Cryptocurrency Glossary of Terms
A glossary of terms for the cryptocurrency and blockchain industry.
Cryptocurrency
A digital form of currency with cryptography as the underlying structure. A foundation of cryptography renders cryptocurrency highly secure and difficult to counterfeit. Cryptocurrencies are decentralized. No governing body or central authority issues a cryptocurrency which makes it a desirable currency for those against the established centralized financial ecosystem.
Cryptocurrency Trading Platforms
Cryptocurrency trading platforms are central exchanges where cryptocurrencies can be purchased and traded. Some notable trading platforms include: CoinBase, Coinmama, CEX.io, Bitstamp, and Bittrex.
Bitcoin
Bitcoin is a type of cryptocurrency that was created in 2009. Bitcoin was reportedly invented by Satoshi Nakamoto though this person has never officially come forward to claim Bitcoin as his invention. It is the most popular and established of the cryptocurrencies and is built on blockchain infrastructure. Bitcoin, like other cryptocurrencies, allows for transactions to occur without centralization.
Futures
Futures is a traditional financial term. It refers to a contract between a buyer and a seller. The buyer agrees to purchase an asset from the seller at a locked-in price at a specific time in the future. Futures are standardized and honored by the stock exchange, so these contracts can be traded on exchanges like the NYSE. Futures are available for a variety of assets including stocks, commodities, and even Bitcoin as of December 2017.
Ethereum
Ethereum is a software platform and programming language that runs on blockchain. It is commonly utilized in SmartContracts and Distributed Applications (DApps) because of its ability to run without downtime, fraud, or third party interference.
Litecoin
Litecoin is a cryptocurrency modeled after Bitcoin. It was created by Charlie Lee, former Google engineer and MIT graduate. Litecoin differs from Bitcoin in that it has faster block generation leading to more use as an “everyday cryptocurrency”.
Bitcoin Cash
Bitcoin cash is a cryptocurrency created in August 2017. It was a fork of Bitcoin and increased the block size of Bitcoin, allowing for more transactions. Bitcoin Cash was the result of pressures surrounding Bitcoin and its prohibitive block sizes according to the larger cryptocurrency community. It remains to be seen the level of adoption that Bitcoin Cash sees.
Ripple/XRP
Ripple, released in 2012, is both a cryptocurrency and a digital payment network. As cryptocurrency it is labeled XRP. As a payment network it operates on an open source and P2P decentralized platform that allows for transfer of any money or cryptocurrency. Ripple is known for its rapid transactions and low fees.
Altcoins
Altcoins refers to cryptocurrency coins other than Bitcoin. Often, altcoins position themselves as better or an optimized version of Bitcoin.
Cryptocurrency Mining
Mining is the process by which Bitcoin and altcoins are discovered. This complex process is a decentralized computational process that confirms transactions in a validated manner. The validation occurs when enough power is devoted to the block. Mining also issues new Bitcoins (or altcoins) to new blocks in the blockchain.
SegWit
Segregated Witness (SegWit) is a process that occurred to help with the issue of Bitcoin block size. There is a need to increase the block size on Bitcoin to help speed transactions, so SegWit was enacted. By removing certain data of a transaction, space was opened up to allow more transactions on the train.
SegWit2x
SegWit2x was a proposal to increase the block size of Bitcoin. The issue of Bitcoin’s capacity remains and SegWit2x gained attention for it’s legitimacy and potential. SegWit2x would first implement the SegWit optimization. Then it would set a timeline for increasing the network’s block size to 2MB (today it is 1MB) three months after SegWit. (Source: CoinBase)
SetWit2x was politically and philosophically divisive because it was not proposed by Bitcoin Core, the main development team behind Bitcoin. It was released November 2017 to limited success as mining pools were hesitant to activate the change.
Blockchain
Blockchain is a type of Distributed Ledger Technology in which transactions are recorded publicly. Blockchain is the technology behind Bitcoin and many cryptocurrencies.
HODL
HODL, like many internet terms, began as a forum post. It first appeared in Bitcoin talk in 2013 when a poster titled an entry “I AM HODLING”. He, of course, meant he was holding on to his cryptocurrency and not selling. Now, to HODL means to be hanging on to your asset because you’re confident it will be worth more in the future.
Fiat Currency
Fiat currency refers to traditional centralized currency like the US dollar. Fiat currency now stands as a comparison currency between cryptocurrency and traditional centralized money.
Decentralized
Decentralized, in the context of the cryptocurrency world, refers to the way that Bitcoin and other cryptocurrencies operate without a central authority. The nature of blockchain means that ledger records are held in multiple locations which allows for no one party to have control of transaction records. Decentralization is highly appealing because it helps to keep money free of fraud, corruption, and security breaches.
Satoshi Nakamoto
Satoshi Nakamoto is the inventor of Bitcoin. He is actually an anonymous person or group of people that are credited with the development of the Bitcoin philosophy and coin. They are responsible for the first successful blockchain database which solved the issue of “double-spending” in cryptocurrency.
Cryptocurrency Wallet
A cryptocurrency wallet is a secure virtual “wallet” in which cryptocurrency assets can be stored. From a crypto wallet you can send, receive, and store your Bitcoin.
Cryptocurrency Wallet Address
Your cryptocurrency wallet address is a collection of characters or a key that identifies where your wallet exists. Because it is digital, you need a key to identify where your wallet exists in a virtual world. Your wallet address is required when spending Bitcoin.
Hard Fork
A hard fork as it relates to blockchain means there has been a permanent divergence in the blockchain. A hard fork happens when nodes aren’t upgraded and can’t reconcile blocks created by more current, upgraded nodes. It is a way to get all nodes and/or users to update to the most recent protocol.
Buy Wall and Sell Wall
First, an order book is a list of orders, both buy and sell, made for a cryptocurrency on an exchange. Order books are useful to understand the general trader valuation of a cryptocurrency. If you wanted to know the average ceiling and floor for a cryptocurrency, an order book is where you could see that.
A buy wall is what happens with the number of buys is higher than the number of sells for a cryptocurrency. If you see a buy wall, it is a good indication that people regard a cryptocurrency as valuable.
A sell wall is the opposite. They reflect that traders will begin to sell the cryptocurrency and it is not a prime time to buy that asset.
When traders are able to discern these patterns of buy walls and sell walls, there is more ability to predict the trajectory of an asset. This leads to volatility and price movement in assets. The more sophisticated traders, especially whales, become at reading the buy and sell walls, the more they are able to create big swings in an asset price.
Cryptocurrency Transaction Fees
Blockchain technology comes with transaction fees. The decentralized nature of cryptocurrencies means you pay for using the network. In order to have your transactions validated, you need to provide financial motivation — transaction fees — to to get that validation. Fees occur when trading on exchanges, when making a transaction, and when using a wallet.
Market Cap
Market cap or market capitalization is a way to quantify the size of a cryptocurrency. It is calculated by multiplying the price of an asset by the supply.
This post was written for howtoshortbitcoin.io
