The Fintech Glossary

Ultimate guide to everything financial technology related

Tyler Scott Ward
May 30, 2019 · 20 min read

We know blockchain is complex — you know blockchain is complex. That’s why we’ve come to your rescue with a glossary that addresses literally every question you could imagine around blockchain. Let this A-Z glossary demystify blockchain and make you the 100% in-the-know you should be.


51% attack: When one person or a group of people control more than 50% of a blockchain’s computing power. This is dangerous because the person with majority control could keep new transactions from being confirmed and reverse transactions.

Address: A secure identifier from which to accept or initiate blockchain transactions. As a hash of a public key, it is one step more secure than providing your public key. Additionally, the shortened nature of them compared to long public keys makes it impossible to accidentally send funds to the wrong address. Users are encouraged to create a new address for every transaction, whether sending and receiving. This increases privacy and facilitates anonymity.

Airdrop: Term used for distributing cryptocurrency tokens that are rewards. Blockchain-based services might airdrop tokens to participants as a means to incentivize them.

Algorithm: Frequently called a consensus algorithm when speaking in relation to blockchain. An algorithm is a protocol for solving a problem. In terms of a blockchain many nodes work on an algorithm and come to a common consensus as to whether it should be accepted or rejected.

Altcoin: Shortened form for “alternative to Bitcoin”. Altcoins are any digital cryptocurrency that are not Bitcoin. Different altcoins may have different policies to encourage different uses. Because they were created as a variant of Bitcoin, altcoins make slight changes to Bitcoin’s open-source code to create new coins and features. Each altcoin possesses its own blockchain.

Andreas M. Antonopoulos: A Greek-British blockchain expert with a podcast called Let’s Talk Bitcoin. Antonopoulos is a speaker, writer, and consultant and notable critic of the trading platform Mt. Gox.

API : Short for Application Programming Interface. An API is needed for each function of the blockchain, such as receipt and issue of payments.

ASICs: A piece of hardware also known as application-specific integrated circuits. These circuits are customized to mine cryptocurrencies. They are advantageous because they require less time and energy to hash than other general purpose software.

Average block time: Measure of time it will take for a network’s miners to find a solution to the block hash. The miners must determine the nonce value that with make a valid block. The time varies based on the currency — it could be seconds, or it could be minutes.


Bitcoin: Bitcoin was the first decentralized cryptocurrency to be created. Many other cryptocurrencies have since followed.

Block: The unit that makes up a blockchain. A block contains records of transactions that have taken place in a set period of time. The time varies based on the currency. It is in the form of a 256 bit hash. Once recorded on a block, the transactions are very difficult to delete or be changed. A block contains a header, reference to the previous block’s hash, and a group of transactions.

Blockchain: A public, decentralized database that serves as a digital ledger comprised of many blocks. The decentralization means that there is not one central point that could potentially be hacked or manipulated, making it much safer, secure and less prone to fraudulent activity. Transactions are added to a blockchain sequentially.

Block Explorer: Open-source web tool that allows people to view latest blocks and transactions on the blockchain and check wallet addresses.

Block generator: One of two block operator roles required for validating transactions. The other are the block signers. The block generator works at a defined interval, accepting transactions, signing them, verifying everyone who needs to sign, then distributing blocks to all nodes in the network.

Block Header: Each block has a unique header defined by a header hash. The correct hash is determined by changing nonce values. Repeated block hashing creates Proof of Work.

Block height: The number of blocks in the blockchain up to a given point in time.

Block reward: Reward given to miners as an incentive to solve blocks of transactions. Block rewards can be lucrative if the hardware used and electricity costs are lower than the value of the reward. Participants in a network use ASICs because of faster computation and less energy requirements. Block rewards release new coins into circulation.

Block signers: Block signers are people defined under the consensus program to use their public keys to validate the creation of a new block.

Bounty: An incentivized reward mechanism that is frequently part of a blockchain initiative’s marketing campaign. Bounties are often times incorporated into ICO campaigns. They are a means to get people to help with anything needed — bug reporting, marketing, or aspects of the framework. The reward for exchange of work is usually in the form of tokens.

