Every day seems to bring a new twist in the world of Bitcoin, with more and more people unable to resist its allure as a result. Before you make the decision to throw your time and effort into the cryptocurrency market, it certainly makes sense to get a grasp of the terminology – we aren’t talking about the popular BTC slang terms being used either. Helping you get to grips with all things Bitcoin, the following breaks down the terms you’re likely to hear, along addressing exactly what they mean.
Glossary of Bitcoin Terms
Address – Represented by a sequence of numbers and letters, an address is required for anyone to send or receive Bitcoin. An address can be public, so much like an email address, it can easily be accessed for the purpose of both sending and requesting Bitcoin.
Attack Surface – When discussing computer security, the attack surface is the number of “weak areas” that a user can exploit to obtain system access. The rule of thumb is that the more complex software, the greater attack surface there is to exploit.
ATH – Acronym for all-time high, i.e. the highest price that a cryptocurrency has ever reached in its history.
Altcoin – The word used to describe cryptocurrencies that don’t carry a large market captiliziation, with such often being seen as the incumbent to Bitcoin’s crown. Altcoins can be both serious and silly; as the term is pretty loose, prime examples of Altcoins include dogecoin, litecoin, and Dash.
ASIC – Embracing the technical side of Bitcoin, ASIC is an abbreviation that you’ll likely hear mentioned. What it stands for is application specific integrated circuit, which is specialized silicon microchip that processes SHA-256 as a means to validate transactions and mine Bitcoin.
ASIC Miner – The hardware that hosts the ASIC chip, this will work via an Internet connection (wireless or modem) independent of a desktop PC to mine Bitcoin,
Bearish – A stock market term that has transferred into the world of cryptocurrency investing, stands for the expectation that the price of Bitcoin will increase.
Bitcoin Index – Monitoring all Bitcoin price movements, the Bitcoin Index relays the value of a single Bitcoin when weighed up against other major currencies – such as USD, EUR, GBP, AUD, and JPY.
BitPay – The leading Bitcoin payment-processing platform, which allows popular merchants (see Overstock, Expedia, and eGifter among others) to accept Bitcoin as a payment currency for services and goods.
Bits – Like cents to dollars and pennies to pounds, bits are a Bitcoin sub-unit, with there being 1,000,000 bits in a single Bitcoin.
Block – The blockchain is like a ledger book, with a block representing a single page of it. The block effectively is a collection of transactions that have occurred over a set period of time – usually around 10 minutes in most cases.
Blockchain – Here’s a term that you’ll hear mentioned in practically every Bitcoin-related discussion. The blockchain is the term that refers to the complete block number that miners have crafted hashes since the launch of a digital currency.
BTC – The standard abbreviation for Bitcoin.
Bullish – Another adopted stock market, standing for the expectation that the price of Bitcoin will decrease.
Cold Storage – The way to store cryptocurrency outside of a digital, web-based wallet. Usually takes the form of USB drive or other data storage medium, a paper wallet, or a common bearer item.
Cold Wallet – When a Bitcoin wallet isn’t connected to the Internet, it is deemed to be in cold storage, hence the term cold wallet.
Confirmation – Until a confirmation is received, any Bitcoin transaction is classified as unconfirmed. For confirmation to be completed, the confirmation must be included in a block on the blockchain. This represents a single confirmation, with three usually required to complete a Bitcoin transaction.
Cosigner – Should a Bitcoin wallet require more than one controlling party, it’s often a case of introducing a cosigner that will have partial control over the Bitcoin wallet in question.
Cryptography – For all things Bitcoin – including the creation of secure wallets, transaction signatures, and blockchain verification – cryptography is required. Cryptography represents the use of mathematics to secure information digitally.
Cryptocurrency – An umbrella term used to depict a currency that is derived from mathematical algorithms through digital means.
Decentralized – The notion that a currency functions without any controlling party of central authority. Bitcoin is deemed decentralized, as it has no individual, company, or government controlling it.
Distrusted – The means of making Bitcoin accessible. It functions as a distrusted network, which means that it is detached from any server that would otherwise be required to spread a commodity. Instead, network users are able to connect with each other directly.
Encryption – A leading and proven security measure, encryption utilises cryptography to ensure that only the intended recipients can decode the sent “message”. Bitcoin makes use of encryption to ensure that wallets are kept out of the hands of malicious parties.
ETF – Standing for exchange-traded fund, it is a marketable security that tracks a Bitcoin index. When you buy into a cryptocurrency ETF, you are buying into a product that tracks and returns based off of the performance of a cryptocurrency index.
Exchange – Minimal explanation required here, as much like in forex, an exchange under cryptocurrency means is simply somewhere traders can trade one currency for another – crypto to crypto or crypto to fiat.
