Cryptocurrency/Bitcoin Terminology 101

Post by: @CryptoLanger

Hey guys. Here is a brief overview on the terms used in cryptocurrency that I think it is important for you to know as you begin your journey. Keep referring back to the page as a cheat sheet! Any words not on here please leave a comment below or ask the community on the Discord Community Chat.

Before i get to the list. If you are wanting to get a technical and thorough explanation on "how Bitcoin works under the hood" then take the time to watch this video:

Here's the Terminology you may need to know:

HODL – Hold On For Dear Life (initially found on bitcointalk forum in 2013 when Bitcoin was crashing and there was a user who wrote a long story about how his GF is out at a gay bar and he’s at home hammered and Bitcoin is just crashing and he doesn’t care because “He’s HODLING!!!”. This was misspelt but other forum readers joked about how HODL stood for he is Holding on for Dear Life. Since then it’s been a golden quote used to Hold long term, through all dips and valleys.

Altcoin - Any coin that is not Bitcoin

Exchange - A website that was built by a company to allow people to exchange Bitcoin for money or other Alt Coins. (Remember, these are safe; but they are still companies and companies are prone to hacks. Don't keep all of your funds on exchanges for long periods of time to reduce the risk of this ever happening to you)

a Satoshi - The smallest fraction of a Bitcoin you are able to own; which is 0.00000001 (8 decimal places). Example: Tron is wort 0.00000546 Satoshi.

UTC - Universal Time, the time on which all cryptocurrency exchanges run on.

Rekt – When you buy something you took a risk on/shouldn’t have and you lose lots of money on it you were “Rekt”.

Bag Holder – When you buy Shit Coins (Altcoins that are going nowhere) in the purpose of trying to day trade and then you ride the pump but get hit on the dump (because you didn’t set a Stop Limit!) and now your stuck holding a bag of coins that your money is tied up in for a long time.

Private Key - is a secret piece of data that proves your right to spend bitcoins from a specific wallet through a cryptographic signature. Here is how I explain Private keys vs a public key. Public keys are like your E transfer email address. If you want someone to E Transfer you money you give them the email address you want them to send it to. Your private key is basically your Mobile Banking Username and Password. Once you have access to your private keys (username/pw) you control everything to do with the funds within that account. This is why you never share private keys, only public keys.

(To understand the difference between a Private and a Public key; see the following article):
https://medium.com/@vrypan/explaining-public-key-cryptography-to-non-geeks-f0994b3c2d5

Hash Rate - is the measuring unit of the processing power of the Bitcoin network. The Bitcoin network must make intensive mathematical operations for security purposes. When the network reached a hash rate of 10 Th/s, it meant it could make 10 trillion calculations per second.

Double Spend- If a malicious user tries to spend their bitcoins to two different recipients at the same time, this is double spending. Bitcoin mining and the blockchain are there to create a consensus on the network about which of the two transactions will confirm and be considered valid.

Cryptography - is the branch of mathematics that lets us create mathematical proofs that provide high levels of security. Online commerce and banking already uses cryptography. In the case of Bitcoin, cryptography is used to make it impossible for anybody to spend funds from another user's wallet or to corrupt the Blockchain. It can also be used to encrypt a wallet, so that it cannot be used without a password.

Block – A Block is a record in the block chain that contains and confirms many waiting transactions. Roughly every 10 minutes, on average, a new block including transactions is appended to the Blockchain through mining.

Block Chain - is a public record of Bitcoin transactions in chronological order. The block chain is shared between all Bitcoin users. It is used to verify the permanence of Bitcoin transactions and to prevent double spending.

Confirmation - Means that a transaction has been processed by the network and is highly unlikely to be reversed. Transactions receive a confirmation when they are included in a block and for each subsequent block. Even a single confirmation can be considered secure for low value transactions, although for larger amounts like 1000 US$, it makes sense to wait for 6 confirmations or more. Each confirmation exponentially decreases the risk of a reversed transaction.

Bitcoin Address - is essentially the same thing as your home address. It’s the location from which you would receive, send or hold your currency. These addresses generally manifest in a long string of alphanumeric characters and will look something like:
Hj35j3ifdggj4456jgodop3lfpxznDfio

A wallet address is the public portion of the two encrypted keys necessary for a holder to accept or verify a transaction.

Halving - is the reduction of minable reward every so many blocks. For Bitcoin the Reward is Halved after the first 210,000 blocks are mined and then every 210,000 thereafter.

Mining - is the term used for discovering and solving blocks along the blockchain. A reward is given for solving the algorithm and lengthening the chain, called a mining reward. The mining reward for the Bitcoin blockchain is Bitcoin.

A node - is essentially a computer connected to the Bitcoin network. A node supports the network through validation and relaying of transactions while receiving a copy of the full blockchain itself.

P2P - is another way of saying Peer-to-Peer. Peer-to-peer has become a very large focus of blockchain as one of the biggest selling points is decentralization. Nearly every interaction on the blockchain can be fulfilled P2P, or without a centralized variable like a store, bank or notary.

Proof of work (PoW) - was a concept originally designed to sieve spam emails and prevent DDOS attacks. A Proof of Work is essentially a datum that is very costly to produce in terms of time and resources, but can be very simply verified by another party. The proof of work for Bitcoin is referred to as a “nonce,” or number used only once. This has been considered an energy intensive alternative to proof of stake as the computers unfortunately have to be on and running, which also drives the market towards centralization of hashing power… which is what the blockchain aims to defeat!

Proof of stake (PoS) - has been considered the greener alternative to PoW. Where PoW requires the prover to perform a certain amount of computational work, a proof of stake system requires the prover to show ownership of a certain amount of money, or stake.

A signature - is the mathematical operation that lets someone prove their sole ownership over their wallet, coin, data or on. An example is how a Bitcoin wallet may have a public address, but only a private key can verify with the whole network that a signature matches and a transaction is valid. These are only known to the owner and are basically mathematically impossible to uncover.

Smart Contracts - A two way smart contract is an unalterable agreement stored on the blockchain that has specific logic operations akin to a real world contract. Once signed, it can never be altered. A smart contract can be used to define certain computational benchmarks or barriers that have to be met in turn for money or data to be deposited or even be used to verify things such as land rights.

FUD/FOMO – Fear, Uncertainty, Death; a common phrase used when people are trying to use scare tactics or doom and gloom articles to make others sell coins so they can buy in at cheaper prices. Fear Of Missing Out on the other hand is people letting there emotions get the better judgement of their goals/game plan.

Fiat - Any currency that is paper backed, centralized and regulated. (USD/CAD/YEN)

Pump and Dump - Someone who is manipulating the price of a coin to draw in new investors (pump) then they cash out and cause the price to fall (dump)

Whitepapers - Each coin has their own white paper which outlines the details of their protocols/plans. You can find these on the coins main website. If you cant find the white paper; let that be a warning sign.

Shilling - When someone talks highly of a coin in which they are heavily invested or involved with in order for them to profit.

Thanks guys! Please feel free to follow on twitter @Cryptolanger