Bitcoin Terms and Definitions

Bitcoin Terms and Definitions
Bitcoin Terms and Definitions

2FA: 2-Factor Authentication, used to add an extra layer of security to an account by requiring a second form of authentication beyond just a password.
51% Attack: Theoretical attack by which someone controlling more than 51% of the network can alter or interfere with the Bitcoin ledger to the detriment of the rest of the network
Alternate Cryptocurrencies: Also known as altcoins, any kind of cryptocurrency other than Bitcoin, such as Litecoin, Dogecoin, Feathercoin, etc.
Alternative Currency: Anything used to exchange value that isn’t a dominant fiat currency nationally or internationally.
Arbitrage: Taking advantage of price differences between different markets, such as between different cryptocurrency exchanges.
ASIC Mining: Mining using powerful Application Specific Integrated Circuits, which are developed specifically for a task (in this case, Bitcoin mining).
Asymmetric Key Algorithm: A type of algorithm that allows for cryptocurrency users to receive funds using differing public and private keys to keep the information being sent between users secure.
Bear Trap: A manipulation that is used by investors and traders on exchanges to create a panic sell in the market. Those running the trap buy in once the price has been pushed low enough for a return after the market bounces back.
Bitcoin: The most widely used in a new class of currency called cryptocurrencies.
Bitcoin Address: Bitcoins are sent from and received to an address. This address is what points to a bitcoin wallet
Bitcoin Gambling: Many online gambling sites allow the use of bitcoins as currency.
Bitcoin Network: All systems that are sharing the blockchain are part of the Bitcoin Network.
Bitcoin Price Index: Data regarding bitcoin prices.
Bitcoin shares – mining: The mining pool awards shares to each client that provides a valid proof of work while cooperative mining.
Bitcoin Stocks: Ownership of a Bitcoin company or asset that is distributed to more than one person through the means of an IPO.
Bitcoin Tip: A bot that allows users to manage bitcoin on their Reddit account. Bitcoin can be sent to other users by “tipping”.
Bitcoin Trading: Trading that takes place on a bitcoin exchange. Bitcoin trading is speculation in securities, specifically the buying and selling of bitcoin. Traders attempt to profit by using a variety of methods such as technical analysis.
Bitcoin Wallet: Much like a wallet in the real world, a Bitcoin wallet is used to store bitcoins. There are varying types of wallets with different strengths and weaknesses, such as paper wallets, mobile wallets, and brain wallets. Web forum dedicated to discussion of Bitcoin that also dabbles in discussion of other cryptocurrencies.
BitPay: Payment processor specifically built for bitcoin payments. BitPay allows merchants to accept bitcoins as payment.
Bitstamp: A bitcoin exchange where bitcoins can be bought and sold.
Block: A group of transactions and transaction confirmations. When the data compiled from these transactions reaches a certain size, the information is bundled and then used for verification.
Block halving: The halving of a bitcoin reward for solving a block. Occurs once every 210,000 blocks solved, or roughly every four years.
Block Header: The block header contains information about a block, including the block version number, the hash of the previous block header, the hash based on transactions in the current block, a timestamp, the current target, and a nonce. This information is updated often.
Block Height: A block’s location in the blockchain can be determined by it’s height. The higher up in the blockchain a block is, the more recently it was added.
Block Reward: The payout that is sent to miners that calculate a hash correctly. This reward can also include any fees accumulated for transactions within that block.
Blockchain: A chronologically connected chain of blocks. Popular bitcoin wallet with more than 1 million users. also provides an easy to use block explorer as well as many useful charts and network data.
Bot Trading: A method used by traders on exchanges to carry out trades automatically via a set of preset formulae. A downloaded piece of software is used to facilitate such trades.
Brain Wallet: Storing bitcoins in a wallet by way of a memorized passphrase rather than using a physical tag or a web wallet. The most secure brainwallets use passphrases that are dozens of characters long.
BTC: Abbreviation of the Bitcoin as a denomination.
