Bitcoin Glossary | Pay Depot LLC
- Address - A secure identifier marked by a unique string of characters that enables payments to an individual or entity via blockchain transactions. It usually requires a private key to exclusively access the funds. For example, Bitcoin addresses are alphanumeric strings that begin with a 1 or 3; Ethereum addresses begin with '0x'.
- Altcoin - A cryptocurrency or a category of cryptocurrencies that are an alternative to bitcoin. Many altcoins project themselves as better alternatives to bitcoin in various ways (e.g. more efficient, less expensive, etc.).
- Bitcoin (BTC) - A type of cryptocurrency created by Satoshi Nakamoto in 2009. It was one of the first digital currencies that enabled instant P2P payments. Bitcoins are created through a process known as bitcoin mining that requires a massive amount of computing power. For more information, please see the Bitcoin whitepaper.
- Bitcoin Cash (BCH) - A type of cryptocurrency that was created in August 2017 and is essentially a clone of the Bitcoin blockchain but has increased block size capacity (from 1 MB to 8 MB) as a way to solve the scaling problem. For more information, please visit their official website.
- Block - Refers to a collection of data related to transactions that are bundled together with a predetermized size and are processed for transaction verification and eventually becomes part of a blockchain.
- Blockchain - A decentralized, digital ledger where transactions made in Bitcoin or other cryptocurrencies are recorded chronologically and publicly. The block contains information that, once it goes into the blockchain, it becomes part of the permanent and immutable database, connecting to other blocks in the blockchain like the links in a chain.
- Circulating supply - An approximation of the number of coins or tokens that are circulating in the public market. See also: total supply and maximum supply.
- Cryptocurrency - A type of digital currency that is generally decentralized and uses cryptography (i.e. data is converted into a format that is unreadable for unauthorized users) for added security, making it difficult to counterfeit or manipulate.
- DASH - A type of cryptocurrency based on Bitcoin software but has anonymity features that makes it impossible to trace transactions to an individual and other capabilities. It was created by Evan Duffield in 2014 and was previously known as XCoin (XCO) and Darkcoin. For more information, visit the official website for DASH.
- Decentralized - A state where there is no central control, power or function, or in reference to infrastructure, no central point of failure. See Vitalik Buterin's definition of decentralization.
- Decentralized applications (dApps) - A type of software program that runs on a decentralized P2P network rather than on a single computer. Although similar, it differs from smart contracts as it can have any number of participants on all sides of the market and it does not have to be financial. Ethereum is a popular development platform for creating dApps. For more information, see Vitalik Buterin's terminology guide.
- Distributed consensus - Collective agreement by various computers in a network and allows it to work in a decentralized, P2P manner without the need of central authority to deter dishonest network participants.
- ERC-20 - A type of token standard for Ethereum which ensures the tokens perform in a predictable way. This allows the tokens to be easily exchangeable and able to work immediately with decentralized applications that also use the ERC-20 standard. Most tokens released through ICOsare compliant with the ERC-20 standard.
- Ether (ETH) - A type of cryptocurrency that is used for operating the Ethereum platform and is used to pay for transaction fees and computational tasks. In the platform, transaction fees are measured based on the gas limit and gas price and ultimately paid for in Ether. For more information, see the Ethereum Foundation's official definition.
- Ethereum - An open source, decentralized platform based on blockchain technology created by Vitalik Buterin in 2013. It runs smart contracts on a custom built blockchain that allows developers to create markets, store registries of debts, and so on. For more information, please visit the Ethereum Foundation website or read their whitepaper.
- Ethereum Classic (ETC) - A type of cryptocurrency that is a continuation of the original Ethereum blockchain following the DAO attack in June 2016. Ethereum is essentially a hard fork of the blockchain that was formed to refund the money that was siphoned during the attack (around $50 million). Ethereum Classic assumes no hard fork occurred and is supported by those who believe in complete immutability of the blockchain. For more information, visit the website for Ethereum Classic.
- Fiat money - Refers to currencies that have minimal or no intrinsic value themselves (i.e. they are not backed by commodities like gold or silver) but are defined as legal tender by the government, such as paper bills and coins.
- Flipping - A type of investment strategy (popular in real estate investing) where you buy something with the goal of reselling for a profit later, usually in a short period of time. In the context of ICOs, flipping refers to the strategy of investing in tokens before they are listed on the exchanges and reselling them for a profit when they are trading in the secondary market.
- FOMO - An acronym that stands for 'fear of missing out' and in the context of investing, refers to the feeling of apprehension for missing out on a potentially profitable investment opportunity and regretting it later.
- FUD - An acronym that stands for fear, uncertainty and doubt. It is a strategy to influence perception by spreading negative, misleading or false information about something, as opposed to reasoned criticism.
- Gas limit - A term used in the Ethereum platform that refers to the maximum amount of units of gas the user is willing to spend on a transaction. The transaction must have enough gas to cover the computational resources needed to execute the code. All unused gas is refunded at the end of the transaction.
