The cryptocurrency and blockchain glossary

This blockchain and cryptocurrency glossary is designed to provide some basic wayfinding points when trying to navigate the emerging world of digital assets.

A

Address – A cryptocurrency address is used to send and receive transactions into Digital Wallets. Similar to a routing number, wallet owners share this address with anyone they wish to receive funds from.

Altcoin – Altcoins are abbreviated from “bitcoin alternatives”. It’s used to describe any single cryptocurrency that is not bitcoin. Most popular altcoins use the same fundamental building blocks as bitcoin.

ATH – ATH is an acronym for “all-time high.” In cryptocurrency discussions, ATH refers to the highest valuation reached to date for a particular currency.

B

Bitcoin : Bitcoin is the first decentralised, open source cryptocurrency that runs on a global peer to peer network, without the need for middlemen and a centralised issuer.

Block :Blocks are packages of data that carry permanently recorded data on the blockchain network.

Blockchain : A blockchain is a shared ledger where transactions are permanently recorded by appending blocks. The blockchain serves as a historical record of all transactions that ever occurred, from the genesis block to the latest block, hence the name blockchain.

Block Explorer : Block explorer is an online tool to view all transactions, past and current, on the blockchain. They provide useful information such as network hash rate and transaction growth.

Block Height : The number of blocks connected on the blockchain.

Block Reward :A form of incentive for the miner who successfully calculated the hash in a block during mining. Verification of transactions on the blockchain generates new coins in the process, and the miner is rewarded a portion of those.

C

Consensus: This is a pillar of open blockchain and cryptocurrency systems like bitcoin and ethereum. Finding consensus is a sloppy decision-making process, but one that is required for a system to operate in a truly decentralized manner. Consensus is derived by node users signaling their preference for code changes and updates. If enough nodes (which can be downloaded by anyone) accept a code change, then that change will be accepted by the entire network and required before additional blocks can be added to the blockchain.

Cryptocurrency: This word generally refers to digital tokens or digital coins that are produced by a blockchain system like bitcoin and Ethereum. There are other forms of digital money such as units of value produced inside video games, or even alternative money systems based on digital platforms, such as e-gold, but those systems are not cryptocurrencies. (Also, it should be noted that even if a blockchain has an associated digital token, it is not necessarily considered a cryptocurrency.) But, as the name implies, cryptocurrencies rely on encryption for security and to protect (or at least shield) a user’s identity. Cryptocurrencies share some characteristics of traditional, government-backed money in that some are used a store of value, or a means of exchange. However, cryptocurrencies continue to be regulated differently across the globe. In some countries cryptocurrencies are considered money, in others they are regulated like commodities or securities.

Cryptography – Cryptography is the practice and study of techniques for secure transmission and storage of data. It includes a wide variety of methods for storing and transmitting data in a form readable only by those who are intended to read and process it. Cryptography is the basis for all cryptocurrencies.

Coin – Traditionally, the term “coin” has referred to small, flat, round piece of metal or plastic that serves as a medium of exchange and/or legal tender. With the rise of cryptocurrencies, the term “coin” has come to refer to individual units of account within a particular cryptocurrency.

Cold Storage – Cold storage refers to a method of storing a reserve of cryptocurrency offline. Cold storage eliminates the risk of theft from hackers, but creates new problems and risks of its own. Some of most popular cold storage methods include:

  • USB drive or other digital data storage medium kept in a secure physical location
  • A piece of paper
  • On a bearer item such as a physical coin
  • A specially designed offline cryptocurrency hardware wallet, such as Ledger Nano

Confirmation – Confirmation refers to the process of verifying a bitcoin transaction on the blockchain. When a new block is created and added to the blockchain by miners, it records new transactions that have occured since the last block was created. A transaction that is verified and recorded in a block has been confirmed.

D

dApps: A decentralized application is an autonomous, open-source entity that can be updated or modified by the consensus of a group of users. User data is encrypted on a public blockchain to prevent a single failure point. dApps also either use tokens of an existing blockchain or produce their own tokens to incentive the maintenance and operation of the application. The goal of a dApp is to remove the need for central authority such as governments or corporations. Bitcoin can be considered a Dapp. An early ethereum-powered Dapp was hacked, causing a cascade of controversy and ultimately led to ethereum’s hard fork. Github has an extensive white paper on decentralized apps.

Digital assets: In some circles, describing cryptocurrency as a currency is considered a poor label for emerging digital assets. The label cryptocurrency can be slightly confusing (since in some instances digital tokens don’t meet all of the test for money). Instead, calling cryptocurrencies digital assets (along with other parts of crypto-finance operations, such as blockchain) better capture the full capability of this emerging asset class.

Distributed ledger: This is another, more descriptive, word for blockchain. Distributed ledgers use the underlying peer-to-peer network to create a verifiable and trustworthy system in which internet-connected machines, devices, and people can exchange value without the need for any kind of intermediary.

Digital Money – Digital money refers to only those types of currency that are available exclusively in digital form. Digital currencies do not exist in the physical realm, and therefore do not circulate as banknotes and metal coins.

Day Trading – Day trading refers to a financial activity in which individuals or organizations buy and sell financial instruments within the same trading day or very frequently. Because day traders only hold on to the securities they purchase over the short term, day trading is considered highly speculative.

Dead Cat Bounce – Dead cat bounce is a term from finance that refers to a small recovery in the price of a financial instrument that is otherwise declining in value. It comes from the idea that a dead cat will bounce if dropped from a sufficient height.

