51% attack – A condition in which more than half the computing power on a cryptocurrency network is controlled by a single miner or group of miners. That amount of power theoretically makes them the authority on the network. This means that every client on the network believes the attacker’s hashed transaction block.
Address – A bitcoin address is used to receive and send transactions on the bitcoin network. It contains a string of alphanumeric characters, but can also be represented as a scannable QR code. A bitcoin address is also the public key in the pair of keys used by bitcoin holders to digitally sign transactions (see Public key).
Altcoin – The collective name for cryptocurrencies offered as alternatives to bitcoin. Litecoin, Feathercoin and PPcoin are all altcoins.
AML — stands for Anti-Money Laundering — techniques used to prevent, detect and report money laundering, which is, in fact, masking the source of money. Sometimes, regulatory authorities apply AML mechanisms to Bitcoin exchange platforms.
Altcoin — a term, used to name cryptocurrencies, alternative to Bitcoin. Such currencies as Litecoins (LTC), Namecoins (NMC) and others are among them.
ASIC — an application-specific integrated circuit, customized for a particular task. In Bitcoin context, ASICs are currently the most powerful machines to mine Bitcoins.
ASIC – An Application Specific Integrated Circuit is a silicon chip specifically designed to do a single task. In the case of bitcoin, they are designed to process SHA-256 hashing problems to mine new bitcoins.
ASIC miner – A piece of equipment containing an ASIC chip, configured to mine for bitcoins. They can come in the form of boards that plug into a backplane, devices with a USB connector, or standalone devices including all of the necessary software, that connect to a network via a wireless link or ethernet cable.
Bitcoin Investment Trust – This private, open-ended trust invests exclusively in bitcoins and uses a state-of-the-art protocol to store them safely on behalf of its shareholders. It provides a way for people to invest in bitcoin without having to purchase and safely store the digital currency themselves.
Bitcoin Price Index (BPI) The CoinDesk Bitcoin Price Index represents an average of bitcoin prices across leading global exchanges that meet criteria specified by the BPI. There is also an API for developers to use.
BitPay – A payment processor for bitcoins, which works with merchants, enabling them to take bitcoins as payment.
BitStamp – An exchange for bitcoins that has been gaining in popularity. Read the latest Bitstamp news.
Bitcoin Cloud Mining — a brand new concept, which allows users to form groups (pools), where their joint efforts are rewarded with greater income, compared to individual mining with their own equipment. All Bitcoin mining is done in the cloud, without any ofﬂine hassle, such as electricity, hosting issues, or installation and upkeep trouble. Thus, everybody can earn extra revenue with little to no risk and frequent payouts.
Block chain — a transaction database containing the list of blocks, which have ever been mined. Each block contains hash of the previous block. That is why it is very hard to modify any block in the chain, because it would change all the following ones. The more blocks mined and are still to come, the more the Bitcoin system is protected from double spending and other attacks.
Block reward — a reward for a miner, who discovered a Bitcoin block. Currently, the pay-off counts 25 Bitcoins per block. After a certain number of blocks are mined, every 210,000 in Bitcoin’s case, the block reward halves.
BTC — abbreviation for Bitcoin.
Commodity Exchange — a platform for trading various commodities and derivatives.
Buttonwood – A project founded by bitcoin enthusiast Josh Rossi, to form a public outcry bitcoin exchange in New York’s Union Square. Named after the Buttonwood agreement, which formed the basis for the New York Stock Exchange in 1792.
Client – A software program running on a desktop or laptop computer, or mobile device. It connects to the bitcoin network and forwards transactions. It may also include a bitcoin wallet (see node).
Confirmation — the process of successful hashing a Bitcoin transaction into a transaction block and validating it. A single confirmation lasts about 10 minutes.
CPU — Central Processing Unit, hardware within a computer, with the help of which the very first Bitcoins were mined. Along with the growing Bitcoin mining difficulty, CPUs are no longer powerful enough to gain profit through mining.
Coinbase – Another name for the input used in a bitcoin’s generation transaction. When a bitcoin is mined, it doesn’t come from another bitcoin user, but is generated as a reward for the miner. That reward is recorded as a transaction, but instead of another user’s bitcoin address, some arbitrary data is used as the input. Coinbase is also the name of a bitcoin wallet service that also offers payment processing services for merchants and acts as an intermediary for purchasing bitcoins from exchanges.