Brute force attack: Considered a harmful trial-and-error method of automated software making many consecutive guesses on encrypted data. Blockchain protocol makes brute force attacks very difficult.


Chad: A fictional cryptocurrency trader who is perfect in every sense of the word. He never misses out on great trades and is generally on top of the world.

Chain: See blockchain.

Coinbase: This is a special transaction that creates coins from nothing. It’s the reward that miners get for mining a block.

Coins: See altcoin. Coins are a digital currency that hold value and can be exchanged on a blockchain. Bitcoin was the first form of digital currency created. Others that have since stemmed from Bitcoin’s open-source code are called altcoins.

Cold Storage: A concept of keeping the majority of your bitcoin offline as a security precaution to avoid them being stolen by an intruder. Cold storage can be done a variety of ways offline, including holding the coins on a USB stick, in a paper wallet, or in hardware wallet.

Confirmation: Once a block has been successfully added to a blockchain the transactions within that block are deemed to have been “confirmed”.

Consensus: Because any entity, who may or may not be trustworthy, can submit information to the blockchain, block signers and generators must all be in agreement with the transactions in question before they are permanently incorporated. This majority or unanimous agreement is called consensus and is an important aspect of a decentralized network. Each blockchain chooses how consensus will be achieved — what consensus algorithm will be used.

Counterparty: Open-source financial platform to create P2P applications on the Bitcoin blockchain.

CRM: Technology used to help companies track relationships and interactions with customers and potential customers.

Cryptocurrency: Shortened form of cryptocurrency. Cryptocurrencies are digital or virtual currencies not governed by a central body that are secured using cryptography. Cryptocurrencies normally refer to altcoins or tokens, but are more accurately just coins.

Cryptographic validation: A federal accreditation program for cryptographic modules.

Cryptosecurity: Measures that protect encryption systems by inhibiting decryption, tampering, intercepting, etc. of data.


dApps: Decentralized, open-source applications that run on a network of computers instead of a central computer, making them free from control of a central authority.

Decentralized: Opposite of centralized. No one single entity has all the processing power for a transaction. This means that man different nodes owned by many different entities are taking part in the processing system. The goal of decentralization is that individuals do not have to rely on a central point for transactions to take place so there is not a central point of failure and so there is not one single entity controlling them.

Delegated Proof of Stake (DPoS): A faster mining system that addresses the mining pools that were being created by Proof of Work. DPoS is very fast, secure and requires little energy. 100 witnesses run the network, with each having incentive to be a good witness who brings a lot of value to the table.

Defense: If someone tries to alter a block, the hash of the following blocks would change and all nodes would be verified and reject that block.

Difficulty: In relation to blockchain, this refers to how hard it is to find a new block, based on total current hashing power available. A higher mining difficulty results when more nonces have to be gone through before the right hash is found.

Distributed ledger: See Ledger.

Dogeparty: Financial platform like Counterparty, but runs on the Dogecoin blockchain. It has many of the same features as Counterparty but two differentiating factors are it confirms transactions 10x faster than Counterparty and is 100x cheaper.

Double spend problem: When a given set of coins is spent in more than one transaction. This can occur several ways. 1) 2 conflicting transactions are sent in quick succession 2) Pre-mining a transaction in to a block and spending the same coins before the block is released.

DRY (Don’t Repeat Yourself): Software principle to avoid redundancies. This principle is contrary to WET — Write Everything Twice.


Encryption: An algorithm used to prevent data theft. Once encrypted, data can only be decoded used an encryption key.

ERC20: Technical standard used for implementing tokens on Ethereum. This standard defines how tokens are transferred between addresses and how information about each token can be accessed.

ERC721: (Ethereum Request for Comments) This is a proposed standard protocol to allow smart contracts to act as tradeable, non-fungible tokens on Ethereum whose value is dependent on their uniqueness and rareness.

Ether: Digital currency used on the ethereum network. It is used to pay transaction fees and computational services.

Ethereum: Ethereum is a highly programmable, scalable, decentralized software platform that enables the execution of Smart Contracts, digital currency, and distributed applications without the risk of downtime, fraud, or control by a third party. It only takes seconds for a block to be verified.

