’ ASIC chips serve one singular purpose in their computing life. In crypto ASIC’s are used for mining and are incredibly efficient chips. Using ASIC’s gives you considerably more hashing power with less energy consumption than other mining methods. Often compared to GPU’s ASIC’s have orders of magnitude more hashrate per energy consumed. Some algorithms are ASIC resistant (Equihash for example) by design.
A Satoshi: (Sat or Sats for short) Named in honor of Bitcoin’s creator(s) Satoshi Nakamoto, a Satoshi is the smallest possible unit of Bitcoin. Many altcoins are traded in sats because they have such a low value relative to Bitcoin. There are 100 million Satoshis in one Bitcoin. It is widely thought by crypto true believers in Bitcoin that a satoshi will be used much like 1 US dollar is used today.
Bitcoin: Bitcoin is the first cryptocurrency. it is the most dominant cryptocurrency and has held that position since it’s genesis block on January 3rd, 2009. There will only be 21 million Bitcoin in existence ever. Because of this, every time someone loses or burns their Bitcoin, the remaining Bitcoin are worth a little bit more.
Blockchain: Incredible technology that has broader potential outside of cryptocurrencies. A blockchain is a shared ledger where transactions are permanently recorded by adding blocks. The blockchain is a historical record of all transactions that have ever occurred. Called a blockchain because blocks are added, creating a long chain of blocks all the way back to the first block in a blockchain. The first block in a blockchain is known as the Genesis Block.
Block Explorer: There are several block explorer’s and they span all types of coins (Bitcoin, ERC20 coins etc.) Block Explorer is a tool that allows you to view all transactions on the blockchain, past, current and unconfirmed/confirming. Block Explorer is an important tool and it’s highly recommended you learn to use it/gain familiarity with it. Check out this link to go to Blockchain.info and try out a Block Explorer tool
Bitcoin Network: Processes all Bitcoin transactions, it is the decentralized, peer-to- peer network that maintains the blockchain. Anyone can join or leave the Bitcoin Network at anytime assuming they have the proper computer equipment.
Block Reward: The incentive that is provided in order to encourage miners to maintain and mine new blocks for the Bitcoin Network. The Block Reward is the financial incentive as to why miners keep up the Bitcoin Blockchain. The Block Reward is given to the miner who successfully calculated the hash in a block during mining.
Chad: Slang; A mythical cryptocurrency trader who is incredibly alpha, good looking and always makes winning trades. Never Fomo’s, ignores FUD and generally is infaliable in all things crypto trading
Cold Storage: Cold Storage is achieved when you keep your private keys offline via a paper wallet, hardware wallet or USB drive. These wallets are known as ‘Cold Wallets’. As long as you keep your private keys absolutely safe and do not lose them, Cold Storage is the safest way to store Bitcoin
Confirmation: The incorporation of a new block into the blockchain. This occurs when there has been a successful act of hashing a transaction and adding it to the blockchain
Consensus: When all participants in the network agree on the validity of the transactions on a blockchain, this ensures that all the ledgers are exact copies of each other and ‘Consensus’ is achieved
Cryptocurrency: Digital currencies that utilize encryption techniques to ensure specific features and events such as regulating the generation of the units of the currency and verifying the transfer of funds. Defined as decentralized, this would exclude fully centralized coins such as Ripple
DAPP: A DApp is a decentralized application. It operates autonomously, is open source and has its data stored on a blockchain
Decentralized: A pillar of cryptocurrencies and critical for the miracle that was performed by Satoshi Nakamoto by removing trust from the equation of transactions between people and entities; decentralization means that currency isn’t issued or regulated by a centralized authority. Current centralized authorities are banks and/0r governments
Difficulty: When referencing Cryptocurrency and mining, this typically refers to how easily a data block of transaction information can be mined successfully and therefore added to the blockchain
Double Spending: A common flaw in some blockchains that allows someone to spend the same coin twice. Malicious users attempt to double spend (spend the same coin twice or in multiple places) in order to profit. Bitcoin has solved for this issue
Ether: In cryptocurrency speak, Ether is the native token of the Ethereum blockchain. It’s used to pay for services on the network, miner rewards and transaction fees
