Here is your guide to a list of frequently used key terms and concepts relating to Bitcoin and Cryptocurrency which is a new revolutionary electronic cash system.
Please Note: the majority of this terminology apply to both Bitcoin Core (BTC) and Bitcoin Cash (BCH).
Address: A string of letters and numbers that people use to send bitcoin to or from. A bitcoin address is shared from one user to another user so that they can send you Bitcoin. Likewise, if you want to send bitcoin to someone you will need their address (obtained from their wallet).
Altcoin: A form of cryptocurrency that has the same decentralized, peer-to-peer principles as bitcoin, but which uses its own blockchain and has its own rules of operation.
Bcash: A derogatory term created by a resentful minority to try and smear Bitcoin Cash on social media, used to avoid associating BCH with the word ‘Bitcoin’.
BCC: A ticker symbol for Bitcoin Cash; used mostly on Asian exchanges.
BCH: The most used abbreviation and exchange ticker symbol for the Bitcoin Cash digital currency.
Bitcoin: An electronic peer-to-peer cash system. There are two main versions of Bitcoin: Bitcoin Cash (BCH) and Bitcoin Core (BTC). BCH is digital money and offers very quick transaction times with low fees. BTC is no longer useful as money because of extremely high fees and slow transaction times.
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: The decentralized, public ledger of each and every Bitcoin transaction that has ever occurred. As blocks are verified by miners, they are added to the chain of previous blocks, hence the name.
Block Reward: An amount of Bitcoin that miners earn upon creating a block (of pending transactions). The reward is equal to the sum of 1) the block subsidy (newly ‘minted’ satoshis) plus all transactions fees attached to transactions included in that block. The subsidy reward is halved every four years.
BTC: An abbreviation and exchange ticker symbol for the Bitcoin Core currency.
Centralized/Centralization: A form of organization whereby a single party, group, authority is in control. These systems have single points of failure. VISA, Paypal, ApplePay are examples of centralized payment systems. Centralized organizations are contrasted by decentralized systems.
Coinbase: A unique type of Bitcoin transaction with no inputs that is created by miners after finding new blocks. This type of transaction is, in most cases, the first transaction within new a block. Coinbase transactions reward miners for their work.
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): 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 finalized although 99.99% of the time Bitcoin Cash transactions can be considered final with 0 or 1 confirmation.
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 authorization from a certain amount of all cosigners on the wallet. The amount of authorizing cosigners required is known as ‘M of N’.
Cryptocurrency: A digital currency that uses cryptography to provide security and verify transactions on its network. Bitcoin is the first cryptocurrency. Unlike traditional fiat currencies, a cryptocurrency does not require a central bank or any other centralized authority to ensure security or to maintain control of money supply.
Cryptocurrency 2.0: A decentralized app, a cryptocurrency 2.0 project uses the blockchain for something other than simply creating and sending money. They typically involve decentralized versions of online services that were previously operated by a trusted third party.
Cryptography: The practice and study of techniques for secure communication in the presence of third parties. Bitcoin and other currencies are related to cryptography insofar 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.
Decentralized: A form of organization which does not require any single party, group, or authority to control services. Bitcoin is a decentralized 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.
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.
Dogecoin: An altcoin that first started as a joke in late 2013. Dogecoin, which features a Japanese fighting dog as its mascot, gained a broad international following and quickly grew to have a multi-million dollar market capitalization.
Encryption/Encrypt: The Bitcoin network uses cryptography to secure wallets so that only those in control of the private key associated with that wallet may access it to send Bitcoin from that address.
Ethereum: An open source decentralized platform based on blockchain technology that runs smart contracts which are applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference.
Exchange: A service, usually a website, that allows users to buy, sell, and trade cryptocurrencies.
FOMO: An acronym that stands for “Fear Of Missing Out”. In cryto terms, if you don’t invest in the next big altcoin then you’re going to miss out on big profits.
FUD: An acronym that stands for “Fear, Uncertainty, and Doubt.“
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.
- It is unique. Only a particular file can produce a particular hash, and two different files will never produce the same hash.
- It cannot be reversed. You can’t work out what a file was by looking at its hash.
HODL: a slang term and Internet meme that is used in the Bitcoin community when referring to keeping, i.e. holding onto the cryptocurrency rather than selling it. Hold On for Dear Life.
HODLer: Hanging on for dear life.
HOLDer: Holding on for the long duration and not a HODLer.
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.
Ledger: A 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, decentralized, and public.
Litecoin: A peer-to-peer cryptocurrency and open source software project released under the MIT/X11 license.
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 authorize a signature.
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 are bitcoin transactions that require authorizing signatures from multiple parties. Bitcoin.com wallets offer the multisig feature.
Node: A special participant on the Bitcoin network. Nodes hold a copy of the blockchain ledger and relay 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: A type of network where participants communicate directly with each other rather than through a centralized server. The Bitcoin network is a peer to peer network.
Private Key: A string of numbers and letters that is be used to spend bitcoins held on a specific Bitcoin address.
Proof of Work: 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 bitcoins from other users.
Pump and Dump: A term borrowed from the unethical practice used in small-cap stock market. Basically, a group hypes a stock, thereby creating perceived value, and, possibly driving up the price. This is the “Pump.” Once the group gets the stock price where they want it to go, they cash out, take their profits, and leave those who bought in high holding the bag. This is the “Dump.”
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.
Signature: A portion of a Bitcoin transaction that proves that the owner of the private key has approved the transaction.
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.
SHA-256: The specific hash function used in the process of mining to secure bitcoin transactions.
Transaction: An entry in the blockchain that describes a transfer of bitcoins 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 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 incentivize miners to add the transaction to a block. Bitcoin Cash (BCH) fees are considerably lower than Bitcoin Core (BTC) fees.
XBC: A ticker symbol for Bitcoin Cash used to meet the International Standard for currency codes (ISO 4217).
Wallet: A collection of Bitcoin private keys used to spend bitcoins.