Dive into the language of cryptocurrency. Find terminology and related information on this page.
A cryptocurrency address is referring to the wallet address of a particular cryptocurrency. These addresses will differ in terms of length and also the beginning letters or numbers. For instance a Bitcoin address will start with a 1, 3, or bc dependant on the version of the type of Bitcoin wallet and what type of addresses are supported by that wallet.
In contrast an Ethereum wallet will start with 0x. Any ERC20 token will also start with 0x.
A wallet address is used to send and receive cryptocurrency. Further explanation will be given in the terms Wallet, private key, and public key.
Arbitrage refers to a cryptocurrency trading strategy. Cryptocurrencies are listed on hundreds of exchanges. There is a price difference between exchanges. Arbitrage refers to the buying of a cryptocurrency on one exchange and selling it on another for a higher price.
Bitcoin is the alternative financial system, payment system built by a person or group known as Satoshi Nakamoto. Built after the economic crash of 2008. The original whitepaper states it was built to stand up against times of economic turmoil. Bitcoin in its simplest form is a virtual currency without the disadvantages that come with traditional fiat currency. Bitcoin is permissionless – a person does not need any permission to use it such as sending money through a bank account requires the permission of a financial instituion using a persons own funds. The bank also knows the details of your purchases which are available on statements. Bitcoin is anonymous. Since the currency is not attached to an account or profile the sender or receiver remains anonymous. As well as purchases made by Bitcoin cannot be retrieved by anyone except for the buyer and seller of the goods or services who would more than likely know what was bought and sold and for how much Bitcoin. Bitcoin is fast. If a person were to send an international wire the regular turn around time is 5-10 business days. There is also a good chance that these wires are held by either the sending financial institution or the receiving financial institution. This is extremely inconvenient especialy if a family member needs funds or a purchase is made where time is of the essence. Bitcoin can be sent and received in minutes. Bitcoin was built to bank the unbanked. Many people in this world do not have trust worthy banks especially in the 3rd world where the banks can crumble. The currency in 3rd worlds can also become worthless. There are many instances of this happening the most recent in Venezuela. The country then turned to Bitcoin and the creation of their own cryptocurrency the Petro.
Bitcoin Cash is what is known as a Fork of Bitcoin. Bitcoin Cash was created in 2017.
There was a dispute about the Bitcoin block size. Without increasing the block size meant it would favor people who wanted to treat Bitcoin as an investment rather than what Bitcoin is suppose to be.
The original Bitcoin white paper is titled “Bitcoin: A Peer-to-Peer Electronic Cash System” Bitcoin originally was suppose to be a cash system and to be treated like digital cash. Obviously there’s a lot more to the whitepaper than it’s title. However this was a major turning point for the currency and the birth of a new cryptocurrency BCH(Bitcoin Cash), an electronic peer to peer cash system.
The Bitcoin blockchain is a publicly available record of all Bitcoin transactions. You might also hear the term used as a “public ledger.” This does not just apply to Bitcoin. Cryptocurrencies can be developed on the same blockchain if the programming allows it or they can also be developed on stand alone blockchains. For instance Bitcoin has the Bitcoin blockchain and Ethereum has the Ethereum blockchain. Ethereum also allows developers to easily create DAPPS(decentralized applications) on it’s blockchain. Most of the cryptocurrencies that are available are actually built using the Ethereum blockchain. The blockchain shows every single record of bitcoin transactions in order, dating back to the very first one. This revolutionary techonology brings scalability and complete transaction transparency. Note: This means that if you were to create a Bitcoin wallet your transactions will be available to view publicly. However this doesn’t mean an invasion of privacy. A Bitcoin wallet address will look something like this: 1Fcrf642Ca1DXm8CetAuU1x1nVPzgBBBEF There is no name or personal data attached. The only information available are the transaction records. How many Bitcoin the wallet currently has and all previous transactional data. This does not include names of any vendors or if making a purchase it does not include what was purchased. A blockchain explorer can be used to search transactional data.
A blockchain explorer is used to search for all transactional data dependent on the explorer. There are different explorers for different cryptocurrencies. A blockchain explorer for bitcoin can be found here.
Give it a try and look up anyone’s Bitcoin address. It can even be a random address found online. All transactional data will be shown.
Centralization or Centralized refers to an organization, or entity which is controlled by one or more individuals or entities. For instance almost every retailer store offline or online would be centralized including the local mom and pop grocery store to the giant financial institutions.