Bubble: This is a market phenomenon that takes place when an industry such as Bitcoin receives an influx of positive publicity and other factors. Some believe that this can end in a “bust” and others believe these are merely growing pains.
Bull Trap: A strategy implemented by market manipulators to create a rush of buy orders that push up the price. The masterminds behind this trap often sell at a level that the market cannot support which leads to a dip.
Buy Order: A trade that has yet to be executed and has several predetermined settings that must be met before the respective assets are bought. There is no guarantee made by exchanges that states the order will be filled.
Calculator: Used to calculate possible profit from mining bitcoins by entering different factors such as hashing power, electricity consumed, current difficulty, and other variables.
Camp BX: Exchange platform at which to buy and sell bitcoins securely.
Candlestick Chart: A type of analytical tool that exposes the full range of price that has been experienced by an asset during a specified time. In addition to the usual bar that shows the open and close of a certain timeframe, a wick is displayed at either end to include market activity outside of the open and close.
Casascius Coins: Physical bitcoins made by Casascius, backed by real bitcoins that are contained in the physical coin.
cBTC: Unit of a bitcoin, 1/100th of a full bitcoin.
Client: A computer that is connected to the Bitcoin network and speaks the protocol. Clients will forward transactions to other clients. Also referred to as Nodes,
Cloud Hashing: An incredibly advanced tech company that has taken the Bitcoin economy by storm with its quick rise in the extremely competitive Bitcoin mining market. The motto of this enterprise is, “The easiest way to earn bitcoins.”
Cloud Mining: A term similar to cloud hashing that refers to processing transactions for a cryptocurrency without physical hardware. A third party that distributes the mining power via contracts or shares fulfills the actual mining.
Coinbase: Coinbase is a platform for bitcoin payment processing as well as a wallet provider.
CoinJoin: A transaction style that has been available to all bitcoin users since the inception of the currency that adds another layer of privacy to Bitcoin.
Coinye West: A scrypt-based cryptocurrency that uses Kanye West as its mascot.
Cold Storage: The most secure way to store bitcoins. Private keys from a Bitcoin wallet are stored on an offline computer or a paper wallet.
Cold wallet: An offline computer, USB, or sheet of paper used to store private keys from a Bitcoin wallet.
Colored Coins: Bitcoins that have been assigned a particular purpose or value, such as representation of stocks or property.
Confirmation: Once a block is published to a network, the transactions it contains are considered confirmed. Each subsequent block is an additional confirmation of the previous transactions.
Cooperative Mining: A mining approach that checks the validity of shares submitted by the miners, rather than checking metahashes. This reduces the resources used by the pool server. By adjusting the pool difficulty, the number of shares submitted can be managed by the pool host.
CPU mining: Mining on the Bitcoin network using your computer’s CPU to process hashes.
Cryptocurrency: A digital currency that uses the same process for coding messages as cryptography. These currencies are completely independent of any government monetary system.
Cryptography: In Latin, “Secret Writing”. In modern information systems, the practice of obscuring data by mathematical algorithm based encryptions.
Cyberlaundering: Laundering money by taking advantage of online sites and services.
Day Trading: The practice of opening and closing trading positions one to several times in one day. In traditional markets, any positions that are created in a day are closed out before trading ends in that market. Cryptocurrency exchanges are different in that they run 24/7 a majority of the time, and therefore positions are usually closed out before the trader stops trading for a period of time.
DDoS: Distributed denial of service attack, whereby service is denied to a user base by way of multiple machines targeting that service.
Dead Cat Bounce: When considering market trends, this analogy is used to describe an upward movement that takes place during a bear market. The movement is followed by a continued downward trend and is equivalent to a dead cat bouncing.
Decentralized: Anything that doesn’t have a central hub of communication or control. Bitcoins have no governing or regulatory body that makes decisions about its future, other than the network, which automatically adjusts difficulty in response to mining.
Deflation: The price of goods and services experiencing a decrease.
Demurrage: Some cryptocurrencies charge users accounts with a fee for sitting on the coins for “too” long. This fee is meant to prevent hoarding and used to keep the currency in circulation.