Coin age – The age of a coin, defined as the currency amount multiplied by the holding period.
Cryptocurrency — a form of currency, which is emitted through solving mathematical problems based on cryptography. Bitcoin was the first cryptocurrency to begin trading back in 2009. It launched the birth of various cryptocurrencies, appearing day to day.
Cryptography – The use of mathematics to create codes and ciphers that can be used to conceal information. Used as the basis for the mathematical problems used to verify and secure bitcoin transactions.
DDoS — a Distributed Denial of Service Attack, aimed to create such conditions, under which legal system users cannot access system resources (servers). Bitcoin platforms are sometimes hit with DDoS attacks.
Difficulty — a measure, which shows, how difficult it is to hash a new block. Bitcoins have a network difficulty, which changes every 2016 blocks.
Double Spending — spending money twice. Bitcoin system prevents double spending, due to its block chain mechanism, where each block contains hash of the previous one. Any block in the chain is hard to modify, as all the following blocks will have to be changed too. Thus, the more blocks are to come, the more Bitcoin system is protected from double spending. Nevertheless, the risk still exists.
Dust transaction — a transaction for a very small number of Bitcoins with insignificant value, which is listed in the block chain, consuming place. The network considers these amounts as “dust”. Thresholds for dust transaction change over time, according to transaction volume and exchange rates.
ECDSA – The Elliptic Curve Digital Signature Algorithm is the lightweight cryptographic algorithm used to sign transactions in the Bitcoin protocol.
Escrow — a method of a more secure payment, when a third-party account holds Bitcoins until the transaction terms are met and the buyer releases payment to the seller.
Exchange – A central resource for exchanging different forms of money and other assets. Bitcoin exchanges are typically used to exchange the cryptocurrency for other, typically fiat, currencies.
Faucet – A technique used when first launching an altcoin. A set number of coins are pre-mined, and given away for free, to encourage people to take interest in the coin and begin mining it themselves.
Feathercoin – An altcoin based on the Scrypt proof of work algorithm.
Fiat currency — currency without intrinsic value, the rate of which is set, maintained and regulated by the government. Bitcoins can be exchanged for different fiat currencies, most frequently — for US dollars.
FinCEN – The Financial Crimes Enforcement Network, an agency within the US Treasury Department. FinCEN has thus far been the main organization to impose regulations on exchanges trading in bitcoin.
Fork — building alternative block chain, usually resulting from hashing other transaction blocks. There are several possible reasons for this process, such as 51% attack, system bug etc. The longest version of the block chain becomes successful.
FPGA — Field-Programmable Gate Arrays, an integrated circuit to be configured by a user or manufacturer after production. Thus, one can buy сhips and transform them for Bitcoin mining before connecting to the equipment.
Freicoin – A cryptocurrency based on the inflation-free principles outlined by the economist Silvio Gessell.
Genesis block – The very first block in the block chain.
GPU — Graphical Processing Unit, an electronic circuit, designed for graphical rendering. Despite low hashing power, GPUs are sometimes used for Bitcoin mining.
Genesis block — the first block in a block chain.
Ghash.IO — a pool, which allows mining Bitcoins and trading GHS at CEX.IO simultaneously.
Gigahashes/secGHS — Gigahashes per second, amount of work done by a miner. 1 GHS Equals 1,000,000,000 hashes per second.
GHS Trading — a concept of buying and selling GHS, in order to receive profit from the price difference.
Hash — a mathematical process that turns a certain amount of data into a fixed-length output. The same hash always results from the same data, but even the smallest data change in the input produces an absolutely different output. Hash is also an amount of work done by a miner.
Hash rate — amount of hashes, which a Bitcoin miner is able to mine in a certain period of time.
Input — part of a Bitcoin transaction showing where the payment has been transferred from. As a rule, input comes in a form of a Bitcoin address.
KHS — Kilohashes, or thousands of hashes per second.
KYC — Know Your Customer. It is a policy, used by banks and other financial institutions, referring to gather relevant information from their customers, in order to be sure that they are legitimate.
Leverage — In foreign currency trading, leverage multiplies the real funds in your account by a given factor, enabling you to make trades that result in significant profit. By giving leverage to a trader, the trading exchange is effectively lending them money, in the hope that it will earn back more than it loaned in commission. Leverage is also known as a margin requirement.
