Glossary

We are all learning something new everyday, and in this case, about cryptocurrencies. We've managed to put together some commonly used terms that might help you better understand this exciting new technology.

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Algorithm

a piece of software code written to automatically perform a set of instructions

 

Altcoin

the general name given to alternative cryptocurrencies to Bitcoin

 

Arbitrage

the nearly simultaneous purchase and sale of a cryptocurrency on different exchanges in order to profit from variations in its price

 

Block

a collection of cryptocurrency transactions bundled into a predetermined-sized group

 

Blockchain

blocks that are interlinked and then secured by cryptography; permanent ledger of all cryptocurrency transactions

 

Bot

a software application that runs automated and often repetitive tasks at extremely high speed over the Internet

 

Cold Storage

moving cryptocurrency offline to protect it from hacking theft; examples include paper wallets (printing out the public and private keys, as well as QR code), USB drive, or a specifically designed hardware wallet, like the Ledger Nano S or the Trevor

 

Confirmation

validation of a transaction block, much like a stamp of approval; process may take between 30 seconds and 30 minutes

 

Crypto currency

alternative currency to traditional fiat currency that is based on mathematics and cryptography, rather than government-issued bill-and-coin

 

Decentralized

not under the control of a government or corporation; free of central authority manipulation, inflation, and extraneous fees

 

DDoS

Distributed Denial of Service; attack on a network, server or computer using a large number of externally-controlled computers to tie up bandwidth and overwhelm their system

 

Exchange

online resource for exchanging between cryptocurrencies or fiat for cryptocurrencies

 

Exploit

piece of software, bot or algorithm that takes advantage of a bug or vulnerability in a program or application to cause unanticipated effects, such as DDoS

 

Fiat Currency

not money to buy an Italian car; money issued by a government that is not backed by commodities, such as gold and silver; value is based on faith

 

FOMO

Fear Of Missing Out; emotional feeling that prompts an often illogical reaction to rising prices; jumping into a skyrocketing investment out of the fear of 'missing the boat'

 

Fork

when a blockchain splits into two chains due to an alternative upgrade, chronic inefficiencies with the existing blockchain, or the profit motive for the mining community; divided into soft fork (alternate divergence, requiring only a majority of miners to upgrade to the new blockchain) and hard fork (permanent divergence from the original blockchain, forcing all miners to upgrade)

 

FUD

Fear, Uncertainty, and Doubt; baseless negativity knowingly spread in order to drive prices of a cryptocurrency lower

 

Genesis Block

the very first block in a blockchain, usually mined by the cryptocurrency's creator

 

Hack

breaking in to a network, system or computer to access private data; may be accomplished physically or through another computer

 

Hash Rate

the speed at which complex mathematical calculations (hashes) are performed in the mining of cryptocurrency data blocks; the higher the rate, the more profitable for the miner

 

ICO

Initial Coin Offering; the introduction of a new cryptocurrency prior to public release; used to raise money for further research and funding, similar to IPOs on stock exchanges

 

Market Capitalization

No. It's not MARKET. This term refers to a cryptocurrency's price multiplied by all outstanding shares or coins; see coinmarketcap.com

 

Mining

the process of using computer power to solve complex computations in a block of transactions; the system that succeeds is given rewards of newly generated cryptocurrency and transaction fees associated with the block of transactions

 

Mining Pool

several miners joining together to share processing power for cryptocurrency block mining; rewards for successful blocks are distributed evenly among the team

 

Node

a computer that possesses a copy of the blockchain and is working to maintain its integrity

 

Offline Storage

same as Cold Storage; storing cryptocurrency offline in the form of a paper wallet, on a USB drive, or on a hardware wallet, such as a Trevor or Ledger Nano S

 

Peer-to-peer

also P2P; transacting between two individuals without the involvement of a central authority

 

PoS Mining

No. It doesn't mean that. Proof of Stake; holding or 'locking up' a cryptocurrency's coins in a wallet to prevent a hostile takeover by a majority holder of the coins; a reward is given to the holders; also, PoS limits miners to mining up to the same amount of coin they hold

 

PoW Mining

Proof of Work; where a computer's dedicated hash power used for block validation is verified

 

Private Key

a string of alphanumeric characters associated with a wallet that provides the address for the contents; should never be shown to the public

 

Public Key

a string of alphanumeric characters associated with a wallet that provides the address for deposits; provided to pay for transactions

 

Pump and Dump

to heavily promote a cryptocurrency to build a strong following, then when prices have significantly increased, sell all holdings into the market, causing the price to collapse

 

QR Code

matrix barcode that stores the dedicated public key for a cryptocurrency wallet; usually read by a QR code reading software application on smartphones

 

ROI

Return on Investment; benefits the investor receives above the initial capital investment; a higher ROI indicates a more profitable investment

 

Satoshi

the smallest subdivision of a bitcoin currently available (0.00000001 BTC)

 

Scrypt

alternative proof of work system to SHA-256; designed to be beneficial to CPU and GPU miners, though not to ASIC miners

 

Segwit

short for Segregated Witness; soft fork change in Bitcoin's transaction format activated on August 24, 2017

 

SHA-256

cryptographic function used as the basis for bitcoin’s proof of work system

 

Staking

Holding a cryptocurrency's coin over a period of time, without lending or trading it

 

Token

a cryptocurrency's symbolic coin used in transactions and created as a result of mining

 

Transaction Fee

a small fee charged for transferring coin, which is awarded to the miner or mining pool that validates the transaction; fee amounts vary according to the speed chosen for the validation process

 

Wallet

a software- or hardware-based storage location for cryptocurrency coins; public and private keys are associated with the wallet for buying and selling transactions

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