Bitcoin is the only cryptocurrency not considered an altcoin (alternative coin). There are thousands of others, each with their own best features, usage and value.
Buying and selling the same asset from different dealers or markets at the same time to profit from differences in prices. They can be commodities, currencies, securities or other types of asset.
An order to sell an asset.
An order to buy an asset.
The first cryptocurrency, which was devised in 2009 by Satoshi Nakamoto. The first also to use blockchain technology. The quantity in circulation is capped at a maximum of 20 million Bitcoins.
A related (hard-forked) cryptocurrency created 1/8/2017. It has a bigger block size with capacity for more transactions so as to encourage miners.
Similar to a conventional ledger, it is a distributed decentralized network that records and stores transactions in a highly secure manner. It’s not just for cryptocurrency and can be used for transferring secure data, goods or currencies.
Similar to pages in a conventional ledger, blocks contain the individual transactions.
Miners are rewarded after mining a block of transactions on the blockchain network. That can be in the Bitcoin network or any other cryptocurrency network.
The scenario when the value of an asset rises to significantly above its actual value. A sudden price collapse occurs when the bubble “pops”.
The term used for an offline wallet. It’s kept offline as a security measure.
A currency that exists only in digital form, using encryption algorithms (cryptography) for transaction security.
Devising and applying complex codes to convert data into an unreadable format for transmission, and then unencoding it into plain format at the receiving end. Cryptocurrency systems use advanced cryptography to guarantee security of data and transactions.
A methodology used for administering a system whereby there is no central control point and governance is performed by all parties. Conventional banking and monetary systems are centralized under the control of banks and central banks. Cryptocurrencies like Bitcoin share responsibility across all the servers and devices in the network.
A core concept of Bitcoin and other cryptocurrencies to ensure rarity is to require significant effort to create, or mine, new blocks. Methods vary but Bitcoin changes the mining difficulty roughly every two weeks to ensure that miners do not overproduce the quantity of the currency available.
Find out more by reading about Ethereum in our Learning Portal. Both a cryptocurrency and a public open-source decentralized network of computers using blockchain technology, Ethereum is capable of securely handling transactions, smart contracts and other data. It was devised by Vitalik Buterin in 2013.
A service that facilitates interaction by both buyers and sellers for financial instruments and assets such as stocks, securities, currencies and cryptocurrencies such as Bitcoin.
Traditional currencies, like the US Dollar, that are backed by governments usually.
Forking is a software term, meaning creating a new version from an existing codebase. Cryptocurrency forks are instituted by miners (cryptocurrency participants). A soft fork means the new version is backward compatible with the existing blockchain technology data formats and can continue to use it. A hard fork requires a new blockchain to operate the new version.
A typical cryptocurrency wallet is a software product. Hardware wallets are physical devices that can be easily taken offline for added security when not in use.
A hash is just another term for an algorithm used in cryptography.
To hash (the verb) is the action of applying a hash to data to encode it.
A measurement of the computing speed of a miner’s equipment that expresses it as the count of hash operation performed every second. It is used to estimate the computing power consumed to support a blockchain. The profit that miners earn depends on the hash rate they can afford to dedicate to mining.
Not a spelling error! But it originated from one in 2010 when the word Hold was misspelled in a Bitcoin forum. Amusingly used as an acronym for Hold On for Dear Life, it refers to holding Bitcoin rather than selling it.
ICO / token sale
ICO stands for Initial Coin Offering. That is the process of selling blockchain tokens to the public before they are formally issued, with actual transfer taking place at a later date.
Similar meaning to a conventional ledger for recording transactions.
When buying or selling an asset, traders can specify the exact price and quantity in an order. Only when the market reaches the stated price does the order become active. If sufficient market liquidity exists at the point when it is created, then the order is fulfilled immediately and called a taker order. Otherwise it waits its turn in an order book and is called a market order.
A limit order to buy or sell that has yet to be fulfilled when the market price reach the point the trader has specified. Because it sits waiting in an order book, it “makes” the market.
