New to the world of blockchain and cryptocurrency? Learn more about key terms with our useful glossary.
Aeternity (AE). æternity is a public, open-source, blockchain-based distributed computing and digital-asset platform that builds upon decentralized cryptographic P2P technology. Real-world data can interface with smart contracts through “oracles”. ICO began in April 2017
Altcoin. A general term used to refer to a form of cryptocurrency other than Bitcoin. The term is a blend of the words alternative and coin, and is a name given to derivatives of the decentralised cryptocurrency Bitcoin. Ripple and Stellar are two examples of popular altcoins, whilst the single biggest competitor to Bitcoin is considered to be Litecoin.
Augur (REP). A decentralized oracle and prediction market platform built on the Ethereum blockchain that was founded in 2014 by Jack Peterson and Joey Krug.
Bear Market. In cryptocurrency, a market in which prices are falling, encouraging selling.
Binance Coin (BNB). Binance is an international, multi-language cryptocurrency exchange. The service raised 15 million dollars in a July 2017 Initial Coin Offering for its ERC-20 BNB token.
Bitcoin (BTC). The first decentralized digital currency, Bitcoin is the name of the original and most important cryptocurrency, originally invented by an unknown person or persons known only as Satoshi Nakamoto. It is from this name that the 1⁄100000000 subunit derives its name of Satoshi.
As a decentralized digital currency, Bitcoin operates in a system that does not have a central bank or single administrator. Instead, it uses a peer-to-peer network and transactions take place between users directly, without an intermediary. Bitcoin transactions are verified by network nodes through the use of cryptography and recorded in a public distributed ledger called a blockchain.
Bitcoin Cash (BCH). A cryptocurrency whose origins date to mid-2017, when a group of developers wanting to increase bitcoin block size limit prepared a code change. The change, called a hard fork, took effect on 1 August 2017.
Bitcoin Gold (BTG). A distributed digital currency. A hard fork of Bitcoin that was released on 12 November 2017.
Bitshares (BTS). A decentralised exchange platform for trading cryptocurrencies without leaving the blockchain. Released October 2015.
Blockchain. The fundamental system by which all cryptocurrency transactions operate, was conceptualized in 2008 by an anonymous person or personsknown as Satoshi Nakamoto and implemented in 2009 as a core component of bitcoin.
A blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography. It is from this principle that the term cryptocurrency is derived. Each block within a chain typically contains a hash pointer as a link to a previous block, a timestamp and transaction data. The end result is a system that is inherently resistant to modification of the data. It is “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way”. For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks, which requires collusion of the network majority.
The invention of the blockchain for bitcoin made it the first digital currency to solve the double spending problem without the need of a trusted authority or central server.
Bull Market. In cryptocurrency, a market in which prices are rising, encouraging buying.
Buterin, Vitalik. Russian-Canadian programmer and writer primarily known as a co-founder of Ethereum and as a co-founder of Bitcoin Magazine. His recognition and awards to date include the Thiel Fellowship Award, 2014, World Technology Award in the IT Software category, 2014, Fortune 40 under 40 list, 2016 and Forbes 30 under 30 list, 2018.
Bytecoin (BCN). The first cryptocurrency based on the CryptoNote technology with an open source code designed for anonymous cash settlement. Initially released 2014.
Cardano (ADA). A distributed computing platform that runs the blockchain for the Ada cryptocurrency. Daedalus is currently the only cryptocurrency wallet that holds Ada and allows transfers to other wallet addresses. Released 2015.
Coinbase. A secure online platform for buying, selling, transferring, and storing digital currency. Headquartered in San Francisco, California, Coinbase brokers exchanges of Bitcoin, Bitcoin Cash, Ethereum, and Litecoin with fiat currencies in around 32 countries.
CryptoNote Technology. An application layer protocol that powers several decentralized privacy-oriented digital currencies. It allows the creation of completely anonymous egalitarian cryptocurrencies. The first coin to use the CryptoNote protocol was Bytecoin, which launched in July 2012.