- Gas price - A term used in the Ethereum platform that refers to the price you are willing to pay for a transaction. Setting a higher gas price will make miners more incentivized to prioritize and validate that particular transaction ahead of those set with a lower gas price. Gas prices are typically denominated in Gwei. For more information on the various ether denominations, see this documentation.
- Genesis block - The first block of data that is processed and validated to form a new blockchain, often referred to as block 0 or block 1.
- Hard cap - The maximum amount that an ICO will be raising. If an ICO reaches its hard cap, they will stop collecting any more funds. See also: soft cap.
- HODL - A type of passive investment strategy where you hold an investment for a long period of time, regardless of market volatility. The term was made famous by a typo made in a bitcoin forum. Also referred to as 'buy and hold' or 'hold on for dear life'.
- Initial coin offering (ICO) - An unregulated means by which a cryptocurrency venture, typically early stage, can raise money from supporters by issuing tokens. It is often referred to as a crowdsale as ICO participants may potentially earn a return on their investments (as opposed to crowdfunding, where supporters donate money to a project or cause). Ethereum is currently the most popular platform for launching ICOs.
- IOTA (MIOTA) - Refers to the cryptocurrency and the name of an open source distributed ledger founded in 2015 that does not use blockchain (it uses a new distributed ledger called the Tangle). It offers features such as zero fees, scalability, fast and secure transactions, and so on. It is focused on the Internet of Things. For more information, visit the official website and the FAQs page for IOTA.
- Lightning Network - A low latency, off chain P2P system for making micropayments of cryptocurrencies. It offers features such as instant payments, scalability, low cost and cross-chain functionality. Participants do not have to make individual transactions public on the blockchain and security is enforced by smart contracts. For more information, visit the official website or the whitepaper.
- Litecoin (LTC) - A type of cryptocurrency that was created by former Google employee Charlie Lee in 2011. It offers features such as Segregated Witness and the Lightning Network which allows for faster processing at lower cost. For more information, visit the Litecoin website.
- Pre-sale - A sale that takes place before an ICO is made available to the general public to participate.
- Proof of Stake (PoS) - An algorithm that rewards participants that solves difficult cryptographic puzzles to achieve distributed consensus. Unlike proof of work or PoW, a person can validate transactions and create new blocks based on their individual wealth (i.e. stake) such as the total number of coins owned. One of the key advantages that PoS has over PoW is lower energy consumption.
- Proof of Work (PoW) - An algorithm that rewards the first person that solves a computational problem (i.e. mining) to achieve distributed consensus. Miners compete to solve difficult cryptographic puzzles in order to add the next block on the blockchain. It prevents spam and cyber attacks such as DDoS as it requires work (i.e. processing time) from the service requester.
- Pump and dump scheme - A scheme in which the development team (or short-term traders) hypes up a project without fundamental basis in order to pump up the price of the tokens temporarily and then sells their holdings immediately after launch to earn a profit. See the US SEC's investor alerton pump and dump schemes.
- Ripple (XRP) - Refers to the cryptocurrency and the name of an open source payment platform where the cryptocurrency (Ripple or XRP) can be transferred. The vision for the platform is to enable real-time global payments anywhere around the world. The Ripple payment protocol was built by OpenCoin which was founded in 2012. For more information, visit Ripple's official website.
- Segregated Witness (SegWit) - The process where the block size limit on a blockchain is increased by removing digital signature data and moving it to the end of a transaction to free up capacity. Transactions are essentially split (or 'segregated'), into two segments: the original data segment and the signature (or 'witness') segment.
- Smart contracts - An automated mechanism involving two or more parties where digital assets are put in and redistributed at a later date based on some preset formula and triggering event. The contract can run as programmed without any downtime, censorship, fraud or third party interference. For more information, see Vitalik Buterin's terminology guide.
- Soft cap - Generally refers to the minimum amount that an initial coin offering (ICO) needs to raise. If the ICO is unable to raise that amount, it may be cancelled and the collected funds returned to participants. See also: hard cap.
- Token - Crypto tokens enable the creation of open, decentralized networks, and provides a way to incentivize participants in the network (with both network growth and token appreciation). This innovation, made popular with the introduction of Ethereum, has given rise to a wave of token networks (e.g. prediction markets, content creation networks, etc.) and token pre-sales, or ICOs.
- Total supply - The total number of coins or tokens that are in existence, including those circulating in the public market and those that are locked or reserved. See also: maximum supply and total supply.
- Wallet - A store of digital assets such as cryptocurrencies, analogous to a digital bank account. Crypto wallets can be divided into two categories: hosted wallets (e.g. wallets store on exchanges or third-party servers) and cold wallets (e.g. hardware wallets such as the Ledger Nano S, paper wallets and desktop wallets).
- Whitelist- A list of registered and approved participants that are given exclusive access to contribute to an ICO or a pre-sale.
- Whitepaper - An informational document that generally informs readers on the philosophy, objectives and technology of a project or initiative. Whitepapers are often provided before the launch of a new coin or token.