An order to buy or sell where a price is not specified, only the quantity required. It is a taker order because it is executed once it is placed using the best price on the market at that time. It is matched with one or more orders that have been waiting in the order book.
Mining is the process of dedicating computing resources to create new blocks of transactions in a blockchain system, such as Bitcoin’s. Miners do it for profit and receive a reward each time a block is successfully completed.
Blocks are created by a process of solving complex mathematical equations that consume significant computing power. The incentive for so doing is payment to the miner. Some blocks are more difficult and command higher rewards, so miners focus on those when the network is busy and slower.
Multi-signature / multisig
An authorization (signature) is required to initiate any transfer or transaction on a blockchain. Some wallets can be configured to require multiple authorizations. Just like writing business checks, that could stipulate that, say, any three of five signatories must authorize any transaction from a MultiSig Bitcoin wallet.
A network server or other computing device containing a copy of the shared blockchain. It is one elements of the decentralized system with the same capability as the other nodes and also part of the chain of security, although it may not be engaged in mining. Every miner is a node, by contrast.
An order is a commitment to buy or sell an asset in a market such as Forex or the Stock Exchange. In our case it instructs the Booyaa exchange to perform a transaction involving Bitcoin exchange for a local currency or another cryptocurrency, or vice versa.
Authorizing blockchain transactions, such as transferring Bitcoin from a wallet, requires the digital equivalent of a password. This is your private key that effectively unlocks your wallet when required.
The public counterpart to your private key identifies which wallet in a blockchain is yours but that is all. You would give it somebody who wants to send you a cryptocurrency payment.
The rate of permitted Bitcoin production is halved roughly every 4 years. Reducing the flow of available new Bitcoin is considered to be deflationary.
The inventor of Bitcoin adopted the name Satoshi Nakamoto but this is not his/her real name and nobody knows the true identity for certain.
Also 1 Satoshi = 0.00000001 Bitcoin. It is the name given the smallest subdivision possible for 1 Bitcoin.
The primary algorithm used in the Bitcoin domain. SHA stands for Secure Hash Algorithm.
Segregated Witness (Segwit)
Some blockchain processes increase the storage efficiency of transaction blocks by moving part of each transaction’s data to a separate storage area. Bitcoin and Litecoin use SegWit.
Contracts can be stored in a blockchain as a piece of software – a software program with an address on the network. That means it can perform actions when invoked, such as sending a cryptocurrency payment to a specific wallet, trigger execution of other smart contracts, or send other transactions.
The difference between an asset’s buy price and its sell price is called the spread. That is effectively the highest priced buy (bid) order in the market order book and lowest sell (ask) price. Lower spreads are better and indicate stability in a market.
An order may not get as far as waiting in the order book because the market’s buy or sell price matches what is required. It is executed immediately. It does that by being matched with a “maker order” waiting in the order book and takes it off the market, and so it’s called a taker order.
Usually, the term refers to a cryptocurrency that utilizes the blockchain of another cryptocurrency. ERC20 tokens are created by the Ethereum blockchain, for example, and are output from smart contracts there.
Bitcoin mining activities deliver a new block into the blockchain every 10 minutes approximately. It varies for different blockchains. A block validates and stores new transactions. New blocks are linked to all existing blocks and provide confirmation of the chain and the data contained in it. So for a transaction added in block 85, a new block in position 104 means there are 20 confirmations of that transaction. This is the methodology for transaction confirmations in the Bitcoin network and others.
Transaction ID (or TxID)
Every transaction has a totally unique identifier.
Two-factor authentication, or 2FA, is best explained by a simple example whereby access may require both a regular password and also verification of a unique 6-digit number sent by SMS to the user’s phone. Essentially, 2FA demands two different methods of authentication. It is commonly used to authorize Bitcoin transactions.
While your account balance of a cryptocurrency is held securely in a blockchain, a wallet holds the private encryption keys that allow you to access the balance and perform transfers or other transactions. The wallet is a software program.