Ready to get into the blockchain and crypto game? Well, you’re gonna have to learn some new lingo by learning some blockchain definitions. Ever since Satoshi Nakamoto, the mysterious creator of blockchain and the first Bitcoin miner (see definition below), invented cryptocurrency in 2008, the vocabulary used in the blockchain ecosystem has been notoriously obscure, highly technical, and sometimes made up on the fly. For those wanting to start a crypto company, learn how to get insurance for a blockchain business, or otherwise join the trillion-dollar crypto market – or just understand what the heck Elon Musk, 50 Cent, and Twitter are talking about, this glossary of blockchain and crypto meanings is for you.
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- Address. A series of numbers and letters that uniquely identifies the place where you send or receive virtual currency — sort of like your TikTok handle without the dancing or anyone knowing who you are. Different cryptocurrencies use different address formats. For example, Bitcoin addresses start with 1, 3, or bc1. Dogecoin, another cryptocurrency, uses a capital D followed by a number or capital letter.
- Altcoin. Altcoin (short for alternative coin) is any cryptocurrency other than Bitcoin. There are actually thousands of altcoins, including Binance Coin, Ether, and Shiba Inu. Some altcoins have specific purposes. Tether, for example is a “stablecoin” — an altcoin whose value has less volatility than others because it’s tied to the U.S. dollar.
- Bitcoin. Abbreviated to BTC, Bitcoin was invented by an anonymous cryptographer called Satoshi Nakamoto (who has since disappeared). It was the first cryptocurrency – basically money that lives in digital form only. Though Bitcoin is used for investments, it was originally conceived as a “peer-to-peer” currency (money exchanged between two entities with no regulatory agencies or banks butting in). There’s a finite amount of Bitcoin – 21 million – to maintain scarcity and preserve its value.
- Bitcoin cash. Bitcoin cash is an off-shoot of the original Bitcoin designed with smaller blocks that (in theory) can be transacted faster – making it more competitive with real money.
- Bitcoin energy consumption. The amount of electricity it takes to fuel all the digital transactions that Bitcoin is comprised of. Crypto is a power hog and many worry about the toll on carbon emissions.
- Bitcoin exchange. Where Bitcoin (and other cryptocurrencies) are bought, sold, and traded. A few exchanges include Coinbase, Crypto.com, and Kraken.
- Bitcoin mining. Adding a new block to the blockchain is called mining. It takes a lot of computational power to determine which block should come next in the chain – and whoever figures it out is rewarded with the equivalent of digital gold.
- Block. A block is a record of all the transactional information that has previously occurred, as well as new information. Once all of that information has been verified, the block is closed and a new one is added.
- Blockchain. A digital ledger or log of all the information about that specific piece of currency (when it was bought and sold, where it’s stored, etc.).
- Blockchain explorer. Explorers are like search engines for blockchains, allowing you to look up transaction details of blockchains, such as the amounts, the sources and destinations, and history.
- Blockchain network. All of the hardware and software that process, record, and store specific blockchains, as well as the people who observe, analyze, and validate the data. There are a few different types of blockchain networks: Permissionless (public networks that anyone can join without approval); permissioned (private networks, also called “managed,” that are controlled by a central authority); Hybrid (users must be approved to join but the information on the network is accessible to all).
- Coin. Basic element of currency created on its own blockchain such as Bitcoin and Dogecoin.
- Coinbase. A publicly traded cryptocurrency exchange platform where you can buy and sell cryptocurrencies. Exchanges allow people to get into the crypto game without having to mine their own blocks.
- Cold wallet. An external hardware storage device, sort of like a thumb drive, that stores your cryptocurrency. It’s “cold” when it’s not connected to the Internet. A few products in this category include the Ledger Nano X, the CoolWallet S, and SecuX.
- Computational power. How fast a computer can perform certain tasks based on the speed of the central processing unit (CPU). For applications that require lots of complex calculations – such as mapping the human genome or cryptocurrency, regular home laptops won’t cut it – instead, supercomputers are used.
- Cryptocurrency. Digital money whose value isn’t based on physical collateral such as gold, but on its own digital record of its validity. Thousands of computers perform calculations independently of each other to analyze these records to determine which one is the most accurate and up to date. Because computers determine the accuracy of the crypto’s history – not banks or governments as in the case with physical currency – crypto is considered more secure.
- Cryptocurrency wallet. Securely stores your crypto. You can use a “cold” hardware wallet that’s not connected to the Internet or a digital “hot” wallet that’s online only.
- Decentralization. Decentralization is one of the defining characteristics of cryptocurrency. It means that multiple entities are responsible for governance over the system instead of one centralized agency such as the government, a bank, or a compancy.
- Decentralized Applications (DApps). Open-source software programs built on a blockchain that let individual users communicate with each other on peer-to-peer networks. BitFlyer, QuipuSwap, and OpenSea are popular dApps for buying and selling cryptocurrencies.
- Decentralized finance (DeFi). Like banks, decentralized finance offers services such as saving, borrowing, and lending money. You can also earn interest on your savings. But unlike banks, DeFi runs on peer-to-peer networks, so there’s no middleman to pay financial fees to. DeFi is making in-roads in the world of online payments with apps like Solana Pay, MoonPay, and Rentberry.
- Digital Gold. Instead of stashing all of your physical gold in a secret wall, you can pay someone to store it in a vault for you. This “digital gold” can be used as an investment or as a way to protect your money in a country that has a lot of instability in the economy.
- Distributed ledger technology (DLT). DLT refers to the hardware and software that process and store all the various segments of an entire piece of information. With no centralized administrator, the software itself contains its own records of all of the transactions it’s gone through — and once those transactions are recorded they can’t be changed. Blockchain is a type of DLT, but there are others, including Ethereum.