Cold storage often interchangeably used with the term cold wallet refers to a cryptocurrency wallet which is completely offline. For example the most well known cold storage provides would be a company called Ledger and a company called Trezor. Cold storage wallets are usually in the form of a piece of hardware that look like USB sticks. Paper wallet are seen as cold storage to most people however there is an argument to be made due to the fact that in order to create a paper wallet this has to be done online through a website which may or may not store your private keys which has led to fraud and theft in the past.
A confirmation is the process of confirming a transaction by the network. When sending cryptocurrencies a transaction is unconfirmed until verified by the network. Once verified Bitcoin transactions are irreversible.
Cryptography is basically mathematical equations and algorithms used to secure information. In the case of cryptocurrencies cryptography is used to sign transactions, secure addresses, and to verify the blockchain.
There is no controlling individual or entity in a decentralized network. This is one of the key features of Bitcoin and most cryptocurrencies. The network is peer to peer and controlled by the users not a central agency, financial institution or the government.
If you have ever seen a credit card statement where 2 identical transactions are charged when there was only supposed to be one. This is a double spend and this happens quite often.
Bitcoin’s confirmation system makes it nearly impossible for double spending to occur.
Ethereum was created by genius college dropout Vitalik Buterin who is actually a Canadian from Toronto.
He was awarded the Thiel Fellowship. This is a prestigious award created by Peter Thiel, the Co-Founder of Paypal. $100,000 dollars is awarded to a young adult who leaves post secondary education for 2 years in pursuit of their dreams. They also get mentored by professionals in all fields of work including the likes of Peter Thiel and Mark Zuckerberg(Facebook).
Ethereum is the 2nd largest cryptocurrency by marketcap only ousted by Bitcoin. It is a revolutionary cryptocurrency which allows anyone to create Dapps and cryptocurrencies on top of the Ethereum blockchain. Hence almost all of the cryptocurrencies that we hear about today are known as ERC20 tokens which are all built on the Ethereum blockchain.
Fiat currencies is just regular money such as the national currency of a country. Fiat means “by decree,” and these currencies have value because some central authority has decreed that they have monetary value.
FOMO stands for the phrase ” Fear Of Missing Out.” This is a common phrase used in cryptocurrency communities. Fomo refers to when individuals start buying up an asset that has recently experienced good gains. These individuals experience a so called “Fear Of Missing Out” so they begin to buy the asset.
A fork is a change in a virtual currencies rules or protocols. There are 2 types of forks a hard fork and a soft fork. Hard forks use a new protocol of which the old protocol is no longer compatible with the new protocol. The only thing to remember is a hard fork usually results in the creation of a new cryptocurrency which is not compatible with the protcols found in the cryptocurrency it originated from. An example of this is when Bitcoin hardforked in 2017. A new cryptocurrency was created known as Bitcoin Cash(BCH). Since then there has been several hard forks to Bitcoin. Many people ask what’s with all these Bitcoin such as Bitcoin Cash, Bitcoin Gold, Bitcoin Private and so forth. They aren’t actually Bitcoin they are new currencies originating from Bitcoin but now have completely new protocols. A soft fork is backwards compatible. The rules are changed or updated but they are still compatible with the old protocol.
The term FUD stands for “Fear, Uncertainty, and Doubt” The idea behind this is spreading FUD about a cryptocurrency to manipulate the price of a currency. FUD can be seen on small community forums to well known news sites. Misleading, inaccurate, information is spread, intentionally or unintentionally creating FUD. This is commonly used to bring an assets price down to purchase at a lower price or perhaps traders want to short a particular currency. When trading assets a short would be to predict the price going down of an asset in the future. Which is a certain type of trading strategy.
The Halving is the point in time when Bitcoin mining rewards are literally halved. This happens every 4 years and the last one just happened in May of 2020. Since the first halving the price of Bitcoin has drastically rose in a short time period after the halving day. This has resulted in halving parties and unrealistic expectations for the future price of Bitcoin after a halving. This years halving was quite different. The price did go up however previous to this happening the Corona virus pandemic or an unforeseeable something created a massive plunge in the price of Bitcoin to under $5000 USD. The price has since recovered but has yet to break what it was trading at before the pandemic.
A hash is commonly referred to as a TXID which is a transaction identifier which lets anyone look up the details of a particular transaction. A block explorer is used to look up a txid. The difference between searching for a wallet and a hash is a wallet search will show the entire transactional data of the wallet since its creation. A txid shows the details of a single particular transaction.
A hashrate is the rate at which mining hardware mines cryptocurrencies. For example the Bitmain Antminer s9 used to be the most commonly used Bitcoin miner, with the low end model having a 13,5ths (terahertz per second) hashrate.
HODL or “Hold On for Dear Life” was actually derived from a mispelling of the word hold. Crytpocurrency markets experience immense price fluctuation so instead of panicking some would say “Just HODL.”
