CRYPTO TERMINOLOGY

For anyone new to the world of cryptocurrencies and crypto terminology, some of the commonly used terms and acronyms might seem rather confusing and pose a significant barrier to entry into the market. Coming up to speed with all of this new terminology will undoubtably help you understand the influx of information you will be bomb-barded with, particularly if you are using Telegram, Discord and Reddit to research potential investments, news and relevant information.

Here is a list of some of the most commonly used terms relating to blockchain and the cryptocurrency market.

CRYPTO TERMINOLOGY

Address: A cryptocurrency address is a string of 26–35 alpha-numeric characters that are publicly available and allow cryptocurrency to be received, held and sent, it can also be represented as a scannable QR code. An address is referred to as the Public Key, similar to bank account number but on the blockchain and is usually specific to a particular currency. ERC-20 tokens can all be stored on an Ethereum Wallet address that you hold the Private Key for. Warning: Ethereum wallets on most exchanges do not give you these Private Keys, so do not send your ERC-20 tokens to them or you will lose them.

Agreement Ledger: Distributed ledgers that are used by two or more parties to negotiate and reach an agreement.

Altcoin: Short for alternative coin, this term generally refers to any digital currency other than Bitcoin (BTC) or Ethereum (ETH). There are now thousands of altcoins in circulation.

ASIC: Is an acronym for “Application Specific Integrated Circuit”. ASICs are silicon chips specifically designed to do a single task. In the case of bitcoin, they are designed to process SHA-256 hashing problems to mine new bitcoins.

Attestation Ledgers: Distributed ledgers that provide a durable record of agreements, commitments or statements, providing evidence that these agreements, commitments or statements were made.

Bag Holder: When an investor is holding on to a cryptocurrency that has dropped in price, they are known a ‘bagholder’ or ‘bagholding’.

BCC: An exchange ticker symbol for Bitcoin Cash; used mostly on Asian exchanges.

BCH: The most used abbreviation and exchange ticker symbol for the Bitcoin Cash.

Bitcoin: Is a peer-to-peer-electronic-cash-system, the first and easily the most well known cryptocurrency, it is the heartbeat for the entire cryptocurrency market and is the base pair for almost everything. It is a proof-of-work blockchain.

Block: A group of Bitcoin transactions that have taken place during a specific time period. The average is around 10 minutes. Miners process Bitcoin transactions not one-by-one but in groups or “blocks”.

Blockchain: Is a type of distributed ledger, comprised of unchangeable packages of digitally recorded data called blocks. Each block is chained to the next block using a cryptographic signature which allows block chains to be used like a ledger. This ledger is shared and publicly available, in other words ‘decentralised’ and not stored in a centralised location like a bank.

Blockchain Rewards: Every successfully hashed transaction block by a miner is rewarded. This is usually coins and/or transaction fees depending on the cryptocurrency. An example of this would be Bitcoin (BTC), a miners block reward is approximately 25 BTC for each successfully hashed block. P.S. This is not an easy task and the subsidy reward is halved every four years.

Block Ciphers: These are a method of encrypting text (to produce ciphertext) in which a cryptographic key and algorithm are applied to a block of data at once as a group rather than to one bit at a time.

Block Height: This refers to the number blocks that are connected together in the block chain. For example, like an array, 0 would be the very first block, this is also referred to as the Genesis Block.

BTC: An abbreviation and exchange ticker symbol for the Bitcoin Core currency.

Central Ledger: A central ledger is a ledger maintained by a central agency. An example would be an institution like a bank.

Centralized/Centralization: A form of organisation whereby a single party, group, authority is in control. These systems have single points of failure. VISA, Paypal, ApplePay are examples of centralised payment systems. Centralised organisations are contrasted by decentralised systems.

Chain Linking: This is the process of connecting two blockchains with each other, thus allowing transactions between the chains to take place.

Cipher: A cipher s a secret or disguised way of writing a code, in other words an algorithm used for the encryption and/or decryption of information.

Cold Storage: A way to hold or store a digital asset offline without connection to the internet. Typical cold storage includes USB drives, offline computers, or paper wallets. Cold storage is the safest method of storing your cryptocurrency especially for wallet balances that you plan to keep untouched for a significant period of time.

Confirmation(s): Means that the blockchain transaction has been verified by the network. This happens through a process known as mining, in a proof-of-work system (e.g. Bitcoin). A Bitcoin transaction is confirmed once it has been included in a block on the blockchain by a miner. Each subsequent block added to the blockchain is another confirmation for that transaction. 6+ confirmations is generally accepted for a transaction to be finalised although 99.99% of the time Bitcoin Cash transactions can be considered final with 0 or 1 confirmations.