- Double spend. A theoretical problem that exists in cryptocurrency where someone takes advantage of the lag time between validation of the last block and the next block in the chain. A hacker could insert a secret block before the previous block is verified. If it happens, the hacker can use the same digital currency twice before the theft is discovered.
- Ethereum. Ethereum is a technology, built on blockchain, that includes a peer-to-peer network, DApps, a community, and more. Ethereum has a cryptocurrency called Ether (ETH).
- Fiat. The somewhat derogatory term crypto enthusiasts use for real money, such as the U.S. dollar, that’s regulated by the government. It’s “fiat” because it represents something else – such as gold – that backs the value of the currency.
- Genesis block. The first block Bitcoin ever mined and the foundation of Bitcoin’s blockchain.
- Hard fork. When the community that manages a specific cryptocurrency no longer agree on the rules, a new currency branches off the original causing a hard fork. Bitcoin cash is a hard fork of Bitcoin.
- Hash. Hashes are algorithms that can accept inputs of any size and generate outputs that are all the same size. They’re an important part of cryptography because blocks in a blockchain have a maximum size, yet each block in the chain contains progressively more information. Hashes make sure that the verification code remains the same size in every block.
- Hashrate. The amount of computational power a network uses to burn through the block-verification process.
- HODL. Hold On For Dear Life. There’s a lot of volatility in the crypto world and investors pride themselves on clinging to their crypto despite the ups and downs.
- Hot wallet. A digital wallet used to store crypto for buying, selling, and saving. This article on hot wallets offers a comprehensive review of various products.
- Immutability. Each block in the chain contains its own record of the transactions its undergone and once these are verified, they can’t be changed.
- Initial Coin Offering (ICO). Like an IPO, an ICO is when a crypto creator sends investors some of the crypto in exchange for their investment to launch the currency.
- Know Your Customer (KYC). The KYC rule for financial companies stipulates that it’s the bank’s responsibility to make sure their clients aren’t doin anything illegal, such as money-laundering. The Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) would extend KYC rules to crypto transactions larger than $3,000.
- Marketing capitalization. The total value of a cryptocurrency, such as Bitcoin. To get a crypto’s total value, multiply the total number of coins in circulation by the price.
- Mathematical function. The math that underpins crypto. (TLDR; it’s very complicated.)
- Miner. A miner is a person who performs the validation process of blocks in a blockchain using a high-powered computer. While Bitcoin has a maximum amount of possible coins (21 million), there’s no maximum on Ether, but all new coins must be mined. Miners are rewarded with crypto when they mine a new block.
- Node. A computer on a peer-to-peer network.
- Nonce value. A number that can only be used once for the same purpose. If you send a friend some crypto coins, each coin will have a unique nonce value.
- Non-fungible tokens (NFTs). Digital files that represent things in the real-world, such as a piece of art, music, or in the case of Twitter founder Jack Dorsey, an original tweet. NFTs are built on blockchain so in theory that contain their own stamp of authenticity.
- Proof of Authority (PoA). The typical blockchain is a so-called “trustless” system; computers validate each block, not people. But this process takes a lot of time, partly because the calculations are incredibly complex and partly because they are spread out over many computers with no single governor. It also requires enormous amounts of energy. The Proof of Authority method allows certain trustworthy individuals on the network to vouch for the authenticity of a block – instead of waiting for the numbers to come in.
- Proof of stake (PoS). This is another method to avoid waiting for all the blocks in a chain to be validated. It allows people to authenticate blocks using their own crypto as collateral.
- Proof of work (PoW). The OG method of validating block, PoW is an algorithm that shows how much computational power a computer expended in the process of validating a block.
- Public ledger. Unlike banks, where only you and the financial institution know your transaction history, blockchain’s ledgers are public. While personal identities are private, every detail about the blockchain is available for every member of the network.
- Public-private key. An asymmetric encryption system that allows people to safely and securely send and receive cryptocurrency without third-party verification. Currency is sent using a public key (usually an address, which anyone can access); the recipient unlocks it using the private key that only they have access to.
- Segregated Witness (SEGWIT). Introduced by Bitcoin developer Dr. Pieter Wuille as a solution to reduce the size of blocks in a blockchain and speed up the validation process for miners. SEGWIT separates the authentication signature from the transaction information in a block and reduces the costs per transaction. Not all exchanges work with SEGWIT.
- Smart contract. Computer code that contains the rules and agreements for a particular blockchain. In theory, smart contracts make blockchain more secure than written contracts because they can’t be changed, they’re verified across the entire network by multiple people, and they can’t contain any mistakes.
- Token. A token is a unit of crypto currency that’s not built on its own blockchain. Bitcoin, Dogecoin, and Ether are coins because they were each created from their own blockchains. But other cryptos, such as Shiba Inu and Tether, are tokens because they are built using existing open-source blockchain code (in the case of Shiba Inu and Tether, Ethereum is the underlying technology.)
- Transaction. A transaction is exactly what you think – an exchange of cryptocurrency. But in the crypto world, a transaction is public so it can be verified by the network. Every transaction contains its own record, which includes the originating address, the recipient’s address (also known as a public key), and the amount to be exchanged.
- Web 3.0. If the current 2.0 Internet landscape is dominated by “Big Tech” – Amazon, Google, Meta to name a few – Web 3.0 decentralizes and democratizes information by using blockchain technology. Some believe Web3 would be more secure and stable, but others argue that the anonymity inherent in blockchain makes it a target for hackers, money launderers, and cybercrime.
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