Ethereum Classic: A famous DAO hack led to Ethereum splitting via a hard fork into Ethereum and Ethereum Classic
Exchange: Most cryptocurrency trading is currently done on exchanges, which are a place where buyers and sellers can exchange Bitcoin and other cryptocurrencies
Fiat: Fiat or Fiat Currency is any currency deemed to be valid for meeting a financial obligation by a government. US Dollars are fiat, the Euro is fiat
FOMO: Fear Of Missing Out. A devastating concept to some investors and traders. It causes investors to pile into investments that are rising or near the top as they do not want to miss out on continued gains. Often times trades initiated due to FOMO lack strategy and price targets, which in turn creates a dangerous and risky trade or investment
Fork: A split in the blockchain. This can result in two coins or the abandonment of an initial coin for an upgraded new coin. There are hard forks and soft forks. If developers decide there must be changes to a coin they can make deliberate adjustments to the code and this results in a ‘hard fork’
FUD: Fear, Uncertainty and Doubt. These emotions damage investors and traders mindsets and often causes them to panic sell. The media is a common source of FUD
Genesis Block: Bitcoins Genesis block was on January 3rd 2009. The Genesis Block is the first block of a blockchain
Halving: Every 4 years, the number of bitcoins generated per block is reduced by 50%. This is known as Halving. There will only be 21 million Bitcoin ever. Bitcoin will continue Halving until all 21 million Bitcoin are mined. The last Halving will happen in 2140
Hardware Wallet: A wallet that stores a user’s cryptocurrencies or Bitcoin on a hardware device offline. This is a secure and recommended way to store crypto longterm
Hash: Used for the verification of blocks in a transaction, a hash is a random mathematical formula used in the process of mining
Hot Wallet: If your Bitcoin or other Cryptocurrencies are in a hot wallet, they are vulnerable to attack. A hot wallet is a wallet that has a connection to the internet. Avoid holding large amounts of Bitcoin and other crypto in a Hot Wallet, put small amounts of crypto in a hot wallet when you need to move the assets or use them in a transaction
ICO: Initial Coin Offering; a mechanism often used for fundraising, a new token is offered to investors in exchange for an established cryptocurrency like Bitcoin or Ethereum. NEO is being used more often for ICO’s as of late 2017
Irreversible: Once a transaction on the blockchain is confirmed, it is completely irreversible. ALWAYS doubled check the addresses you use to request coins or the addresses you send coins to
KYC: Common for ICO’s KYC or Know Your Client(Customer) is a rule that is used to make financial institutions vet and know who they are doing business with
Lightning Network (LN): An off chain processing network used to address transaction scalability issues. Lightning Network or LN is a decentralized network using smart contract functionality on the blockchain to enable instant payments across a network of participants. If successful the Lightning Network will allow bitcoin transactions to happen incredibly fast- almost instantaneously
Mempool: The backlog of unconfirmed transactions stored by a node until they get processed and included in the main chain or expire. If you send a Bitcoin or other cryptocurrency transaction with an extremely low tx fee, you may watch your tx sit in the mempool for a long time, or it may eventually time out
Mining: When computers validate transactions and then add them to the blockchain this is called mining. PoW (Proof of Work) coins require mining to process transactions
Mt. Gox: The infamous Bitcoin exchange that was hacked and lost around 850,000 Bitcoin. Learn more about Mt. Gox in our article here
Node: A computer or device connected to a cryptocurrency network, like Bitcoins network. Nodes support the network by receiving a copy of the full blockchain, through validation and relaying transactions
Proof of Stake (PoS): Proof of Stake or Staking coins are coins that rely on a consensus distribution algorithm that rewards earnings based on the number of coins you own or hold. The more you hold of a coin, the more you gain by mining with this protocol. A flaw with PoS is often cited as a potentially lopsided distribution method where the wealthy are able to accrue and control a majority of coins whereas mining has the potential to be more evenly distributed
Proof of Work (PoW): A consensus distribution algorithm that requires the active mining of data blocks. Miners are incentivized via block rewards which they receive when they are the first to successfully solve a block
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