Consensus Process: Is a group of peers responsible for maintaining a distributed ledger use to reach consensus on the ledger’s contents.

Consortium Blockchain: Is a partly private blockchain but operates under the leadership of a group instead of a single entity. A consortium platform provides many of the same benefits affiliated with private blockchain — efficiency and transaction privacy, for example — without consolidating power with only one company.

Cosigner: A person or entity that has partial control over a multi-signature Bitcoin wallet. To complete a send of bitcoin, a multi-sig wallet requires authorisation from a certain amount of all cosigners on the wallet. The amount of authorising cosigners required is known as ‘M of N’.

Cryptanalysis: The art or process of deciphering coded messages without being told the key.

Cryptocurrency: A type of digital asset/currency that is used as a medium of exchange. Based on mathematics, where encryption techniques (Cryptography) are used to regulate the generation of units of currency and verify the transfer of funds. Unlike traditional fiat currencies, cryptocurrencies operate independently of a central bank or any other centralised authority to maintain control or supply.

Cryptography: The art or process of encrypting and decrypting information. Cryptocurrencies are related to cryptography as they use mathematics to secure information. Within Bitcoin, cryptography creates and secures wallets, signs all transactions, and verifies each and every transaction on the blockchain.

DAO (Decentralized Autonomous Organization): can be thought of as a corporation run without any human involvement under the control of an incorruptible set of business rules.

DAPPs (Decentralised Applications): Are blockchain based applications that run in entirely decentralise manner. It must run autonomously and with no entity controlling the majority of its tokens.

DCA: Stands for ‘Dollar Cost Averaging’ is used to reduce the volatility of market portfolios by the buys and sells over a more extended period of time. Example might be that you purchase BTC at $20,000 USD, BTC drops to $10,000 USD, if purchase more at the lower price your average price would now be $15,000 USD.

Decentralized: A form of organisation which does not require any single party, group, or authority to control services. Bitcoin is a decentralised network because no company, government, or individual created or is in control of it. Bitcoin’s governance relies on the community and its code is open-source.

Decryption: Is the process of turning cipher-text back into plaintext.

Digital Commodity: Is a scarce, electronically transferrable, intangible, with a market value.

Digital Identity: An online or networked identity adopted or claimed in cyberspace by an individual, organisation, or electronic device.

Distributed: Also know as peer-to-peer (P2P). A distributed network does require users to connect to any central server or entity. In a distributed network, users connect directly to each other. Bitcoin is a distributed network that does not have any central processing entity.

Distributed Ledgers: A type of database that is spread across multiple sites, countries or institutions. Records are stored one after the other in a continuous ledger. Distributed ledger data can be either “permissioned” or “unpermissioned” to control who can view it.

Difficulty: In Proof-of-Work mining, difficulty is how hard it is to verify blocks in a blockchain network. In the Bitcoin network, the difficulty of mining adjusts verifying blocks every 2016 blocks. This is to keep block verification time at ten minutes.

Double Spend: This refers to a scenario, in the Bitcoin network, where someone tries to send a bitcoin transaction to two different recipients at the same time. However, once a bitcoin transaction is confirmed, it makes it nearly impossible to double spend it. The more confirmations that a particular transaction has, the harder it becomes to double spend the bitcoins.

Encryption/Encrypt: Encryption is the process of turning a clear text message (plaintext) into a data stream (cipher-text), which looks like a meaningless and random sequence of bits.

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

Ethereum (ETH): An open-source, public, blockchain-based distributed computing platform and operating system featuring smart contract (scripting) functionality.

Ethereum Classic (ETC): Is a split from an existing cryptocurrency Ethereum after a hard fork. The majority moved forward with the hard fork and hence kept the original ticker (ETH), the minority continued to mine the original version of the blockchain which became Ethereum Classic (ETC).

Exchange: A service, usually a website, that allows users to buy, sell, and trade cryptocurrencies.

EVM Code: is the programming language in which accounts on the Ethereum blockchain can contain code. The EVM code associated with an account is executed every time a message is sent to that account, and has the ability to read/write storage and itself send messages.

Fiat Currency: You will hear the term ‘Fiat’ a lot, this is usually in reference to the USD or paper money. All money that is declared by a government to be valid is described as fiat currency. These are fully regulated, centralised currencies typically issued/printed by Governments and Central Banks.

FOMO: Stands for Fear of Missing Out and is one of the most commonly terms used in cryptocurrency. Instead of buying in the dips when the price is low, the price suddenly rises or spikes, this is when the FOMO becomes real. The more the price continues to rise, the more likely you will be to jump on the moving train as the demand causes it to rise even higher and higher.

Fork: A fork is the creation of an ongoing alternative version of the blockchain, by creating two blocks simultaneously on different parts of the network. This creates two parallel blockchains, where one of the two is the winning blockchain.