An initial coin offering or ICO is a vehicle to raise funds. To raise funds an investor would receive the cryptocurrency created by the ICO company. In the traditional world this is sort of like an IPO. For the most part ICO’s are highly volatile and unregulated. Many people became wealthy from investing in ICO’s and creating ICO’s. On the other hand ICO scams are everywhere and people have lost their life saving investing in ICO’s.
KYC is not a cryptocurrency term but is commonly used due to the previous lack of regulations in the industry. KYC stands for “Know Your Customer”. It is the process of identifying and verifying a clients identity. There are regulatory requirements for KYC practices which are different in every country.
Mining is the process in which Bitcoin are mined. An analogy can be made to mining gold. Instead of physical mining, cryptocurrencies that run off of Proof of Work are mined digitally. Right now the only thing to remember is Bitcoin is mined using the proof of work protocol. Complex mathematical calculations are made in order to mine Bitcoin. Bitcoins are mined when transactions are verified. A piece of hardware is used to do these calculations. Any hardware with the exact same configuration has an equal chance at mining Bitcoin. So like “striking gold” it can come down to luck. However that is only comparing one piece of hardware. Mining farms have thousands of devices. Basically whoever has the most hardware devices that can do the fastest calculations has a better chance at mining Bitcoin or any cryptocurrency on the POW protocol.
A private key allows access to a specified wallet. A good analogy is made to a password. This is the reason a private key should never be shared. The public key or public address can be shared to anyone. An easy way to think of this is comparable to an email. An email address can be shared, so the email address is the public key, however the only person who can receive or send emails is the person who created that email address. Hence unless the password(private key) is shared that email address is created for the sole purpose and use of the owner.
Proof of stake is another way to mine cryptocurrencies. With POS mining comes down to the amount of that particular cryptocurrency is staked. For example Ethereum is moving from POW to POS shortly. Right now mining Ethereum requires hardware just like Bitcoin. After the switch mining Ethereum will be based on the amount of Ethereum is staked by anyone. Stake meaning held upfront. Proof of stake is a lot more efficient, capital and environmentally friendly. POW mining consumes so much electricity. Currently the amount of electricity that Bitcoin miners use is more than the entire country of Switzerland.
Proof of work mining requires the use of hardware to do complex calculations in order to mine Bitcoin by verifying transactions. The POW system many argue is a flawed system due to the enormous amounts of power required to mine Bitcoin.
Public addresses can be shared and are used to show another party a receiving address. The only thing to remember is when creating a cryptocurrency wallet sometimes 2 addresse or keys are shown most likely labeled public and private. Only share the public one.
A pump in dump is the manipulation of a stock or in this case a cryptocurrencies price. This can take various formats. Trading groups, forums, communities, meetups, and even unreliable news sources can cause this. Usually the group that starts the pump purchases the cryptocurrency and releases news, graphs, expectations through various networks. This then is supported by a buying spree that starts from the pump group and ends with the pump group dumping all the coin they bought at a lower price. This is illegal in traditional finance however this still happens in the unregulated cryptocurrency world.
The creator(s) of Bitcoin is known as Satoshi Nakamoto. The reason for the plural is no one knows who created Bitcoin just that the pseudonym Satoshi Nakamoto was used. For this reason many believe Satoshi Nakamoto was a group not a single individual. The idea to do this was a stroke of ingenuity. Forget about what Bitcoin is and how it works to change our financial system and the potential benefits it can bring. If Bitcoin was created using a real name many would argue that this technology would’ve never came into the limelight just like many technologies that are stopped or bought by the government or the people who want to control that technology.
Often the word token is used in the cryptocurrency industry. A token is just another word for cryptocurrency. Cryptocurrencies built on the Ethereum platform are called ERC-20 tokens, hence the word token started be used.
A cryptocurrency wallet is like an actual wallet. Just like people put cash in their wallets people put cryptocurrency into their virtual wallets. There are various types of wallets please read our in depth article on wallets for further explanation.
A whale refers to a large buyer or seller. Since Bitcoin transactions are transparent people are able to view the amount of funds being moved sold or bought. These amounts can have an affect on the market since some whales move over $100 million dollars at a time.
A white paper in actuality is supposed to be a technical authoritative report or guide that informs readers concisely about a particular topic. It is meant to help readers understand an issue, solve a problem, or make a decision. Most cryptocurrencies should have a white paper. This should not be a simple one page document. When the ICO boom happened many companies did not have white papers, some of them were simple one pagers, while others were simply written by an expert paid by the company doing an ICO. This is not investment advice but do not base everything especially in the cryptocurrency industry on a white paper.