Glossary
Altcoin
Any coin that is not the original bitcoin. Examples of altcoins are Ripple, Litecoin, Stellar, Monero, Dash or RavenCoin.
ASIC (Application Specific Integrated Circuit)
A custom built computer to solve only one problem. In this case mining a cryptocurrency. Your computer or smartphone is good at a lot of things, but it’s not great at any one thing because it needs to make calls, text, surf the web, have a good battery life, a crisp screen etc. The manufacturer has to make tradeoffs to accomplish all of this. ASICs do only one thing so they’re very efficient at it. It would be like your phone always getting really good signal, but you couldn’t text or surf the web.
Bitcoin
The first crypto currency. Devised by Satoshi Nakamoto it was launched and the genesis block mined in early 2009. It is now the most popular cryptocurrency with the largest market capitalization.
Block
One group of transactions on the ledger of a particular cryptocurrency. This is an encoded entry that makes up one “link” in the chain.
Blockchain
The immutable (unchangeable) record of all transactions recorded in the database of the cryptocurrency.
Cryptocurrency
A form of digital asset that is distributed across a large network of computers. The distributed nature makes it nearly impossible to shutdown or censor. True cryptocurrencies do not have any central server or authority that can be corrupted or shutdown.
Coin
A coin is a primary cryptocurrency. Examples include Bitcoin, Litecoin or Ethereum. It’s a primary source of value exchanged with all of the functions needed to do so. By contrast, Tokens are hosted “on top” of a existing coins network.
Custody
Custody and ownership is a bit of a complicated definition. What if you purchase Bitcoin with fiat(USD$) on an exchange like Coinbase. If that Bitcoin stays on the Coinbase exchange, only Coinbase has the ability to send those funds to another account. They hold the keys and that means that ultimately they have the power over those funds and how they’re spent. This is why holding your crypto in a wallet where only you hold the keys is so important.
Decentralized
Lacking any central authority or ability to control the actual funds or the movement of those funds. Usually anonymous, no KYC(Know Your Customer) requirements and not able to be censored.
Dapps (Decentralized Applications)
Applications that do not run on a centralized server. If you have ever experienced an application or website being unavailable, these apps are not susceptible to those types of interruptions. Many applications run on web 3.0 infrastructure that are redundant and decentralized.
DAO
Decentralized Autonomous Organizations are essentially organizations that have their rules and policies encoded as computer programs or smart contracts. The whole organization is transparent and the financials as well as the operating are all on the blockchain.
ERC-20
Its the technical name for the specific token standard used on the Ethereum network. There are many tokens using this standard. Some examples include BAT, Chainlink and 0x.
Fiat
Fiat is currency that is assigned a value by a government or other entity. There is no particular intrinsic value the currency is used as a form of payment only.
Fintech (Financial Technology)
The new wave of finance development (e.g. Bitcoin) seeking to compete with traditional financial tools and institutions.
FOMO
Fear Of Missing Out. Usually describing a feeling when you see prices going up and you feel the need to buy that asset.
FUD (Fear Uncertainty Doubt)
News of any type (official news outlets, tweets, videos) that are specifically setup or constructed to produce fear, uncertainty or doubt in your mind regarding investments or decisions you’ve made.
Gas Price
The cost of a transaction on a crypto network. Ethereum popularized this term.
Genesis Block
The first block that is mined on a blockchain.
HODL
Originally a misspelling of the word hold. It’s now a mantra to help investors understand the timeline isn’t measured in hours, weeks or months. This style of investing involves
ICO (Initial Coin Offering)
The first time a new coin is available for public purchase outside of the team that developed it. It’s similar to a stock market “IPO”(Initial Public Offering) However, the stock exchange is significantly more regulated and you need to meet certain measure to have an IPO. On the contrary, an ICO can be orchestrated by anyone. Keep this in mind when making the decision to purchase coins.
