A basic vocabulary for crypto newbies.
2FA – Two Factor Authentication. This requires either an emailed password/confirmation or a QR code to either access or transfer funds.
2nd Layer/Protocol Layer – An additional software layer running on top of the existing blockchain to allow for special features or Dapps to be run.
51% Attack – A hypothetical scenario in which 51% of the network is controlled by a single person of group of people in order to manipulate it.
The processing power needed to achieve this on the bitcoin network is almost unfathomable and therefore virtually impossible at present.
Alt-coin – Alternate Coin. Any digital coin/currency that came after Bitcoin (i.e. anything but bitcoin). Also known as crypto-coins or crypto-currencies.
Algorithm – A complex mathematical equation that is employed on a core level on a blockchain to prevent hacking and predominantly a 51% attack. This algorithm is what the miners have to solve in order to “find” a block.
A.M.L / K.Y.C – Anti Money Laundering / Know Your Customer.
These are specific laws that relate to bitcoin exchanges worldwide.
Arbitrage – The buying of a crypto-coin from one place and selling it at a higher rate in another location. Often results from harsh government control. This process normalises prices across exchanges.
Bad Actors – Members of the network who seek to disrupt, coerce, manipulate or destroy it. Any one acting against the growth of a network.
Block – A combination of many sets of data that includes the newest completed algorithm and a list of transactions that have occurred. On the bitcoin network the block times average exactly 10 minutes apart.
Block Chain – The result of linking all the blocks together starting from the genesis block to the present. Once a block is mined it is stored forever on the chain and can never be altered. Blockchains are “immutable”.
Cloud Mining – SCAM No cloud mining contract pays out any decent return. Look at the terms ans conditions and you will realise that 95% of your “profit” is taken to pay electricity. You are better off buying BTC and Hodl.
Consensus – “Not quite unanimous.” Inorder to change a decentralised network up to 95% of participants (miners, nodes, developers) have to agree. This can lead to struggles in upgrading the network or code.
Crypto – Short for Cryptographic or Cryptography. An encrypted code.
D.L.T – Distributed Ledger Technology. Synonymous word for blockchain.
The concept of distributing information across a vast inter-connected grid.
DAPP – Decentralised Application. An application running on a blockchain.
D.A.O – Decentralised Autonomous Organisation. A way of running an organisation that doesn't rely on a hierarchal structure. The antithesis of a corporation.
Decentralised – Having no specific point of failure. Power, wealth and responsibility are all highly distributed instead of funnelled to an apex.
Difficulty – How hard the current block algorithm is to solve. The difficulty re-adjusts in respect to the total hash power online at any given time.
Escrow – A middleman service that can settle deals with untrusting parties. Both parties essentially give the product or money to the escrow service and neither are released until both parties have given over their side of the deal.
Exchange – A place to buy or sell crypto-currencies or tokens.
F.U.D – Fear. Uncertainty. Doubt. The enemy of bull (rising) markets.
Faucet – An app or website that will give away free crypto-coins.
Fee – The cost of moving some crypto-currency from one wallet to another.
Fiat – Traditional money systems. For example Dollars, Euros, Yen, Pound.
Fork – To have 2 different versions of the same code running independently of each other. From one they forked into 2 different chains. This is how Ethereum Classic was born. Dash is also a deliberate fork from Bitcoin.
Genesis Block – The very first implementation of the code. The first block from which point the chain was born and will theoretically live indefinitely.
Hash Power – The amount of processing power (in Hashes) being used for or by any specific network or computer contributing to that network.
Hodl – Hold. To store crypto-coins instead of trade with them. Also Hodler.
“Hold On for Dear Life.”
I.C.O – Initial Coin Offering. Similar to IPO on the stock market. A tech company may issue an I.C.O and sell crypto-tokens in order to raise revenue.
Immutable Ledger – A decentralised transcript of everything that has ever happened on a network that cannot be destroyed or altered in any way.
Liquidity – How much availability there is of a coin/token at a point in time.
Market Cap – Market Capitalisation. The total amount of coins/tokens that in existence currently, multiplied by the price of each coin/token.
Mining – The process of solving a difficult algorithm and recording network transactions using computers in reward for a certain amount of crypto-coins.
Node – An actively participating copy of the blockchain. Nodes act as servers that perpetuate the network. Some nodes require an amount crypto-currency to be “staked” and then get paid for securing transactions.
P.2.P – Peer to Peer. Interacting directly with another user without using any sort of middleman or a large centralised platform. Transactions are P2P.
Ponzi Scheme – A ponzi scheme is a scam design in which the newest members financial contributions are distributed the the older members. This scam relies upon more and more people signing up until at some point it collapses. Bitcoin is very falsely accused of being a ponzi on occasion.
Cloud mining and other false representations do exist and are indeed ponzis
Proof of Stake – A way of creating trust on a network. P.O.S requires anyone who is participating in validation of the blockchain to commit a certain amount of currency which will be forfeited from any “bad actors”.
Proof of Work - A way of creating trust on a network. P.O.W requires computer processing power to validate transactions happening on a blockchain. The cost of the infrastructure therefore incentivises the miners to stay consistent so that the chain they are mining is the majority chain.
Private Key – This is the password to your funds. KEEP THIS SECRET!
Public Key - This is the address for people to send funds to you. It can be displayed on the internet to receive tips or used in real to accept payment.
QR Code – A visual representation of your public key that can be scanned.
Recovery Seed – A backup series of words that is used to restore a wallet. Never show anyone these words, or else they can steal your entire wallet.
Segwit – Segregated Witness. An add-on (Protocol) layer to the Bitcoin network that will help to speed up transactions and lower fees.
Ticker – Exchange ID. Bitcoin=BTC/XBT, Ethereum=ETH, Monero=XMR.
Token – A sort of “share” in a company that runs on an existing blockchain. Tokens are traded synonymously as actual crypto-currencies are.
Wallet – This is the way you store your coins/tokens. Each way has certain advantages or limitations. All wallets are free to use, although obviously hardware wallets will cost an establishment fee.
Client: A Full Node wallet, requires time to sync (download blockchain).
Or Lite Client wallet, a light desktop version of the software.
Web: A third party wallet provider who is in control of the private key.
Hardware: An encrypted usb drive that provides sole access to a wallet.
Paper: A physical piece of paper that holds the public key offline.