Devcoin: Ethically driven cryptocurrency, which seeks to fund the efforts of writers and software developers. Plans to eventually support all types of developers and creators.
Difficulty: Represents the level of difficulty for solving a hash of a block. Difficulty is self-adjusting such that only 1 block is found every ten minutes. Difficulty is reevaluated every 2016 completed blocks.
Digital Currency: Digitally generated currency. Early digital currencies were tied to a physical commodity to determine value, but more recent digital currencies typically use a floating exchange rate much like traditional government fiat.
Dogecoin: A new cryptocurrency that uses the Doge Meme as its mascot. Advocates include early adopters of Bitcoin and anyone that just wants to have fun. This altcoin in particular has attracted “much attention” through several community driven marketing efforts.
Double Spend: Essentially spending the same money more than once. Risk of a hacker successfully altering a transaction in order to keep or obtain bitcoins goes down the more confirmations a transaction has.
Dust Transaction: Any transaction containing a fraction of a full bitcoin small enough to trigger a fee. Currently, this is any transaction less than .01 BTC. Depending on the miner who includes your transaction in the block, you may not be billed a dust transaction fee.
Encryption: Coding messages so that only people with the correct information can decode them. Encryption in modern information systems typically relies on mathematical algorithms.
Escrow: The practice of a third party holding on to funds and assets in a transaction between two parties. In this case, bitcoin escrow services facilitate sales between unknown or untrusted individuals to ensure a successful transaction.
Exahash: 1,000,000,000,000,000,000 Hashes
Exchange: An exchange is a place to buy and sell bitcoins in a marketplace.
Exchange Rate: The exchange rate is the listed price of bitcoins in a specific currency.
Faucet: Site which gives away free bitcoins to a connecting IP address. Some sites also do test giveaways in which once they have been received to a temporary address, the coins must be returned.
Feathercoin: An alt currency similar to bitcoin.
Fill or Kill: In bitcoin trading, if an exchange cannot be made immediately at the price a user has specified, then the order is automatically canceled.
Finney Attack: When a transaction has zero confirmations, a Bitcoin miner can perform a Finney attack. This is done by writing a transaction that sends his own coins back to himself in a block he has recently found, the attacker can wait until a transaction with a merchant completes and then submit his block before that transaction is confirmed. This overwrites what the attacker spent so that he retains his purchase while also retaining his money.
Fontas: Fontas is a member of the Reddit community who frequently engages in a scheme known as Pump and Dumps. This particular member or group used the scheme to scam investors by providing misinformation that lead to a pop in the price at which time they sold a large proportion of their shares.
Fork: A fork is a split of the blockchain when two blocks are created at the same time. The two blocks will have different hashes and difficulty. The fork with the longest version of the block chain, will be the successful one that starts the new chain.
FPGA Mining: Mining on the Bitcoin network using a Field Programmable Gate Array to process hashes. A FPGA unit can be specially configured to work best when mining.
Freicoin: A currency, which institutes a demurrage fee in order to discourage hoarding of coins.
Genesis Block: The inception of Bitcoin began with this block. It is referred to as the very first block in the “block chain” The block number for genesis is the number 0 in the current Bitcoin protocol version and was the number 1 in earlier versions.
Gigahses/sec Gh/s: 1 billion different hashes per second.
GPU Mining: Mining using a Graphical Processing Unit or graphics card. Processors designed for modern computer gaming graphics were found to be very efficient at Bitcoin mining. Advantages over CPU mining included reduced power consumption and increased mining power. Have since been outpaced by FPGA and ASIC miners.
Gyft: An app that allows you to buy and store your gift cards on your phone instead of carrying plastic. Accepts bitcoins as a form of payment for gift cards.
Hashrate: The rate of computing power used to perform mathematical calculations that keep transactions secure.
Hot wallet: A Bitcoin wallet that is kept online and connected to the internet. Bitcoin exchanges and other Bitcoin related websites that store bitcoins can be said to be using hot wallets.