KYC (Know Your Customer)
This terminology comes from the fiat banking world. It’s a requirement by some governments that the financial institution gathers addition and sometimes extensive information on their customers. This is why you will see some exchanges ask for pictures of a drivers license or a passport.
Lightning Network
A network that sits “on top” of the Bitcoin network. It’s a method of payment were two parties can setup a “Channel” where funds are set aside and used as collateral while processing fast and cheap transactions. Those transactions are eventually settled on the bitcoin network. Since the transactions were on a separate network they were fast and reduced the strain on the bitcoin network. Even though there might have been dozens and dozens of transactions between two parties only one has to be recorded on the Bitcoin blockchain.
Market Cap (Market Capitalization)
The total value of the crypto currency. The supply of coins available multiplied by the price. (Total Coins x Price)
Maximum Supply
The greatest total count of coins in supply. Because some cryptocurrencies don’t start with all of the coins available instead they must be mined, it’s important to understand how many total coins will be in circulation. As an example Bitcoin will only have 21 million coins ever.
Mining
Mining serves two purposes. The first is adding new transactions to the blockchain. The second is minting new coins. After downloading a specialized software computers try to solve complex problems and the first computer to solve the problem wins the newly minted coins.
OTC
Over The Counter. This is an off exchange transaction where two parties agree on a price and then buy and sell crypto outside of the exchange. OTC brokers tend to have lower KYC requirements making it attractive for certain types of buyer's and sellers.
PoS (Proof of Stake)
Individuals “Stake” or set coins aside and are only then considered validators on the network. Each crypo that uses proof of stake has different rules for how much you might need to stake an the details of the staking system. To attack a Proof of Stake system you would have to own greater than 50% of the coins
PoW (Proof of Work)
The fundamental security behind Bitcoin. A network of computers have to solve a complex algorithm to add the next block to the chain. To attack a Proof of Work network you would have to have more computing power than 50% of the network. For large networks this is extremely difficult.
Pump and Dump
A scheme whereby someone with an interest in driving up price and then selling can manipulate the market. They might by spurring a bunch of buys in a short period which drives up the price. They then sell all of their coins with the price high. They may even potentially repurchase at a lower price to execute the scheme again once the price recovers.
Segwit (Segregated Witness)
A change in how the Bitcoin protocol worked. It solved a problem where transactions could be changed before the network actually processed the transaction. You generally want to use Segwit if asked. It’s the currently recommended protocol.
Smart Contracts
Smart contracts are pieces of code that power the digital economy. They tell each asset (coin/token) how to behave. You could setup a smartcontract that you can send Bitcoin to that will then break out the bitcoin into sub payments and each pay a portion to the power company, the water company, the rent and so on.
Trustless
Not having to trust a third party to transfer funds between parties or even to ensure funds are available. This is the foundation of the new digital economy. Many aspects of the future will be trustless and will not need third party intervention in any way. It will be handled by computer programs called smart contracts.
Token
A token is the representation of an asset stored in digital form. This could be anything. It could represent your share of real estate; a vehicle sharing program, a portion of a company, etc. Anything that has value and have it’s value broken out into smaller pieces. A token is in many cases stored on a network of an existing coin. You could tokenize a rental property to ensure accurate accounting for time that you or your family spends there vs. others who own shares. Maybe each share represents 1 day and there are 365 total tokens representing your property. You can sell your share to others or keep them and spend that time at the property.
Total Supply
The greatest number of tokens or coins that can be in existence. For Bitcoin that number is 21 million. Other crypto currencies may be higher or lower some have total supplies in the billions.
Wallet
A wallet is software that keeps your crypto safe and keeps track of your balance on the blockchain. You need to be very cautious to only use reputable wallets because they have access to your funds. You wouldn’t put your money in an unknown shady bank, don’t do the same with your crypto.
Whitepaper
A summary of how a cryptocurrency works at a high level. It describes the theory and road map. It out lines the creators vision of the technology.