FinTech Dictionary
Welcome to our FinTech Dictionary which will aim to demystify and explain a number of terminology increasingly being used in the industry. If you would like to add a term or contribute to improving some of definitions, please drop us a note.
Bitcoin — an online payment system invented in 2008 by Satoshi Nakamoto. The system is peer-to-peer; users can transact directly without needing an intermediary. Transactions are verified by network nodes and recorded in a public distributed ledger called the block chain. The ledger uses its own unit of account, also called bitcoin. The system works without a central repository or single administrator, which has led the US Treasury to categorize it as a decentralized virtual currency. Bitcoin is more correctly described as the first decentralized digital currency.
Source: Economist.com
Blockchain — the technology that underpins bitcoin (a sort of peer-to-peer system of running a currency) and a public record of all transactions in chronological order. In essence, the blockchain is a giant ledger that keeps track of who owns how much bitcoin. The coins themselves are not physical objects, nor even digital files, but entries in the blockchain ledger: owning bitcoin is merely having a claim on a piece of information sitting on the blockchain.
Crowdfunding — practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the internet. One early-stage equity expert described it as “the practice of raising funds from two or more people over the internet towards a common Service, Project, Product, Investment, Cause, and Experience, or SPPICE.” The crowdfunding model is fueled by three types of actors: the project initiator who proposes the idea and/or project to be funded; individuals or groups who support the idea; and a moderating organization (the “platform”) that brings the parties together to launch the idea.
Cryptocurrency is a medium of exchange using cryptography to secure the transactions and to control the creation of new units. Cryptocurrencies are a subset of alternative currencies, or specifically of digital currencies. Bitcoin became the first decentralized cryptocurrency in 2009. Since then, numerous cryptocurrencies have been created. These are frequently called altcoins, ascontraction of bitcoin alternative. Cryptocurrencies typically feature decentralized control (as opposed to a centralized electronic money system, such as PayPal) and a public ledger (such as bitcoin’s block chain) which records transactions.
FinTech — a contraction of “finance” and “technology” — refers to companies that provide financial services through the engagement of technology. FinTech companies are generally startups founded with the purpose of disrupting incumbent financial systems and corporations that rely less on software.
Peer-to-peer lending — commonly abbreviated as P2PL is the practice of lending money to unrelated individuals, or “peers”, without going through a traditional financial intermediary such as a bank or other traditional financial institution. P2PL is not to be confused with peer to peer investing (P2PI). This lending takes place online on peer-to-peer lending companies’ websites using various different lending platforms and credit checking tools. Many also use the abbreviation “P2P” when discussing the peer-to-peer lending or investing industries more generally.
Robo-advisors — class of financial adviser that provides portfolio management online with minimal human intervention. While their recommendations may vary, they all employ algorithms such as Modern portfolio theory that originally served the traditional advisory community, which has relied on algorithmic templates to conduct portfolio management since at least 2005.
Satoshi Nakamoto — a person or group of people who created the Bitcoin protocol and reference software, Bitcoin Core. In 2008, Nakamoto published a paper on The Cryptography Mailing list describing the Bitcoin digital currency. In 2009, he released the first Bitcoin software that launched the network and the first units of the Bitcoincurrency, called bitcoins.
Sources: Wikipedia, Investopedia, The Economist