Cryptocurrency A digital asset designed to work as a medium of exchange that derives its name from the use of cryptography to secure its transactions, control the creation of additional units and verify the transfer of assets. Cryptocurrencies are classified as a subset of digital currencies and are also classified as a subset of alternative currencies and virtual currencies.
The first decentralized cryptocurrency was Bitcoin, created in 2009. Since then, a large number of similar cryptocurrencies have been created which are typically referred to as altcoins.
Distributed Ledger. A database that is consensually shared and synchronized across network spread across multiple sites, institutions or geographies, usually using peer-to-peer technology. The system differs from the typical banking model in that there is no centralised control, leading to the term ‘Decentralised’ also being used. Participants at each node of the network can access the recordings shared across that network and can own an identical copy of it, allowing transactions to have public “witnesses,” thereby making a cyberattack more difficult. In addition, any changes or additions made to the ledger are reflected and copied to all participants in a matter of seconds or minutes. Underlying the distributed ledger technology is the blockchain, the technology behind bitcoin, as well as any other applications.
Fork. A situation in which a blockchain splits into two separate chains temporarily or permanently. Forks are a natural occurrence during mining, where two chains following the same consensus rules temporarily have the same accumulated proof-of-work and are both considered valid. They can also occur as a consequence of the use of two distinct sets of rules trying to govern the same blockchain. Forks have been used in cryptocurrencies in order to add new features to a blockchain or to reverse the effects of hacking or catostrophic bugs on a blockchain as was the case with the fork between Ethereum and Ethereum Classic. Notably, blockchain forks have been widely discussed in the context of the bitcoin scalability problem.
Forks can be classified as soft forks or hard forks:
A hard fork occurs when a blockchain splits into two incompatible separate chains. This is a consequence of the use of two incompatible sets of rules trying to govern the system.For example, Ethereum has hard-forked to “make whole” the investors in The DAO, which had been hacked by exploiting a vulnerability in its code. In 2014 the Nxt community was asked to consider a hard fork that would have led to a rollback of the blockchain records to mitigate the effects of a theft of 50 million NXT from a major cryptocurrency exchange. The hard fork proposal was rejected, and some of the funds were recovered after negotiations and ransom payment.
In contrast to a hard fork, a soft fork is a change of rules that creates blocks recognized as valid by the old software, i.e. it is backwards-compatible. A soft fork can also (temporarily) split the network when non-upgraded software creates blocks not considered valid by the new rules. A user-activated soft fork (UASF) is a controversial idea that explores how to perform a blockchain upgrade that is not supported by those who provide the network’s hashing power.
Genesis Block. In cryptocurrency terminology, a genesis block is the name given to the very first block or first few blocks of a blockchain.
Hash. A blockchain database consists of two kinds of records: transactions and blocks. A block holds a batch of valid transactions that are hashed and encoded into a Merkle tree. Each block includes the hash of the prior block in the blockchain, linking the two and allowing for the formation of a chain. This iterative process is at the heart of the security of blockchain transactions as it confirms the integrity and validity of the previous blocks, all the way back to the original genesis block.
Initial Coin Offering (ICO). A means of crowdfunding centered around cryptocurrency, which can be a source of capital for startup companies. In an ICO, a quantity of cryptocurrency is preallocated to investors in the form of “tokens,” in exchange for legal tender or other established cryptocurrencies such as Bitcoin or Ethereum. These tokens become functional units of currency if or when the ICO’s funding goal is met and the project launches.
ICOs provide an innovative means by which start-up companies can raise funds, whilst also avoiding the costs of regulatory compliance and intermediary financial organizations, although the risk to investors is higher than through traditional alternatives. It is yet to be seen whether ICOs fall outside existing regulations and become subject to government control. They are already banned altogether in some jurisdictions, such as China and South Korea.
Kelley, Jordan. Notable in the world of cryptocurrency as the founder of Robocoin and, on 20 February 2014, the launch of the first bitcoin ATM in the USA. The kiosk installed in Austin, Texas is similar to bank ATMs but is equipped with scanners to read government-issued identification such as a driver’s license or a passport to confirm users’ identities. By September 2017, 1574 bitcoin ATMs were installed around the world with an average fee of 9.05%. An average of 3 bitcoin ATMs were being installed per day in September 2017.