Ethereum Classic: An open-source, blockchain-based distributed computing platform created when people who were opposed to the hard fork of Ethereum as a response to the $50 million DAO attack in 2016 stuck with the original chain.

Evangelist: An evangelist is a person who actively shares a product or their experience with a product to groups and individuals, with the intention of spreading the word, getting more users, etc. An evangelist can be either internal or external to a company.

Exchange: An exchange is a digital marketplace where cryptocurrencies can be bought and sold.


Fiat currency: Currencies governments have declared as legal tender and not backed by gold. Their value is derived from how much value people place in it — supply and demand.

FUD (Fear, Uncertainty, Doubt): Contributes to people’s behavior in regards to keeping or selling the cryptocurrency they hold.

FOMO (Fear of Missing Out): Fear of missing out drives may push people to purchase cryptocurrency when they feel market conditions are as favorable as they can get.

Fork: A split in a single blockchain because of a split in consensus or a change in the rules of protocol.

Accidental fork:

A fork caused by a split in consensus results when miners discover a block at the same time. This is also called an accidental fork. The longest chain always is deemed to be the truth, so as soon as an additional block is added to one of the chains, the other is abandoned by the network. Forking usually creates a new coin.

Intentional forks:

Soft Fork: Only previously made blocks are invalid. Easiest fork to implement because only a majority of participants need to update their software. Participants who have not updated their software will experience limited functionality. Blocks that are not considered valid by the new rules will cause a split. All blocks within the new soft fork also follow the old rules.

Hard Fork: This software upgrade is not compatible with previous versions and participants using old versions will not be able to continue validating transactions. All users must upgrade to the latest version of protocol software.

  • Planned — If there is a support for the minority chain, the minority chain can continue existing in parallel, following the old rules, while the new chain follows the new rules. Planned forks might be planned from the start to enhance capabilities and features.
  • Spin-off coins Changes made to the open-source protocol to create a new coin.

Co-Fork: The merging of two cryptocurrencies on a single blockchain. This brings larger blocks, high transaction speeds, and lower fees. The first example of it was between BTC and ZClassic.


Genesis block: The first block of a blockchain, most frequently hardcoded into the software and numbered as block 0.


Halving: A concept which limits the release of the set number of bitcoins in to the network. The code dictates that for every 210,000 blocks discovered, the number of freshly minted bitcoins awarded per block will be halved. Halving occurs roughly every four years. After 64 halvings, all of the 21 million bitcoins will be in circulation and no more new ones will be released.

Hash/ Hashing: A hash serves as a lock for validated transactions in a block, making blockchains very secure. When an algorithm is applied to input values, it is virtually impossible to learn the input of the hash function based on the output. Secure hash functions produce drastically different outputs despite similar inputs. When the algorithm is applied to the input it produces a finite number of bits very quickly. Each new hash value for a block contains information about all the previous transactions.

Hash rate: The speed at which a hash function is computed. The higher a network participant’s hash rate, the more likely they will be the one to complete a block and get the reward.

HODL: Now common slang term and acronym that resulted from a misspelling of the word “hold”. It refers to holding cryptocurrency instead of selling it. HODLing suggests an individual feels their cryptocurrency will increase in profitability some day.

Hot Wallet: Bitcoin wallet that is online, contrary to cold storage, which is offline. Transactions on the blockchain can be made instantly with bitcoins held in a hot wallet.

Howey Test: A test used by the SEC in the U.S. to determine if a token is a security or not. If all of these conditions are met, a token will be considered a security: 1) Is money being invested? 2) Is there an expectation of profits? 3) Is money being invested in a common enterprise? 4) Is profit coming from someone else’s efforts? It is desirable to pass the Howey Test so that security laws do not need to be kept. To pass the Howey Test a company can create a decentralized currency that is not connected to the success of a company. Implementing functionality into a coin keeps it from being labeled a security.

Hyperledger: An open-source framework created by the Linux Foundation on which blockchains can be built. Hyperledger is a global collaboration to advance cross-industry blockchain technologies and already has hundreds of global tech giants involved.


ICO (Initial Coin Offering) . This is a quick mechanism for a company to raise funds by selling crypto tokens related to their project. These might be a utility token or exchangeable for bitcoin or ether. Participants of an ICO can generally benefit much faster than in traditional investing. ICOs are not when a token is sold as a digital good — a utility. If a given company’s token is seen as shares and securities they will be regulated as such.

