A Basic Glossary Of Terms For Crypto Newbies

bitcoin vocabulary

The idea behind all of this is data security and proof that the data has not been altered. Under a Proof of Stake consensus mechanism, a slashing condition is one that causes the validator’s deposit to be destroyed when they trigger it.

  • The idea of the blockchain was first introduced when the Bitcoin white paper was released in late 2008.
  • This mechanism encourages rational miners to only submit valid blocks, or else they will have wasted time and effort.
  • This agreement is crucial if the varying network participants are to have the same information.
  • A digital commodity that is scarce, electronically transferable, and intangible with a market value.
  • Your wallet’s address, which is similar to your bank account number.
  • As of October 2021, the United States had surpassed China to become the world’s biggest global hub for Bitcoin mining.

Usually compared with previous highs.Return on Investment A measure used in order to assess the efficiency of an investment. Keys – Public and private keys are an integral component of cryptocurrencies built on blockchain networks that are part of a larger field of cryptography. This public/private key concept is the same standard that all other secure technologies such as HTTPS, SSH, VPN, etc. use for security. A consensus mechanism used in private blockchains, granting a single private key the authority to generate all of the blocks or validate transactions. The process by which blocks or transactions are verified and added to a blockchain using a Proof of Work consensus mechanism. In order to verify a block a miner must use a computer to solve a cryptographic problem.


A hard fork is a change to a digital currency’s protocol that makes blocks created using the old protocol incompatible with the new chain. A blockchain is a type ofdistributed ledger, comprised of unchangeable, digitally recorded data in packages called blocks . Each block is then ‘chained’ to the next block, using a cryptographic signature. This allows blockchains to be used like a ledger, which can be shared and accessed by anyone with the appropriate permissions. Software Currency —Bitcoin is software that runs on top of a shared/decentralized database for the purpose of enabling safe financial transactions that don’t require banks or other institutions as a trusted third party. DPoS is a type of consensus that limit the number of validators who can add blocks to the blockchain.

This collection includes definitions for 50 common cryptocurrency terms. You’ll be able to tell the difference between a blind signature scheme and formal verification and explain how hard forks and hashing work. It can be targeted or distributed to all existing addresses on a given blockchain network. Like miners, the validators’ role is to collect transactions into blocks to add to the blockchain. For adding valid blocks, validators are rewarded in proportion to the amount of currency they post (“stake”) as collateral. One advantage of proof-of-stake over proof-of-work is that it does not “waste” energy. However, proof-of-stake consensus protocols are often more complex, and have their own unique vulnerabilities.

Unspent Transaction Output Utxo

View keys are a feature of certain anonymous cryptocurrencies, such as ZCash. They enable users to maintain anonymity in the network, yet selectively reveal certain transactions without also revealing their private key. Interestingly, proof-of-work networks don’t guarantee finality. Even though the whole chain is the equivalent of Mount Everest, it theoretically possible to dig it all back up. On the other hand, a proof-of-stake network “seals” or finalizes blocks at regular intervals. This means that past transactions can never be reversed even if the majority of the network is taken over by a single malicious party. For instance, if a user wants to directly transfer assets/value across different blockchains, i.e. from Bitcoin to Ethereum, interoperability protocols create the “bridge” to enable this exchange.

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Cryptonetworks use consensus mechanisms to create an interlocking system of economic incentives to secure the network and prevent double-spending. The contents of this folder are the transactions that occur over a given time interval . Each block contains a reference linking it to the previous block — hence the term “blockchain”. Previous efforts to create a decentralized digital currency failed because there is no “scarcity” in the digital world. Bits can be infinitely reproduced — just as easily as an image or line of text can be copy/pasted. In contrast, a dollar bill or bar of gold has physical scarcity because the owner does not physically possess either after payment for a good or service.


In crypto, ASICs optimized to compute hash functions now dominate proof-of-work mining. This activity has become increasingly concentrated among a handful of large, specialized firms. Some members of crypto community resent this as a source of centralization. Others argue that because ASICs can’t be repurposed for other tasks, they add “skin in the game” for miners and incentivizes them to act honestly . Most integrated circuits — like the CPUs in smartphones and laptops – can do a lot of different types of computations.

bitcoin vocabulary

Some blockchains have the same name for both the network and the coin, like Bitcoin. Others can have different names for each, like the Stellar blockchain, which has a native coin called Lumen. A digital form of record keeping, and the underlying technology behind cryptocurrencies. A blockchain is the result of sequential blocks that build upon one another, creating a permanent and unchangeable ledger of transactions . Cryptography is the branch of mathematics that lets us create mathematical proofs that provide high levels of security. 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 block chain. It can also be used to encrypt a wallet, so that it cannot be used without a password.

How Does Hashing Ensure Validity Of A Block?

