CoinChapter.com Knowledge Base

Glossary

< All Topics

#

51% Attack:

If more than half the computer power or mining hash rate on a network is run by a single person or a single group of people, then a 51% attack is in operation. This means that this entity has full control of the network and can negatively affect a cryptocurrency by taking over mining operations, stopping or changing transactions, and double-spending (reusing) coins.

A

Address:

A place where cryptocurrency can be sent to and from, in the form of a string of letters and numbers. A cryptocurrency address can be shared publicly in the form of text or QR code to those who want to send you cryptocurrency.

Algorithm:

A process or set of rules to be followed in problem-solving or calculation operations, usually by a computer, although humans tend to follow steps algorithmically as well (let’s say doing math or following a recipe).

Altcoin:

As Bitcoin is the first cryptocurrency that captured the world’s imagination, all other coins were subsequently termed “altcoins”, as in “alternative coins”.

Anti-Money Laundering (AML):A set of international laws enacted to curtail criminal organizations or individuals laundering money through cryptocurrencies into real-world cash.

B

Bitcoin Improvement Proposal (BIP):

A technical design document providing information to the Bitcoin community, describing new proposed features, processes or environments affecting the Bitcoin protocol. Suggested changes to the protocol are submitted as a BIP. The BIP author is responsible for soliciting feedback and consensus for his or her suggested improvements within the community, and documenting dissenting opinions.

BitLicense:

A business license issued to cryptocurrency companies in New York, created and provided by the New York State Department of Financial Services (NYSDFS).

Block:

A container or collection of transactions occurring every time period on a blockchain.

Blockchain:

A blockchain is a continuously growing, append-only, list of records called blocks, which are linked and secured using cryptography.

Block Reward:

An incentive for a miner who successfully calculates a valid hash in a block during mining. By contributing to the security and liveness of the chain, the miner is rewarded with this incentive, ensuring that miners continue to act in the best interest of the blockchain by legitimately taking part in the process (instead of hacking it).

Byzantine Generals’ Problem:

A situation where communication that requires consensus on a single strategy from all members within a group or party cannot be trusted or verified. An example of this agreement problem is where a group of generals, encircled around a city, must decide whether to attack or retreat. Every general must agree to attack or retreat, or everyone will be worse off. Some generals may be treacherous, voting falsely, and messengers may deliver false votes. Under these circumstances, a consensus must be reached. In cryptocurrency, when network participants post false or inaccurate information to others about transactions taking place, it could lead to network failure. Check out this quick video for more.

C

Coin:

A coin is a cryptocurrency that can operate independently.

Cold Storage:

Offline storage of cryptocurrencies, typically involving hardware non-custodial wallets, USBs, offline computers, or paper wallets. *see Hot Storage.

Cold Wallet:

A cryptocurrency wallet that is in cold storage, i.e. not connected to the internet.

Cryptoasset:

Cryptoassets leverage cryptography, consensus algorithms, distributed ledgers, peer-to-peer technology and/or smart contracts to function as a store of value, medium of exchange, unit of account, or decentralized application.

Cryptocurrency:

A cryptocurrency is a digital medium of exchange using strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets.

Cryptography:

A field of study and practice to secure information, preventing third parties from reading information to which they are not privy.

Cypherpunk:

An activist who advocates for the mass adoption and use of strong cryptographic solutions and privacy-enhancing technologies to enact social and political progress.

D

Dark Web:

A portion of internet content existing on darknets, not indexed by search engines, that can only be accessed with specific software, configurations or authorizations.

Decentralized:

Decentralization refers to the property of a system in which nodes or actors work in concert in a distributed fashion to achieve a global goal.

Decentralized Applications (dApps):

A type of application that runs on a decentralized network, avoiding a single point of failure.

Decentralized Autonomous Organizations (DAO):

An organization that is run through rules encoded in smart contracts.

Decryption:

The process of transforming data that has been rendered unreadable through encryption back to its unencrypted form.

Delegated Proof-of-Stake (dPOS):

A consensus mechanism where users can vote for delegates producing blocks on the blockchain, with votes proportional to their stake. It aims to increase efficiency and environmental friendliness of blockchain consensus protocols.

Digital Currency:

Digital currency, also known as digital money or electronic money or electronic currency, is a type of currency available only in digital form, allowing for instantaneous transactions and borderless transfer-of-ownership.

Distributed Denial of Service (DDoS) Attack:

A cyber-attack in which the perpetrator seeks to make a machine or network resource unavailable, disrupting services of a host connected to the Internet, by overloading the system with requests so that legitimate requests cannot be served.