IFTTT (If This Then That): IFTTT is an internet task automator that triggers actions based on conditional statements. One way it can be used is to track Bitcoin prices in a spreadsheet over time.

Incentives: Motivating people by giving awards for completing certain tasks.

Influencer: Someone who has a following. When they talk, people listen.

IPFS (InterPlanetary File System): P2P method of storing and sharing hypermedia in a distributed file system.

Irreversible: The state of a transaction once it has been verified. Transactions can only be refunded by the receiving party.


Key pair: Consists of a Public key (broadcasted to the network) and private key (kept secret). A key pair is a way of ensuring hackers cannot steal users’ funds and ensuring the integrity of messages. The private key serves as a digital signature of information sent and the public key legitimizes the origin of the transaction.

KYC verification (Know your customer). In the case of blockchain this pertains to digital identity verification.


Ledger (Distributed): A database that is independently updated by various participants or nodes and has no central authority. Each node in the network processes each transaction independently and then verifies its conclusions with the other nodes to come to majority consensus.

Lightning Network: A financial transaction protocol on top of a blockchain that is proving to be a potential solution to the bitcoin scalability problem by being able to perform a high volume of transactions at a high speed, economically. It also is very low cost and is enforced by smart contracts.


Mainnet: The main network or blockchain where a transaction can take place on a distributed ledger.

Masternode (MN): Server on a decentralized network that holds transacted coins, increases privacy of transactions, and enables instant transactions. Costly to run because of their increased capabilities, but incentives encourage people to host them.

Mempool: Pool of unconfirmed transactions that nodes have not yet started hashing to put in a block. Some transactions will stay in the mempool longer based on their transaction fees. Transactions with higher transaction fees associated with them will be selected for verification first.

Merkle root: Also a root hash. Summarizes all the data in related transactions and stores it in the block header.

Merkle trees: Allows for efficient and secure verification of large amounts of data. A merkle tree summarizes all the data in a block, from the bottom up, by making a digital fingerprint. Pairs of hashes are hashed together until there is only one hash remaining. Merkle trees are a quick test to see if a transaction is in a set or not to prove integrity or validity of data. They are not time or space intensive since only small amounts of information need to be transmitted.

Miners: People who mine bitcoin to release them into circulation.

Mining: Competitive process of computing complex puzzles to verify transactions and process by which coins are created. This process requires internet access, ample energy, and the appropriate software. When a participant successfully completes it they are able to place the next block in the chain and receive the transaction fees as rewards along with the newly release coins.

Mining difficulty: A higher mining difficulty results when more nonces have to be gone through before the right hash is found.

Mining pool: A group of miners who share their processing power instead of relying on one node to take longer to do the computations on their own. Participants in a mining pool split the reward amongst themselves when they have identified the right hash.

Minting: Process by which a cryptocurrency such as Dascoin is created, but miners are not involved in the creation process and the currency is centrally controlled.

Mnemonic key: A list of words generated by a wallet which stores the information needed to recover a wallet address. It’s helpful knowing your mnemonic key if your computer crashes.

Moon: A term for an optimistic price projection.

Mt. Gox: A bitcoin exchange that at one time processed 70% of all bitcoin transactions. $450M worth of bitcoins were stolen from their hot wallet and the exchange eventually filed for bankruptcy.

Multisig: Short for multisignature, this is a digital signature that increases the security of cryptocurrency transactions by requiring a set number of signatures out of a total number of participants in order for the transaction to be completed. Multisignatures generally produce a joint signature that is more compact.


Network: A decentralized collection of peer-to-peer (P2P) nodes who collectively process and verify transactions.

NFT (Non-fungible token): A token that is unique and is not interchangeable with other tokens. Its uniqueness and digital scarcity is what raises its value — contrary to cryptocurrencies like bitcoin that are interchangeable or fungible. An example of a non-fungible token is a digital certificate, where unique information can be written in to it.

Node: A participant or computer in a blockchain network. Nodes independently compute and verify transactions to participate in general consensus before a block is added to a chain. Each node has access to all records of all transactions ever executed on that blockchain.