Hybrid Wallet: A type of Bitcoin address holder that sends and receives bitcoins, but never holds the private key in a non-encrypted form.
Index: Described as the output that is referenced in a transaction.
Inflation: When prices of food, goods and property rises and purchasing power falls.
Input – Transaction: This piece of the transaction and ledger process is a reference to the output of another transaction. Often there are multiple inputs that are listed in a transaction. Values of the outputs will be added up and the sum is able to be used in outputs for this new transaction.
Keypairs: A corresponding pair of both one public key and one private key. These keys are used to verify and send transactions with cryptocurrencies.
Kilohash: A thousand different hashes per second.
Kittehcoin: One of the more recent altcoins to hit the market and can be found on several altcoin only exchanges throughout the internet. It recently re-launched after some fixes in the Kittehcoin protocol.
Liquidity: Measurement of availability of an asset or currency on a market. The more liquid, the easier it is to buy and sell an commodity.
Litecoin: Inspired by Bitcoin. Litecoin can be efficiently mined using consumer-grade hardware because the scrypt-based mining proof-of-work. Litecoin is known to be the silver to Bitcoin’s gold status.
Local Bitcoins: An exchange platform that mixes over the counter trades with a community driven rating system. As one of the popular Bitcoin exchanges, it is seen as more anonymous.
Longchain: See Blockchain.
Market Order: An order that gets executed by the user at the going market rate. Market orders are placed when users want to buy or sell coins immediately on an exchange.
mBTC: A denomination of bitcoin that is in the thousandths place. It is written as .001 for one millibit.
Megahash: A million different hashes per second
Merkle Root: The root node that verifies the integrity of all connecting transactions.
Microtransaction: Sending or receiving a tiny amount of bitcoin or any other asset. Very difficult with conventional payment methods because of expensive transaction fees.
Mining: The secure process of validating transactions for a block through mathematical calculation. Successful validations are rewarded with bitcoins.
Mining Hardware: Specially equipped computers used to mine bitcoins.
Mining Pools: A processing of the data blocks by more than one miner, which is used to increase the odds of solving a block, and therefore generates a greater ROI.
Mintage Cap: The max amount of coins that can be mined for a specific cryptocurrency. This amount is predetermined and is used as a means to avoid devaluation. Some coins do not have such caps.
Minted coins: Coins that have been created by the mining process. These coins are available to transact and use on the respective network.
Mintpal: UK exchange launched in Feberuary,2014. They exchange numerous cryptocurrencies and add new coins through a voting process.
Mixing Service: An online service that is used to anonymize cryptocurrency transactions. It helps with privacy protection and can be used for both legitimate and nefarious purposes.
Mobile Wallet: A type of cryptocurrency wallet that can be accessed from many different locations at the same time or a wallet that can be accessed on your mobile phone.
MtGox: The oldest and largest Bitcoin exchange based in Japan. MtGox has handled more volume than any other exchange and is the most well known. MtGox stands for Magic the Gathering Online Exchange. This exchange filed for bankruptcy in February 2014 and no longer exists. $400 million worth of bitcoins were lost.
Namecoin: A cryptocurrency that uses a modified version of the Bitcoin software and is intended to be used as a decentralized DNS. (Domain Name System)
Node: (Also referred to as a Client) A computer connected to the Bitcoin network that communicates using the Bitcoin protocol.
Nonce: Number used once When hashing a transaction block, a nonce, or string of data is input to satisfy the numerical parameters set by the difficulty. Every hash will use a different nonce, resulting in billions of nonces while Bitcoin mining.
Offline Storage: Bitcoins that are kept on a computer, usb, or sheet of paper that remains offline, disconnected from the Internet. Also referred to as “cold storage”.
Orphan Block: The discarded block from a hard fork not used in the main blockchain.
Orphaned block: Also known as detached, are blocks that are not apart of the main chain and are produced when either two miners produce blocks at the same time or when someone attacks the network.
Output – Transaction: This important step in a transaction holds the instructions for sending bitcoins. More than one output is possible and they will share the value of the combined inputs.