Distributed Ledger:

Distributed ledgers are ledgers in which data is stored across a network of decentralized nodes. A distributed ledger does not necessarily involve a cryptocurrency and may be permissioned and private.

Double Spending:

A situation where a sum of money is (illegitimately) spent more than once.

E

Ether:

The form of payment used in the operation of the distribution application platform, Ethereum, in order to incentivize machines into executing the requested operations.

Exchange Traded Fund (ETF):

A security that tracks a basket of assets such as stocks, bonds, and cryptocurrencies but can be traded like a single stock.

F

Faucet:

A cryptocurrency reward system usually on a website or app, that rewards users for completing certain tasks. It is mostly a technique used when first launching an altcoin to interest people in the coin.

Fiat:

Fiat currency is “legal tender” backed by a central government, such as the Federal Reserve, and with its own banking system, such as fractional reserve banking. It can take the form of physical cash, or it can be represented electronically, such as with bank credit.

Fork (Blockchain):

Forks, or chain splits, create an alternate version of the blockchain, leaving two blockchains to run simultaneously. An example is Ethereum and Ethereum Classic, which was forked after the DAO hack.

Fork (Software):

A software fork, also known as a project fork, is when developers take the technology (source code) from one existing software project and modify it to create a new project. An example is Litecoin, which was a software fork of Bitcoin.

FUD:

An acronym that stands for “fear, uncertainty and doubt”. It is a strategy to influence perception of certain cryptocurrencies or the cryptocurrency market in general by spreading negative, misleading or false information.

G

Gas:

A term used on the Ethereum platform that refers to a unit of measuring the computational effort of conducting transactions or smart contracts, or launch dApps in the Ethereum network. It is the “fuel” of the Ethereum network.

Genesis Block:

The first block of data that is processed and validated to form a new blockchain, often referred to as block 0 or block 1.

H

Halving:

An event in which the total rewarded bitcoins per confirmed block halves, happening every 210,000 blocks mined.

Hard Fork (Blockchain):

A type of protocol change that validates all previously invalid transactions, and invalidates all previously valid transactions. This type of fork requires all nodes and users to upgrade to the latest version of the forked protocol software. In a hard fork, a single cryptocurrency permanently splits into two, resulting in one blockchain that follows the old protocol and the other that follows the newest protocol. Some examples are Bitcoin and Bitcoin Cash, or Ethereum and Ethereum Classic. *see Soft Fork.

Hash:

The act of performing a hash function on input data of arbitrary size, with an output of fixed length that looks random and from which no data can be recovered without a cipher. An important property of a hash is that the output of hashing a particular document will always be the same when using the same algorithm.

Hash Function:

Any function used to map data of arbitrary size to data of a fixed size. *see Cryptographic Hash Function.

Hash Power / Hash Rate:

A unit of measurement for the amount of computing power being consumed by the network to continuously operate. The Hash Rate of a computer may be measured in kH/s, MH/s, GH/s, TH/s, PH/s or EH/s depending on the hashes per second being produced.

HODL:

A type of passive investment strategy where you hold an investment for a long period of time, regardless of any changes in the price or markets. The term first became famous due to a typo made in a bitcoin forum, and the term is now commonly expanded to stand for “Hold On for Dear Life”.

Hyperledger (Hyperledger Foundation):

Hyperledger is an umbrella project of open source blockchains and blockchain-related tools started by the Linux Foundation in 2015 to support the collaborative development of blockchain-based distributed ledgers.

I

Initial Coin Offering (ICO):

A type of crowdfunding, or crowdsale, using cryptocurrencies as a means of raising capital for early-stage companies. It has come under fire due to the occurrence of scams and market manipulators.

Initial Token Offering (ITO):

Similar to ICOs, but the focus is on the offering of tokens with proven (or unproven) intrinsic utility in the form of software or usage in an ecosystem.

K

KYC:Acronym for “Know Your Customer”, this process refers to a project’s or financial institution’s obligations to verify the identity of a customer in line with global anti-money laundering laws.

L

Ledger:

A record of financial transactions that cannot be changed, only appended with new transactions.Leverage:A loan offered by a broker on an exchange during margin trading to increase the availability of funds in trades.

Lightning Network:

The Lightning Network is a “second layer” payment protocol that operates on top of a blockchain. Theoretically, it will enable fast, scalable transactions between and across participating nodes, and has been touted as a solution to the Bitcoin scalability problem.

M

Masternodes:

Masternodes are a server maintained by its owner, somewhat like full nodes, but with additional functionalities such as anonymizing transactions, clearing transactions, and participating in governance and voting. It was initially popularized by Dash to reward owners of these servers for maintaining a service for the blockchain.