E

Exchange: An exchange is a place to buy and sell cryptocurrencies with traditional government issued currency (fiat currency) or to trade between different cryptocurrency systems. Most legitimate exchanges that accept fiat currency for cryptocurrency adhere to some level of Know Your Customer (KYC) laws designed to prevent money laundering and other criminal activities. These laws require customers to reveal basic identifying information before performing transactions. Most exchanges have different tiers of required disclosure, so users have to share information in relation to how much, and how frequently, they are exchanging cryptocurrency for fiat. There are also exchanges that allow users to trade between cryptocurrencies.

Exchange Rate – An exchange rate is the value of a currency in terms of another currency. Also known as a currency pair, exchange rates capture a moment in time when traders are willing to pay x amount in one form of currency for y amount of another form of currency. As orders are entered to buy a currency and sellers agree to sell at that price this sets Exchange Rates.They change constantly depending on movements in the market and even world events and news headlines.

ERC-20 – ERC-20 is the Ethereum token standard used for Ethereum smart contracts (associated with tokens). ERC-20 gives developers the ability to understand in advance how any new token based on the standard will behave on the Ethereum platform. Ethereum-based apps can then easily adapt to any new cryptocurrency or token that follows the ERC-20 protocol.

F

Fiat currency – Fiat currency refers to currency without any intrinsic value other than by legal decree. Fiat currencies are usually regulated and controlled by a government or central bank.

Fintech – Fintech refers to a technological innovation in the financial sector, from education to cryptocurrency.

FOMO – A slang acronym that stands for “Fear of Missing Out.” Cryptocurrencies that are quickly rising in value often draw interest from investors due to the fear of missing out (FOMO) on a chance to get in when prices are still low. Many market analysts advise against making investment decisions based purely on emotional reactions.

Forex – The abbreviation for Foreign Exchange, Forex is a decentralized global marketplace for trading in all of the world’s FIAT currencies. Famous for never closing, Forex allows trading 24 hours a day, 7 days a week from anywhere in the world. With a daily trading volume of $5 trillion or more, it’s the largest, most liquid market in the world. Forex does not officially support trading in bitcoin or other cryptocurrencies, but some Forex brokers will trade in cryptocurrencies under certain circumstances.

Fork – A fork occurs when a cryptocurrency’s existing code is changed. A hard fork splits a blockchain into two divergent chains, which why two distinct cryptocurrencies arise, such as BTC and BTG. A soft fork is only results in one coin.

FUD – FUD is an acronym for “Fear, Uncertainty, and Doubt”. In cryptocurrency discussions, FUD refers to negative analysis that stimulates investors to step back from the market. FUD can cause the perceived value of a cryptocurrency to drop.

Flippening: The flippening is when bitcoin cedes its market dominance to other cryptocurrencies. Ethereum is currently the number two cryptocurrency by market cap, but other currencies are also growing rapidly, such as Ripple and Litecoin. The crypto community is conflicted on whether the flippening is signaling a decline (or at least a serious stall) in bitcoin’s growth and relevance, or whether a more diverse and competitive cryptocurrency market is a sign of maturation and increased acceptance.

G

Genesis Block – A Genesis Block is the first block created on a blockchain. All cryptocurrencies begin with a Genesis Block. Bitcoin’s Genesis Block was the first-ever block of blockchain technology.

H

HODL – HODL is a slang trading term that means holding on to a cryptocurrency for the long term rather than selling it for a profit when it hits a certain valuation. Investors who HODL often will not sell their assets even in falling markets.

I

Initial Coin Offering – An initial coin offering (ICO) involves selling a newly created cryptocurrency or token to raise money for a startup, software project, or blockchain network. Investors generally buy tokens from ICOs which they hope to sell on an exchange for a profit later.

M

Miner – While traditional currencies are printed by central banks, bitcoins are “minted” by Bitcoin miners. In this way, bitcoin resembles gold. Like gold, there is only a limited amount of bitcoins out there to find. The original Bitcoin protocol permanently limited the total number of bitcoins to 21 million.

In order to get bitcoins, miners must solve complex mathematical problems that require lots of computing power and time to solve. Also, bitcoins are awarded to miners as a form of payment for carrying out the task of validating bitcoin transactions on the blockchain nodes which they maintain.

Mining Pool – A mining pool facilitates the sharing of resources over a network (such as processing power/hashrate) among a given set of cryptocurrency miners, who then split the rewards of mining according to the contributions of each of them to the pool. Miners in pools benefit because they often get more cryptocurrency working together then they would when mining on their own.

N

Network – A cryptocurrency network is a peer-to-peer payment system that works under a cryptographic protocol. Users send and receive coins by sending messages to the network using compatible cryptocurrency wallet software. Miners solve complex, time consuming math equations to validate these transactions.

Network Fee – A network fee is a fixed amount of cryptocurrency a user must pay to transfer an amount via the blockchain. Network fees go to the miners who verify the transactions. Anytime you buy or sell a cryptocurrency, you must pay a network fee. Higher network fees generally mean faster transaction speeds as they are given priority over transactions with lower fees.

Node – A node is a computer on a cryptocurrency network.

T

Token – Token is a word often used interchangeably with cryptocurrencies, or single units of a particular cryptocurrency, but tend to represent a digital asset, utility, or equity that runs on top of another blockchain. Tokens are especially associated with ICOs (initial coin offerings).