P2P: Peer-to-Peer. Nodes in the network are referred to as peers. These peers act as consumers and suppliers of resources. The network is decentralized and allows interactions between at least two parties.
paper wallet: A printed version of a wallet address that can be stored in a physical wallet more securely than web or software wallets.
Paper Wallet: Private keys from Bitcoin addresses are printed on a piece of paper then discarded from the computer. The funds can be redeemed with the private keys pair. They are more secure than software wallets so they are often used for cold storage.
Peer-to-Peer: A concept essential to the inception of cryptocurrency. It has been used for several different industries as a means to communicate and share information while avoiding centralization. This approach allows for anyone to invest in and transact with cryptocurrencies without government overhead.
Peercoin: Sunny King created PPCoin in 2012 and was the first cryptocurrency based on the combination of proof-of-stake and proof-of-work. Peercoin plans to attain an annual inflation rate of 1%, so no hard limit is in place.
Platform Exchange: A type of cryptocurrency exchange that uses special trading algorithms to facilitate trades between users and limit the exchange owners’ interactions with traders.
PPCoin: A currency that has been online since August of 2012. and has become one of the more popular cryptos in the world. This coin uses SHA-256 for mining with proof-of-work and proof of stake methods.
Pre-mining: The mining of a cryptocurrency by it’s developers before the coin is publicly launched. Not all, but most pre-mined coins are considered scam coins.
Primecoin: A cryptocurrency that uses a proof-of-work based on finding chains of prime numbers. Like Peercoin, Sunny King who was inspired by Bitcoin created Primecoin. Primecoin’s users have found a world record Cunningham chain.
Private Key: An identifying code that is used to sign transactions digitally for a specific cryptocurrency. This key is unique in that it is not shared with anyone but the owner of the corresponding account. It is used to approve any transactions that are received by an account and sign off on any transactions sent from the account.
Proof of burn: This is a form of verifying cryptocurrency transactions that is an alternative to Proof of Work an Proof of Stake. Miners that use this method must show proof of burning coins via sending them to an unspendable address. This method is meant to be similar to Proof of Work without consuming real world resources.
Proof-of-Stake Mining: A type of mining method that takes into consideration a miner’s level of “interest” or amount coins that they own when paying out rewards for mining. This method is not currently used on its own for any digital currency, but instead is used in combination with Proof of Work mining.
Proof-of-Work Mining: A type of mining method that bases mining rewards purely on the amount of hashing power dedicated to the network by the miner. This method is used by several digital currencies, like bitcoin and litecoin, as the only means of mining while also being used in combination with others, like Peercoin.
Proportional Mining: The more hashing power a miner has, the more bitcoin the miner will be rewarded. The reward will be proportional to the amount of power the miner contributed.
Public Key: An identifying code shared with the Bitcoin or other cryptocurrency networks that validates the address associated with it and all transactions sent from that address with the private key.
Pump and dump: A strategy often used on cyrptocurrency markets to take advantage of under valued assets. The scheme is executed by pumping the market with statements that are positive and should lift the price of the currency. Then once the price reaches a high enough level the “masterminds” dump their shares and to make a quick profit.
QR Code: A code embedded in an image similar to a bar code, but instead of using lines it uses boxes or other images inside a box shaped image. All of these codes can be scanned by a mobile app that reads and displays the information associated with the code.
Ripple: An alternative digital currency that was conceived by a centralized group that premined all the coins and kept a majority to control the market.
Rounds: A reference to the work done by miners during a time period that may or may not produce a solved block.
RTBTC: Zeroblock’s web based trading platform that allows users to trade in real time using Bitstamp’s API
Satoshi – BTC amount: The smallest denomination of a bitcoin that can be transacted and is set at 0.00000001 Named after the creator of Bitcoin, Satoshi Nakamoto.
Satoshi Nakamoto: The enigmatic figure behind the invention of Bitcoin. It is likely that Satoshi Nakamoto is actually a code-name for a group of people rather than a single person.