KodakCoin. Announced at CES2018, KodakCoin is described as a “photographer-centric” blockchain cryptocurrency used for payments for licensing photographs. The US firm said it was teaming up with London-based Wenn Media Group to carry out the initial coin offering (ICO), which is scheduled to begin on 31 January 2018.
Litecoin (LTC or Ł). A peer-to-peer cryptocurrency and open source software project released under the MIT/X11 license. Creation and transfer of coins is based on an open source cryptographic protocol and is not managed by any central authority. The coin was inspired by, and in technical details is nearly identical to, Bitcoin (BTC).
Mining. The act of validating blockchain transactions. The necessity of validation warrants an incentive for the miners, usually in the form of coins. With the current boom in cryptocurrency, mining can be a lucrative business when done properly – however it is important to consider the hardware and energy costs involved amongst other factors. The use of efficient and suitable hardware and mining target can enable mining to produce a stable form of passive income.
Nakamoto, Satoshi. The name used by the unknown person or people who designed bitcoin and created its original reference implementation. As part of the implementation, they also devised the first blockchain database. In the process they were the first to solve the double-spending problem for digital currency. They were active in the development of bitcoin up until December 2010.
Node. A copy of the ledger operated by a participant of the blockchain. Mining nodes validate transactions, add them to the block they are building, and then broadcast the completed block to other nodes.
Oracle. A server outside of the blockchain which allows for arbitrary conditions to be checked for. It essentially works as a bridge between the real world and the blockchain by providing data to the smart contracts.
Peer to Peer. Blockchain technology is based upon a distributed ledger system, which relies principally on a Peer to Peer (P2P) networkfor validating new blocks. P2P as a definition refers to the decentralized interactions between two parties or more in a highly-interconnected network. Participants of a P2P network deal directly with each other through a single mediation point, eliminating the need for any centralised administrative system.
Ripple. A real-time gross settlement system (RTGS), currency exchange and remittance network by Ripple. Also called the Ripple Transaction Protocol (RTXP) or Ripple protocol, it is built upon a distributed open source Internet protocol, consensus ledger and native cryptocurrency called XRP (ripples). Released in 2012, Ripple purports to enable “secure, instantly and nearly free global financial transactions of any size with no chargebacks.” It supports tokens representing fiat currency, cryptocurrency, commodity or any other unit of value such as frequent flier miles or mobile minutes. At its core, Ripple is based around a shared, public database or ledger, which uses a consensus process that allows for payments, exchanges and remittance in a distributed process.
The network can operate without the Ripple company. Among validators are companies, internet service providers, and the Massachusetts Institute of Technology.
Used by companies such as UniCredit, UBS and Santander, Ripple has been increasingly adopted by banks and payment networks as settlement infrastructure technology, with American Banker explaining that “from banks’ perspective, distributed ledgers like the Ripple system have a number of advantages over cryptocurrencies like bitcoin.”
As of January 26, 2018, XRP is the third largest coin by market capitalization.
Satoshi. The 1⁄100000000 subunit of Bitcoin. Derives its name from the creator(s) of bitcoin, Satoshi Nakamoto.
Transaction Block. A term that refers to a collection of transactions gathered into a block that can then be hashed and added to the blockchain.
Ubiq. (UBQ). An open-source, public, blockchain-based distributed computing platform featuring smart contract (scripting) functionality. The Ubiq network provides a stable blockchain to host an Ethereum Virtual Machine, integrating a decentralized Turing-complete virtual machine that allows for the creation of contracts and tokens. It provides a value token called “Ubiq (UBQ)”, which was generated by transferring the value of a three-year old established token, Jumbucks (JBS), onto a blockchain with Ethereum functionality. Thus, it provides EVM functionality in a blockchain segregated technologically, politically, and conceptually from Ethereumor Ethereum Classic.
Wallet. A cryptocurrency wallet is a software program that stores private and public keys and interacts with various blockchain to enable users to send and receive digital currency and monitor their balance. If you want to use Bitcoin or any other cryptocurrency, you will need to have a digital wallet in that particular currency.