FUD: Which stands for Fear, Uncertainty, and Doubt and is a way too common sight in the cryptocurrency market. When the market is booming, the news/media are always praising and posting about the unique role blockchain will play in the future, spreading rumours of partnerships with blockchain companies and its application in society. As soon as things begin to take a small turn for the worse they are just as quick to spread FUD, …’the market is crashing, sell, sell, sell, its a scam, its a bubble, someone is banning this or that…’. Uncertainty and doubt are very common in volatile markets and new investors should be prepared for this.

Full node: A full node is a node that fully enforces all of the rules of the blockchain.

Gas: Is a measurement roughly equivalent to computational steps (for Ethereum). Every transaction is required to include a gas limit and a fee that it is willing to pay per gas; miners have the choice of including the transaction and collecting the fee or not. Every operation has a gas expenditure; for most operations it is ~3–10, although some expensive operations have expenditures up to 700 and a transaction itself has an expenditure of 21000.

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

Hard Fork: Hard forks are typical in the world of cryptocurrencies, and this term refers to the alteration of the underlying block structure of the cryptocurrency, A hardfork is a change to the blockchain protocol that makes previously invalid blocks/transactions valid, and therefore requires all users to upgrade their clients.

Hash: A mathematical process miners use on blocks to secure the network and maintain network security. “Hash” also refers to the unique identifier of a Bitcoin transaction.

Hashcash: is a proof-of-work system used to limit email spam and denial-of-service attacks, and more recently has become known for its use in bitcoin (and other cryptocurrencies) as part of the mining algorithm.

Hashrate: is the number of hashes that can be performed by a bitcoin miner in a given period of time (usually a second).

Hot Wallet: Any Bitcoin wallet running on an internet-connected device is considered “hot” (as opposed to an offline or “cold” wallet). Hot wallets should be secured by users since the funds on these wallets are subject to security compromise from hostile users on the network.

ICO (Initial Coin Offering): Is similar to an IPO or Initial Public Offering in the stock market. An ICO is used to raise money for a new cryptocurrency project by offering a set amount of coins to the public. The initial release of coins is available at a base price prior to releasing on an exchange which will then fluctuate based on supply and demand. This initial sale price will usually be much cheaper than the price the coin/token will release for on an exchange. Beware though as this is very different to how an IPO works. With an IPO, you are purchasing actual shares of ownership in the company. The coins/tokens you receive in an ICO may have value but do not offer you the same stake in the company. Do your own thorough research before entering into any ICO, as scams and phishing run rampart and many ICO’s do not actually have working products. I good site I use the start my research is ICODROPS.

Ledger: Is an append only list of IDs, transactions, time-stamps, balances, and other data related to a financial account. The Bitcoin blockchain is unique ledger in that it is distributed, decentralised, and public.

Longing: Taking a long position is the opposite of a short. When a trader or investor goes long, they hope to profit from a price increase.

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

M of N: The requisite number of cosigners needed to provide signatures (M) out of the total amount of cosigners (N) within a multi-signature wallet. A common M of N value is “2 of 3”. This means of the three cosigners, any two are needed to authorise a signature.

Mining: Is the process by which transactions are verified and added to a blockchain. Mining involves using sophisticated computer hardware to solve complicated mathematical problems, this process also triggers the release of cryptocurrencies and can be very lucrative to a miner.

Miner: A specialized Bitcoin user comprised of a computer or group of computers that 1) collect pending transactions into blocks in order to process them and 2) verify blocks created by other miners. Miners are incentivized to perform this work because they collect all transaction fees (attached to transactions within blocks) and are rewarded with new bitcoins as part of the block reward.

Multi-Signature: Also known as ‘multisig’. These addresses allow multiple parties to require more than one key to authorise a transaction.The needed number of signatures is agreed at the creation of the address. Multi signature addresses have a much greater resistance to theft. Bitcoin.com wallets offer the multisig feature as do many other wallets including ZCL’s Electrum Wallet.

Node: A node is any computer that connects to the blockchain network. A Node holds a copy of the blockchain ledger and relays new transactions to other nodes.

Open Source: Freely distributed software the code of which is available to the public to edit, use, and share. The Bitcoin code is open source.

Paper Wallet: An offline, cold storage, wallet where private key(s) are printed onto a piece of paper or manually attached to some other physical medium for offline storage. This is one of the most secure ways of holding a cryptocurrency.

Peer to Peer (P2P: A type of network where participants communicate directly with each other rather than through a centralised server. The Bitcoin network is a peer to peer network.