Scamcoin: Name given to cryptocurrencies known for scamming or pre-mining by developers in “get rich quick” schemes
Scrypt: A mining algorithm
Sell Order: An order placed on an exchange where the user is trying to sell bitcoin. A sell order can take place instantly at market value, or be placed at a higher amount to be sold when the value hits the amount set.
SHA-256: SHA stands for Secure Hashing Algorithm. The U.S National Security Agency created a set of cryptographic hash functions as a Federal Information Processing Standard. Using this hashing algorithm in Bitcoin allows blocks to be identified by their hash. This hash serves as identification and integrity verification.
Shared Coins: A website that mixes bitcoin transactions together for a more private and anonymous transaction.
Signature: Combining the private and public key in a hash to prove ownership and complete the transaction.
Silk Road: Black market operated as a TOR hidden service. Users are able to purchase goods anonymously using bitcoin. The site was shut down in 2013 by the FBI for alleged murder for hire and drug trafficking.
Soft Fork: When an important change is made or a core development team introduces new features in a new version of a client
Software Wallet: A Bitcoin or other cryptocurrency wallet that is used online or can be accessed on several different types of hardware. This type of wallet is differentiated from Hard wallets and paper wallets.
SPV – simplified payment verification: Allows nodes to verify payments without downloading the entire block chain. Utilized in a lot of mobile Bitcoin wallet apps.
Stale Block: A block that has already been solved and holds old transactions as well as data that will no longer yield a reward if solved by another party.
Stop-Loss Order: An order to sell when the price falls to a designated value. Helps traders or investors limit their loss on a security position.
Strong Hands: Traders that aren’t easily shaken by fluctuations in the market or high volatility. Strong hands are known to usually hold long term.
Taint- Taint analysis: The analysis of how likely it is that two addresses are related or owned by the same person.
Technical Analysis: Traders and investors use technical analysis to try and forecast a future security price by analyzing past price changes.
Terahash: 1 trillion different hashes per second.
Testnet: An alternative to block chain that allows developers or testers to experiment without the risk of using real bitcoins or ruining the main chain.
The Bitcoin Paper: The original white paper release by Satoshi Nakamoto in 2008 titled: Bitcoin: A Peer-to-Peer Electronic Cash System.
Third Party: A neutral individual or entity involved in the transaction that is neither the buyer nor the seller.
Timestamp Server: Used to prove that data existed at a certain time. All timestamps include the previous timestamp hash; this connection to the previous hash forms an ongoing chain.
TOR: (The Onion Router) A program that bounces communications around a distributed network that prevents spying and the disclosure of your physical location. TOR is open sourced and can be used by web browsers.
Transaction Block: Transactions are collected on the Bitcoin network in a block that is hashed then added to the block chain
Transaction Fee: An amount that is deducted when transacting in cryptocurrencies such as bitcoin and litecoin. The fee is optional on some wallets and can be any amount the user chooses. It main effect on a transaction is the processing time.
uBTC: Micro bitcoin 1 uBTC= .000001 BTC
Value: Number of Satoshi, which is converted from 1 BTC as one hundred million Satoshi, that an output can be worth when it is claimed by an input.
Vanity address: A Bitcoin address containing words or a pattern.
Virgin Bitcoin: Bitcoins that have never been spent, such as block rewards.
Volatility: Risk or uncertainty related to the size of changes in the value of bitcoin. High volatility means the value fluctuates greatly.
Weak hands: Traders that get scared from potential losses so they tend to trade/sell when the market is in a downward trend.
Web Wallet: Wallets maintained by a web service such as Coinbase.
Wire transfer: An electronic transfer used to send or receive fiat currency.
XBTC: Sometimes used as a currency code for a single bitcoin.
Zero-confirmation transaction: When a transaction is unconfirmed, and not included in any block. These transactions will stay in the pool until the node includes it in the blockchain or throws it away.
Zerocoin: Originally proposed as an add-on to Bitcoin but was released as its own independent cryptocurrency due to the success Dogecoin received.

Related Posts Plugin for WordPress, Blogger...