Liberty Reserve — A centralized digital currency payment processor based in Costa Rica. It was shut down by the US government, after it was found guilty of money laundering.
Litecoin — an altcoin or peer-to-peer cryptocurrency, inspired by and almost identical to Bitcoin, except for some differences.
Liquidity — The ability to buy and sell an asset easily, with pricing that stays roughly similar between trades. A suitably large community of buyers and sellers is important for liquidity. The result of an illiquid market is price volatility, and the inability to easily determine the value of an asset.
Margin call — The act of calling in a margin requirement. An exchange will issue a margin call when it feels that a trader does not have sufficient funds to cover a leveraged trading position.
Maintenance fee — a fee for covering electricity and upkeep costs, charged for cloud-based GHS.
Megahashes/sec MHS — Megahashes, or millions of hashes per second.
Market order — an order provided to an exchange, stating the amount of assets to buy or sell at a particular rate.
mBTC — a millibitcoin, which equals to one thousandth of a Bitcoin (0.001 BTC).
Microtransaction — Paying a tiny amount for an asset or service, primarily online. Micro-transactions are difficult to perform under conventional payment systems, because of the heavy commissions involved. It is difficult to pay two cents to read an online article using your credit card, for example.
Mining — the process of getting new Bitcoins through solving mathematical problems. Mining is done by the means of mining hardware.
Mixing service — A service that mixes your bitcoins with someone else’s, sending you back bitcoins with different inputs and outputs from the ones that you sent to it. A mixing service (also known as a tumbler) preserves your privacy because it stops people tracing a particular bitcoin to you. It also has the potential to be used for money laundering.
Mt. Gox — One of the first bitcoin exchanges, and historically the most popular, although it now faces challenges from other exchanges such as BitStamp. Based in Japan, Mt. Gox was started by Jed McCaleb in 2010.
Namecoin — an altcoin or cryptocurrency, which also uses an alternative DNS. Namecoin uses modified Bitcoin software, so there is an overall limit of 21 million Namecoins respectively.
Node — a computer, connected to the Bitcoin network using a client, which relays transactions to others.
Nonce — A random string of data used as an input when hashing a transaction block. A nonce is used to try and produce a digest that fits the numerical parameters set by the bitcoin difficulty. A different nonce will be used with each hashing attempt, meaning that billions of nonces are generated when attempting to hash each transaction block.
Orphan Block — a block, which doesn’t belong to the longest chain and is a part of a discarded fork.
OTC exchange — An exchange in which traders make deals with each other directly, rather than relying on a central exchange to mediate between them.
Output — the landing address of a Bitcoin transaction.
P2P — peer-to-peer. Type of interactions between individual nodes in the decentralized network, where they act as both suppliers and consumers of resources without being controlled by any central server.
Paper wallet — A printed sheet containing one or more public bitcoin addresses and their corresponding private keys. Often used to store bitcoins securely, instead of using software wallets, which can be corrupted, or web wallets, which can be hacked or simply disappear. A useful form of cold bitcoin storage.
Pool — a group of mining clients, who mine a common block and split rewards respectively after new Bitcoins are generated.
PPCoin — Peercoin or Peer-to-Peer Coin. This is the first cryptocurrency based on an implementation of a joint proof-of-stake and proof-of-work system. Unlike Bitcoin, Namecoin and other cryptocurrencies, PPCoin doesn’t have limited amount of possible coins, but it eventually attains 1% of annual inflation rate.
PPLNS scheme — “Pay per last N shares”, a reward scheme, according to which the payment is given to shares in a window, starting with the last share submitted and going backwards up to some number N of shares. Shares older than the window are not paid.
Pre-mining — The mining of coins by a cryptocurrency’s founder before that coin has been announced and details released to others who may wish to mine the coin. Pre-mining is a common technique used with scamcoins, although not all pre-mined coins are scamcoins (see Scamcoins).
Primecoin — Developed by Sunny King, Primecoin uses a proof of work system to calculate prime numbers.
Private key — an alphanumeric secret code, which allows its owner to spend Bitcoins. Each Bitcoin address is matched a private key, saved in the Bitcoin wallet of a person who owns the balance. It is highly recommended to keep the private key in secure.
PSP — Payment Service Provider. The PSP offers payment processing services for merchants who wish to accept payments online.