This is not to be confused with a “privacy cryptocurrency” which are cryptocurrency with specific privacy features, such as hidden user identities. When discussing Non-Fungible Tokens , “fungibility” refers to an object’s ability to be exchanged for another. For example, an individual dollar is considered fungible as we can trade dollars with one another.

Another source of concern related to miners is the practical tendency to concentrate in parts of the world where electricity is cheap, such as China, or, following a Chinesecrackdown in early 2018, Quebec. Bitcoin mining consumes massive amounts of electricity, and this has led some governments to curtail access to power or designate special rates for Bitcoin miners. This, coupled with the Chinese government’s repeated attempts to crack down on mining systems located in that country, has led to a dispersion of miners across the globe. As of October 2021, the United States had surpassed China to become the world’s biggest global hub for Bitcoin mining. This system drives up Bitcoin’s stock-to-flow ratio and lowers its inflation until it is eventually zero. After the third halving that took place on May 11, 2020, the reward for each block mined became 6.25 bitcoins.

Haha Money Printer Go Brrrrr

A form of digital currency based on mathematics, where encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds. Furthermore, cryptocurrencies operate independently of a central bank. A confirmation means that the blockchain transaction has been verified by the network. This happens through a process known as mining, in a proof-of-work system (e.g. Bitcoin). Once a transaction is confirmed, it cannot be reversed or double spent.

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Tokens might affect the financial world in the same way as email affected the postal system. Rather than operating on their own blockchain, tokens are hosted by another platform, such as Ethereum. This is one proposed scaling solution.Linux A popular open-source operating system, created in 1991 by Linus Torvalds. Symmetric-key cryptography is used by various blockchain networks for transfer of cryptocurrencies. Blockchain addresses generated for wallets are paired with private keys that allow transfer of cryptocurrency.

Blockchain 2 0

The main component of Bitcoin is blockchain, a series of digital blocks that are linked together as a list and maintain records of all transactions occurring in its network. The use of a blockchain enables Bitcoin to function as a decentralized system that does not require a neutral central entity to confirm and process transactions.

Calculated in terms of standard deviations in the annual return of an asset over a set period of time.Volume A measurement of the number of individual units of an asset that changed hands in a market during a given time. A consensus mechanism in which each block is ‘mined’ by a group of individuals or nodes on the network. Hashing a block, which is in itself an easy computational process, under PoW requires each miner to solve for a set, difficult variable. In effect, the process of hashing each block becomes a competition.

Introduction To Futures Trading

This is different from most wallets which only require one signature to approve a transaction. MetaMask, either in its mobile app form on iOS and Android, or in its browser extension form, is a tool to access and interact with blockchains and the decentralized web. Its functions include that of a wallet, a dapp permissions manager, and token swap platform. Short for Market Capitalization, this term refers to the total value held in a particular industry, market, company, or asset. For a publicly traded company, the market cap is the total dollar market value of a company’s outstanding shares. For Bitcoin or Ethereum, the total market cap is a reflection of the current existing supply times the market price. Many cryptocurrencies have a finite supply, which makes them a scarce digital commodity.

Why do governments hate Crypto?

While Bitcoin has the potential to upend established dynamics of the existing financial ecosystem, it is still plagued by several problems. Government wariness about the cryptocurrency can be partly attributed to fear and partly to the lack of transparency about its ecosystem. Those latter concerns are not misplaced.

In early bitcoin forums, someone posted a message that spelled the word “hold” wrong, and readers interpreted it as an acronym “hold on for dear life,” Saddington explains. “Now, it’s become a meme of sorts, so that when the prices are highly volatile, bitcoin buyers say ‘HODL!'” Saddington describes himself as “a long-term HODLER.” To make sense of such crypto-slang, CNBC Make It asked Peter Saddington, a serial entrepreneur and early bitcoin investor who runs a bitcoin community called The Bitcoin Pub, to break it down. Saddington first purchased bitcoin in November 2011 when one coin only cost $2.52. The powerful technology of Bitcoin and Ethereum should be named and explained in simple terms that are understandable to the average human, but also to the average programmer.

They combine traditional finance with the power of software to enable vastly more programmable and powerful financial applications. A digital ledger comprised of unchangeable, digitally recorded data in packages called blocks.

Can Bitcoin go to 100k?

Bitcoin To Reach $100k In A Few Months

Bitcoin is currently struggling below the $50k level, but market experts are confident that it could touch the $100,000 region in the coming months. … The research team said Bitcoin’s move to $100,000 could also trigger further price surges in Ether.

The process that maintains this trustless public ledger is known as mining. Undergirding the network of Bitcoin users bitcoin vocabulary who trade the cryptocurrency among themselves is a network of miners who record these transactions on the blockchain.

Author: William Watts

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