Permissioned Ledger: Is a ledger where actors must have permission to access the ledger. Permissioned ledgers may have one or many owners. When a new record is added, the ledger’s integrity is checked by a limited consensus process. This is carried out by trusted actors, government departments or banks, for example. Which makes maintaining a shared record much simpler than the consensus process used by unpermissioned ledgers.

Permissioned Blockchains: provide highly verifiable data sets because the consensus process creates a digital signature, which can be seen by all parties.

Private Key: Is a string of data that shows you have access to coins/tokens in a specific wallet. Private keys can be thought of as a password; private keys must never be revealed to anyone but you, as they allow you to spend the currency from your wallet through a cryptographic signature.

Proof of Authority: Is a consensus mechanism in a private blockchain which essentially gives one client (or a specific number of clients) with one particular private key the right to make all of the blocks in the blockchain.

Proof of Stake: Is an alternative to the proof-of-work system, in which your existing stake in a cryptocurrency (the amount of that currency that you hold) is used to calculate the amount of that currency that you can mine.

Proof of Work (POW): Proof of work is used to tie mining capability to the computational power of the computers involved. It refers to a portion of data which is difficult (i.e., high in resource cost and time-consuming) to produce yet easy for others to verify and which satisfies some requirements. Producing a proof of work can be a random process with low probability so that a lot of trial and error is required on average before a valid proof of work is generated.

Protocol: A set of official rules which govern how participants on a given network must communicate. Bitcoin’s protocol dictates how each node connects with the others, the supply of Bitcoins at a certain time, and also defines other aspects of the network.

Public Key: A string of letters and numbers that is mathematically derived from a private key. Public keys allow one to receive bitcoin or other cryptocurrencies from other users.

QR Code: An image, usually square, that digitally represents a bitcoin public or private key. QR codes are similar to barcodes found on physical products and can be scanned by digital cameras on smartphones or computers.

Satoshi: The smallest divisible unit of one bitcoin. There are 100 million satoshis (8 decimal places) in one bitcoin. One satoshi = 0.0000001 bitcoins.

Satoshi Nakamoto: Author of the Bitcoin Whitepaper, published in 2008. Nakamoto is consider the founder and creator of Bitcoin.

Scrypt: A scrypt is an alternative proof of work system to SHA-256, designed to be particularly friendly to CPU and GPU miners, while offering little advantage to ASIC miners.

SHA-256: Is the cryptographic function used as the basis for bitcoin’s proof of work system.

Shorting: Cryptocurrency can be shorted in much the same way that stocks are. When a trader or investor goes short on a cryptocurrency, he or she hopes to profit from a price decrease. Shorting can be risky since a rising price could produce a huge loss.

Signature: A portion of a Bitcoin transaction that proves that the owner of the private key has approved the transaction.

Smart Contracts: Are contracts whose terms are recorded in a computer language instead of legal language. Smart contracts can be automatically executed by a computing system, such as a suitable distributed ledger system.

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

Stream Ciphers: Are a method of encrypting text (cyphertext) in which a cryptographic key and algorithm are applied to each binary digit in a data stream, one bit at a time.

TA: Is short for Technical Analysis. It is used by analysts to predict the price action and direction of a coin the near future. Some people believe it is nothing short of quackery but many analysts think they can generate handsome profits with the typical volatility that occurs in crypto markets

Token: Is a digital identity for something that can be owned.

Tokenless Ledger: This refers to a distributed ledger that doesn’t require a native currency to operate.

Transaction: An entry in the blockchain that describes a transfer of cryptocurrency from address to another. Bitcoin transactions may contain several inputs and outputs. Abbreviated as ‘tx’ e.g, Usually, the first tx within a block is the coinbase.

Transaction Block is a collection of transactions on the network, gathered into a block that can then be hashed and added to the blockchain.

Transaction Fee: Sometimes called the “miner’s fee”. The transaction fee is an amount of bitcoin included in each transaction by users and collected by miners. These fees are used to incentivise miners to add the transaction to a block. Bitcoin Cash (BCH) fees are considerably lower than Bitcoin Core (BTC) fees.

Unpermissioned Ledgers: Such as Bitcoin have no single owner, they cannot be owned. The purpose of an unpermissioned ledger is to allow anyone to contribute data to the ledger and for everyone in possession of the ledger to have identical copies.

Volatility: Volatility is a measure of the price movement of an investment over time. The cryptocurrency markets are well known for their high levels of volatility.

Wallet: In cryptocurrency terms, a wallet is a digital or physical address that is used to store coins or tokesn. The wallet can also be used to send and receive Bitcoin and other forms of cryptocurrency.

XBC: A ticker symbol for Bitcoin Cash used to meet the International Standard for currency codes (ISO 4217).

SOURCES: Hackernoon, Blokt, Bitcoin

Originally published at VISIONAIRE.