Merkle Tree:

A tree structure in cryptography, in which every leaf node is labelled with the hash of a data block and every non-leaf node is labelled with the cryptographic hash of the labels of its child nodes. Hash trees allow efficient and secure verification of the contents of blockchains, as each change propagates upwards so verification can be done by simply looking at the top hash.

Miners:

Contributors to a blockchain taking part in the process of mining. They can be professional miners or organizations with large-scale operations, or hobbyists who set up mining rigs at home or in the office.

Mining:

A process where blocks are added to a blockchain, verifying transactions. It is also the process through which new bitcoins or some altcoins are created.

Mining Reward:

The reward resulting from contributing computing resources to process transactions. Mining rewards are usually a mix of newly-minted coins and transaction fees.

Mt. Gox:

Mtgox or Mt. Gox was one of the first websites where users could take part in fiat-to-bitcoin exchange (and vice versa). In 2014, Mt. Gox was shut down after about 850,000 bitcoin was declared lost or stolen. Mt. Gox was created in 2006 by Jed McCaleb who named it after Magic: The Gathering Online Exchange where users could use the cards like stocks. Jed later sold Mt. Gox to Mark Karpelès in 2011.

N

Node:

A copy of the ledger operated by a participant of the blockchain network.

Nonce:

When a transaction is hashed by a miner, an arbitrary number meant to be used only once is generated, called a nonce.

O

Offline Storage:

The act of storing cryptocurrencies in devices or systems not connected to the internet.

Online storage:

Online storage offers more convenience but also increased risk of theft.

P

Paper Wallet:

A physical document containing your private key or seed phrase.

Permissioned Ledger:

A ledger designed with restrictions, such that only people or organizations requiring access have permission to access it.

Private Key / Secret Key:

A piece of code generated in asymmetric-key encryption process, paired with a public key, to be used in decrypting information hashed with the public key.

Proof-of-Stake (PoS):

A blockchain consensus mechanism involving choosing the creator of the next block via various combinations of random selection and wealth or age of staked coins or tokens.

Proof-of-Work (PoW):

A blockchain consensus mechanism involving solving of computationally intensive puzzles to validate transactions and create new blocks.

Q

QR Code:

A machine-readable label that shows information encoded into a graphical black-and-white pattern. For cryptocurrencies, it is often used to easily share wallet addresses with others.

R

REKT:A shorthand slang for “wrecked”, describing a bad loss in a trade.

S

Satoshi (SATS):

The smallest unit of bitcoin with a value of 0.00000001 BTC.

Satoshi Nakamoto:

The individual or group of individuals that created Bitcoin. The identity of Satoshi Nakamoto has never been confirmed.

Segregated Witness (SegWit):

Bitcoin Improvement Proposal (BIP) that aimed to fix transaction malleability on Bitcoin. In the past, when changing the “witness” information (signatures) on blocks, it would change the transaction ID and its subsequent hash; SegWit was aiming to fix this by segregating signature and block content; a side effect of this change was smaller block sizes and the ability to support second layer solutions.

SHA-256:

cryptographic hash function that generates a 256-bit signature for a text, used in Bitcoin Proof-of-Work (PoW). Standing for “Secure Hash Algorithm”, it is one of the SHA-2 algorithms, first designed by the NSA.

Shitcoin:

A coin with no obvious potential value or usage.

Silk Road:

An online black market that existed on the dark web, now shut down by the FBI. It had accepted bitcoins for transactions.

Soft Fork (Blockchain):

A protocol upgrade where only previously valid transactions are made invalid, with most soft forks requiring miners to upgrade their mining software in order to enforce it.

Stablecoin:

A cryptocurrency with extremely low volatility, sometimes used as a means of portfolio diversification. Examples include gold-backed cryptocurrency or fiat-pegged cryptocurrency.

T

Token:

A digital unit designed with utility in mind, providing access and use of a larger cryptoeconomic system. It does not have store of value on its own, but are made so that software can be developed around it.Token Generation Event:The time at which a token is issued.

Tor:

Tor is free software for enabling anonymous communication. The name is derived from an acronym for the original software project name “The Onion Router”. It consists of a network of volunteer relays to conceal users’ location and usage.

W

Wallet:

A cryptocurrency wallet is a secure digital wallet used to store, send, and receive digital currency, and are divided into two categories: hosted wallets and cold wallets.

Z

Zero Knowledge Proof:

In cryptography, a zero knowledge proof enables one party to provide evidence that a transaction or event happened without revealing private details of that transaction or event.