Bitcoin has created a new world of vocabulary to articulate its universe. Some terms are completely new (ex. Blockchain, Cryptocurrency, Proof of Work) while others adapt existing words for new purposes (ex: Wallet, Address, Mining). As I started to write posts about Bitcoin, I realized that most people are not familiar with definitions of common terms used. Because of this, I have compiled a list to help readers comprehend and understand articles that cover Bitcoin and cryptocurrency.
ASIC: 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.
BTC: A common unit to describe one bitcoin, as USD represents one United States Dollar.
Bit: There are 1,000,000 bits per bitcoin so 1 bit = 0.000001 BTC. Cheaper items are denominated in bits.
Blockchain: type of distributed ledger, comprised of unchangeable, digitally recorded data in packages called blocks (rather like collating them on to a single sheet of paper). Each block is then ‘chained’ to the next block, using a cryptographic signature. This allows block chains to be used like a ledger, which can be shared and accessed by anyone with the appropriate permissions.
Bitcoin: Bitcoin with a capital ‘B’ is used to describe the network or protocol that bitcoin runs on, bitcoin with a lowercase ‘b’ represent the digital token or money that is used on the Bitcoin network.
Bitcoin Address: Also known as a public key, is similar to an email address. Give your bitcoin address to anyone who you want to receive a payment from. It is best practice to use a new bitcoin address for each of your transactions.
Block: A block is a group of bitcoin transactions that are being processed & confirmed. Roughly every 10 minutes a miner will find a new block, which will confirm any bitcoin transactions that were processed during that 10 minutes.
Confirmation: A confirmation means your transaction was processed by bitcoin miners and added to a new block on the blockchain. It is generally accepted that after 6 confirmations your transaction has been set in stone globally and cannot be reversed by anyone.
Difficulty: In Proof-of-Work mining, 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: When a malicious user tries to send their bitcoin to two different people at the same time to pay for several services with the same bitcoin. It is up to miners to decide which of the transactions are accepted into the network. One transaction will receive confirmations, the other will be rejected by the network. Most users never have to worry about double spend attacks, they are rare and difficult to pull off.
Mining: Bitcoin mining is making computers do complex mathematical calculations for the Bitcoin network to confirm users bitcoin transactions in a block. Bitcoin miners greatly increase the security of the network and are rewarded with new bitcoins and transaction fees for their efforts.
Full node: A node that fully enforces all of the rules of the blockchain.
Gas: 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.
Hash Rate: Is a measurement of computer processing power of bitcoin miners. Miners earn bitcoin for their share of the network hash rate, so they are incentivized to have the highest hash rate possible. This works out for everyone because the security of the Bitcoin network increases as the network hash rate grows.
Node: Any computer that connects to the blockchain network.
Private key: Every public key (bitcoin address) has a private key associated with it. A private key is a secret piece of data that proves your right to spend bitcoins from your wallet. Your private key(s) are stored in your computer if you use a software wallet; they are stored on some remote servers if you use a web wallet. If you don’t encrypt your bitcoin wallet it makes it easier for someone to steal your private keys. Anyone with access to your private keys can spend your bitcoin from any computer worldwide.
Proof of Authority: 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: 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: A system that ties mining capability to computational power. Blocks must be hashed, which is in itself an easy computational process, but an additional variable is added to the hashing process to make it more difficult. When a block is successfully hashed, the hashing must have taken some time and computational effort. Thus, a hashed block is considered proof of work.
Protocols: Sets of formal rules describing how to transmit or exchange data, especially across a network.
Satoshi: The penny of bitcoin. 1 Satoshi = 0.00000001 BTC This is the smallest measurement of bitcoin.
SHA 256: The cryptographic function used as the basis for bitcoin’s proof of work system.
Smart contracts: 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: 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.
Token: A digital identity for something that can be owned.
Transaction block: A collection of transactions on the bitcoin network, gathered into a block that can then be hashed and added to the blockchain.
Transaction fees: Small fees imposed on some transactions sent across the bitcoin network. The transaction fee is awarded to the miner that successfully hashes the block containing the relevant transaction.
Wallet: Where you store your bitcoins. A bitcoin wallet is a program that manages all of your bitcoin addresses and allows you to save or spend your bitcoin.
ALTCOIN = Any cryptocurrency other than bitcoin.
ASHDRAKED = A situation where you lost all your money.
BAGHOLDER = A person who buys and hold coins in large quantity hoping to make good profits in the future.
BEAR/BEARISH = Negative price movement
BTFD = Buy The Fucking Dip (an indication to buy a coin when it has dumped so hard)
BULL/BULLISH = Positive price movement
DILDO = Long green or red candles
DUMP = To Sell off a coin
DUMPING = Downward price movement
DYOR = Do Your Own Research
FA = Fundamental Analysis
FOMO = Fear Of Missing Out (A coin is pumping and you get the feeling it’s gonna pump more, so you buy high)
FUD = Fear Uncertainty & Doubt
HODL = Hold On for Dear Life
JOMO = Joy Of Missing Out
LONG = Margin bull position
MCAP = Market Capitalization
MOON = Continuous upward movement of price
OTC = Over The Counter
PUMP = Upward price movement
SAJ CANDLE = Huge green candle
SHITCOIN = A coin with no potential value or use
SHORT = Margin bear position
SWING = Zig zag price movement (Upwards and downwards)
TA = Technical Analysis
REKT = When you have a bad loss
REVERSE INDICATOR = Someone who is always wrong predicting price movements.
RSI = Relative Strength Index
WHALE = Very Wealthy trader/Market mover