Nonce: A set of arbitrary characters added to data to create a different hash. A nonce is added to the equation every time a new transaction block is added to the chain. The resulting hash value has to have a certain number of zeros at the beginning in order to meet the difficulty level restrictions when trying to re-hash. Miners have no way of knowing what nonce will create that hash output, so they try many nonces until they get a hash value that works. The simplified version of the equation is as follows: previous hash + new transaction block + nonce = next hash


One pager: A form of your white paper reduced down to one page. It consists of the key information participants in your ICO need to know.

Orphan blocks: Valid blocks that are not part of the main chain because 2 or more miners produced blocks at similar times. Eventually they will be abandoned based on the chain that has greater proof of work.


P2P: Short for Peer to Peer network. “Peer” refers to a node, and is a central part of blockchain’s functioning, providing decentralized processing power and disk storage. A P2P network decreases the likelihood of being exploited, hacked or data lost.

Practical Byzantine Fault Tolerance (PBFT): One method of consensus that requires at least ⅔ of participants to agree for a block to be accepted. PBFT ensures that even if there are non-trustworthy people involved, that the outcome decided by the trustworthy majority will hold. This method is secure because it assumes there will be traitors and it manages how they will be handled. Hyperledger, Stellar and Ripple blockchains rely on this consensus algorithm. PBFT requires less effort than other consensus methods.

Proof of Authority (PoA): Replacement for Proof of Work that is more secure, has more predictable block adding time, is less computationally intensive, and more performant. The majority of “authorities” or nodes needs to sign off in order for the chain to become permanent record. This holds block users accountable.

Proof of Capacity (PoC): Users contribute hardware for storage and computing functions. The down side to PoC is that a large entity could choose to contribute lots or all of the storage needed and could take over the blockchain.

Proof of Importance (PoI): Blockchain consensus mechanism that functions similarly to Proof of Stake, but encourages the integrity of the blockchain by discouraging the hoarding of coins received. By spending resources, participants receive a higher importance score. This maintains their vested interest in the blockchain. Higher importance scores give users a higher chance of getting a financial reward — the related transaction fees. Several advantages to proof of importance: vesting takes place over time, which reduces likelihood of attack on the system and users don’t need to run their own node — as long as you have harvested coins, you can delegate them to other nodes, which saves energy.

Proof of Stake (PoS): Consensus method where parties have a legitimate stake in the blockchain. With this method, a node is selected to mine a block based on the percentage of total coins they have. As such, larger players are more likely to mine more and become even larger. Measures, such as time limits and proof of burn, have been put into place to keep this from happening. This method is more effective than using the Proof of Work algorithm, which is high energy and has the potential for creating mining pools (a form of centralization, counterintuitive to blockchain).

Proof of Work (PoW): Most well-known and accepted algorithm for reaching consensus on block validation between many nodes on a network. This algorithm requires a lot of energy to solve the cryptographic puzzle of a block’s header. For this reason, mining pools have been formed to create the block faster. Participants in the mining pool then split the reward. This is counterintuitive to decentralization, however.

Protocol layer: This layer consists of the protocols for consensus, mining, propagation, and semantics. Most of the blockchain’s value is found in the protocol layer. The application layer is separate.

Public key: This derivative of an individual’s unique private key is an intermediary step to an individual’s public address. For someone to be able to send you coins, it is done using your public key, which is like an address. Members of the network verify the public key to make sure the transaction is coming from the legitimate owner of the wallet.

Private key: A private key is a large integer number belonging to your unique wallet to sign sign digital transactions and digital currencies being sent. All addresses for bitcoin transactions using your wallet are mathematically derived from your private key. This key should never be shared.


Root hash: See Merkle root.


Satoshi: Named after Satoshi Nakamoto, the creator of the first bitcoin client, a Satoshi is the smallest fraction of a bitcoin that can be sent. A satoshi is 0.00000001 BTC.

SEC: U.S.-based Security and Exchange Commission who legally determines whether a token is a security or not and must follow laws regarding securities. They state that just because automated technology is being used does not keep it from being subject to securities law.