Faucet – When a team (or even an individual) devises and develops a cryptocurrency, they may opt to pre-mine a certain amount of the currency and issue them to others for free or at a reduced price.
Fiat – A currency that has been declared legal tender by an active government. The common supply and demand relationship rather than the back of a physical commodity determines a fiat currency’s value.
Fork – The process of a cryptocurrency blockchain splitting into two commodities. See Bitcoin and Bitcoin Cash as a prime example of this.
Genesis Block – The initial block within a blockchain, which provides the nucleus for any cryptocurrency.
Hash – Hash is a term used to describe the algorithm that takes set data of any composition or length and converts and compress is it into a fixed piece of data.
Hash Rate – Relates to the amount of hashes that a miner can carry out within a set time frame.
Hot Wallet – The opposite of a cold wallet, a hot wallet is a wallet that is device based and requires an Internet connection in order to be functional.
ICO – Initial coin offering, basically the cryptocurrency variation of an initial public offering.
Ledger – An electronic (or physical if you’re old school) logbook that details transactions, values, and balances linked to financial accounts. What the Bitcoin blockchain represents is the first public, decentralized, and openly distributed ledger.
M of N – With “M” representing a cosigner signature and “N” representing the total number of cosigners required for a Bitcoin transaction to occur, the M of N number is the figure needed to process a transaction on a multi-person access wallet.
Market Cap – Short for market capitalization, alludes to the way the relative size of a cryptocurrency is ranked. A market cap is calculated by multiplying the total supply of a cryptocurrency by the current price.
Miner – An umbrella term to describe a computer (or family of computers) that both verify blocks created by other miners and add transactions to blocks overall. Miners are “paid” through transaction fees and the award of Bitcoins for effort given to the mining process.
Mining – For new Bitcoins to be created mining needs to occur. Often an intensive process, as more bitcoins are mined, the overall process of mining new Bitcoins becomes increasingly tougher.
Multi-Signature – Sometimes referred to as “multisig”, any Bitcoin transaction that requires signatures from more than one party is referred to as a multi-signature transaction.
Node – A node is a participant within the Bitcoin network, collectively nodes will relay messages to other nodes, sharing a blockchain copy in the process.
Open Source – Previously used as a term to discuss a type of software, it’s now an open-ended term that applies to Bitcoin. This is because it arguably represents the very fist form of open source currency.
Output – During the course of a Bitcoin transaction, the output is the term used to describe the destination address.
Paper Wallet – For those that prefer to store Bitcoin physically –or as close to physical storage as is possible – a paper wallet is often the preferred format. Considered a version of cold storage, it is a series printed pages that hold private keys to an array of public Bitcoin addresses.
Peer-to-Peer – Effectively what Bitcoin is, a peer-to-peer network that allows users to communicate directly removing the need for a centralized server.
Private Key – A sequence of numbers and letters that are used to transfer or spend Bitcoin that’s linked to a designated Bitcoin address.
Proof of Work – The trigger to start the generation of new blocks, a proof of work is a pivotal part of the Bitcoin process.
Protocol – A set of rules that relate to how all participants on a network must operate. In the case of Bitcoin, it relates to how each node links with others, how many Bitcoins are in existence, and defines how other network aspects function.
Public Key – Another string of letters and digits that is effectively your own bitcoin address. This is the key used to hash with the equivalent string – known as a private key – through this it digitally signs and completes any required online communication.
QR Code – The graphical appearance of a private or public key – similar to a barcode in many respects – can be scanned by a smartphone or tablet to provide quick access.
ROI – Return on investment, referring to any gains on top of an initial investment.
Satoshi – Derived from the name of Bitcoin’s mythical inventor, it represents the smallest divisible unit of a single Bitcoin – a single satoshi equals 0.00000001 Bitcoin.
Satoshi Nakamoto – The mysterious and largely unknown individual that invented Bitcoin.
Signature – The part of any Bitcoin transaction that certifies that the private key owner has approved and verified the transaction that is taking place.
SHA-256 – Any cryptocurrency – no matter its size – is required to have a cryptographic function that determines how the hash is created. For the sake of Bitcoin, SHA-256 represents this particular function, as it’s used as the foundation for all hash creation.
Transaction – The process of transferring Bitcoin from one address to another, with the process having the potential to contain multiple inputs and outputs in order to complete.
Transaction Fee – Particular transactions that take place within the bitcoin blockchain will feature transaction fees. Such fees will be paid to the miner that hashed the block that presents the base for the transaction.
Vault – An alternate form of Bitcoin wallet comes with additional security measures and an added time lock that collectively goes to extra lengths to keep your crypto funds protected.
Wallet – Anyone that holds an interest in obtaining Bitcoin requires a wallet. The wallet will hold the keys associated with both public and private Bitcoin addresses.
Whale – The term to refer to any individual that holds a lot of any one or various cryptocurrencies.