Security: A security is an investment of money in a common enterprise with the expectation of a profit from someone else’s efforts, which results in shares. The Howey Test is used to determine whether a token is a security or not. As a blockchain company who is going to run an ICO, it is ideal to avoid your token being labeled by the SEC as a security. When issuing a security certain rules must be met, which can be expensive and time consuming for a start-up to know, understand, and execute.

Security tokens: Security tokens give the holder ownership rights and are subjected to security laws.

SHA-256: One of the two most common cryptographic hash algorithms that generates an almost unique 256-bit signature, to authenticate blocks. The alternative is Scrypt. SHA-256 is slower and requires high hash rates, which makes it less accessible to miners who do not have extensive equipment, but leaves less room for error.

Scrypt: Common algorithm to authenticate blocks. Scrypt is a memory hard-key derivation function that adjusts the number of variables that need to be stored contrary to SHA-256. Scrypt is a quicker and simpler algorithm than SHA-256 and increases the number of miners participating in the network to use less energy.

Signatures: Created using a private key, a digital signature ensures that a transaction is executed by the rightful owner of a wallet. It is formulated using cryptography, unlike a signature on paper which can be easily forged, making it more secure.

Smart contracts: Self-executing digital contracts stored in a blockchain. They are a quick, cost efficient, and reliable method to control the transfer of funds and other transactions and automatically enforce obligations. As with everything on a blockchain, susceptibility to tampering is almost negligible. Ethereum is the largest blockchain that supports smart contracts.

Snapshot block: A data capture of what a blockchain looks like at a given date and time. Snapshots can be used to restore data.

SPV Node — Simplified Payment Verification Node: It ensures your transactions are in a block and lets you know that other blocks are being added to the chain without having to verify the entire blockchain.

ST20: Security token protocol that embeds government regulatory requirements in to tradeable tokens and associated smart contracts to make them only available to authorized participants and ensure legal requirements are being met.

Stellar blockchain: Facilitates financial transactions on a decentralized network.

Sybil attack: When an entity controls multiple nodes in a network unbeknownst to the others in the network. Proof of Work protocol is the most vulnerable to this kind of attack.


Timestamp: Contain lots of information regarding who a contract was between, a hashed version of any documents, details about the transaction, and more. Each transaction on the blockchain is a public timestamp. Blockchain’s timestamps are decentralized, public, immutable, and programmable.

Testnet: Network where dApps can be tested and show a working prototype.

Token: Tokens represent a liability or asset/utility on a given blockchain that represent different actions that can take place. These tokens are usually created, sold and transferred during a company’s ICO. Creating tokens is a much easier process than creating a coin, as they do not need their own unique blockchain. Tokens work best when fueling a network effect and gaining critical early adopters. A token can either be a utility or a security.

Tokenization: The process of protecting sensitive data by generating a new, but related number to represent it. These new numbers are the token.

Token launch: Synonymous with a token generation event. Generated on the Ethereum blockchain, contrary to an ICO which is on the blockchain.

TGE (Token generation event): Synonymous with an ICO, but for tokens instead of coins.

TCR (Token curated registry): Self-policed lists listing tokens available for purchase. Economic incentives are provided to keep the list valid and up-to-date.

Transaction: When two parties exchange any asset in digital form such as medical records, money, deeds, or customer records, etc.


Utility tokens: A token with a use that represents a company’s product or service. They are not designed to be an investment. They are exempt of security and regulation laws.


Validation: The process of committing a new block to the blockchain. Blocks must be validated before they are added to the blockchain. The most widely accepted form of validation is Proof of Work. Once a block has been validated it is distributed to all the nodes within the network so it can be added to the majority chain.

Validators: Network participants who commit new blocks to the blockchain.


Wallet: A means to manage digital currency such as bitcoin. It stores an individual’s private key which allows the user to buy, sell or trade bitcoin. A user provides someone with their wallet address in order to receive the digital transaction.

White paper: A paper detailing to potential participants in an ICO or token generation event what the technology is, why it is needed, what the value of the token is, why the team is the best one to make the technology a reality, etc. It provides all the details people need in order to make them feel comfortable in participating in the ICO.

WIF (Wallet Import Format): A shorter way of encoding a private key to make it easier to copy.

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