Pump and dump — Inflating the value of a financial asset that has been produced or acquired cheaply, using aggressive publicity and often misleading statements. The publicity causes others to acquire the asset, forcing up its value. When the value is high enough, the perpetrator sells their assets, cashing in and flooding the market, which causes the value to crash.
Process node — The size of a transistor in nanometers, produced during a chip fabrication process. Smaller process nodes are more efficient.
Proof of stake — An alternative to proof of work, in which your existing stake in a currency (the amount of that currency that you hold) is used to calculate the amount of that currency that you can mine.
Proof-of-work — a system, which requires some work from the service requester, usually meaning computational power. Block hashing requires computational process, which is actually easy, but is added an extra variable to make it more complicated. As soon as a block is successfully hashed through spending some time and computational effort, it is considered to be proof of work.
Public key — an alphanumeric code, which is publicly known and serves as an address to receive Bitcoins.
QR code — a matrix (or two-dimensional) barcode, the pattern of which contains a particular piece of data. QR codes are often scanned by cameras in mobile devices to encode Bitcoin addresses.
Ripple — A payment network that can be used to transfer any currency (including ad hoc currencies that have been created by users). The network consists of payment nodes and gateways operated by authorities. Payments are made using a series of IOUs, and the network is based on trust relationships.
Satoshi — the smallest fraction of a Bitcoin, which can currently be sent, and equals 0.00000001 BTC. Satoshi, as a monetary unit, is named after Satoshi Nakamoto, a pseudonymous developer who introduced an original paper specifying Bitcoin cryptocurrency.
Satoshi Nakamoto — The name used by the original inventor of the Bitcoin protocol, who withdrew from the project at the end of 2010.
Scamcoin — An altcoin produced with the sole purpose of making money for the originator. Scamcoins frequently use pump and dump techniques and pre-mining together.
Scrypt — proof-of-work system, alternative to SHA-256. Scrypt is more handy for CPU/GPU miners, rather than for ASIC miners.
Signature — A digital digest produced by hashing private and public keys together to prove that a bitcoin transaction came from a particular address.
Silk Road — An underground online marketplace, generally used for illicit purchases, often with cryptocurrencies such as bitcoin. Silk Road was shut down in early October 2013 by the FBI after owner Ross Ulbricht was arrested.
SEPA — The Single European Payments Area. A payment integration agreement within the European Union, designed to make it easier to transfer funds between different banks and nations in euros.
SHA-256 — the cryptographic function, on which Bitcoin’s proof of work system is based.
Shares — hashes, smaller than the target for difficulty of 1 (Usually, pools use such difficulty as the target for share, but technically, any difficulty could be used). Every hash created has a 1 in 232 possibility of being a valid share. In order to get Bitcoins in a more distributed and predictable way, miners use pools. If this is the case, miners are awarded Bitcoins, according to their shares.
Signature — a mathematical mechanism, which allows someone to prove ownership. In Bitcoin case, signature is a combination of private and public keys to prove that a Bitcoin transaction came from a particular address.
Stale — a block is stale or solved if it has already been successfully hashed. Thus, other miners working on that block should stop and restart their process, as they are attempting to solve a block without a reward.
Taint — An analysis of how closely related two addresses are when they have both held a particular bitcoin. A taint analysis could be used to determine how many steps it took for bitcoins to move from an address known for stolen coins, to the current address.
THS — Terahashes, or trillions of hashes per second.
Testnet — An alternative bitcoin block chain, used purely for testing purposes.
TOR — An anonymous routing protocol, used by people wanting to hide their identity online.
Transaction block — A collection of transactions on the bitcoin network, gathered into a block that can then be hashed and added to the block chain.
Trade fee — a fee set by an exchange for buying or selling assets.
Transaction fee — a fee for some transactions within the Bitcoin network, as a rule for those, which draw coins from numerous Bitcoin addresses and, as a result, contain a large data size.
Two-factor authentication (2FA) — an approach to authentication requesting two or three authentication factors of an entity presenting some evidence of its identity to a second entity. 2FA decreases the probability that the requester is presenting false evidence of its identity.
uBTC — a microbitcoin, which equals to one millionth of a Bitcoin (0.000001 BTC).
Vanity address — A bitcoin address with a desirable pattern, such as a name.
Virgin bitcoin — Bitcoins purchased as a reward for mining a block. These have not yet been spent anywhere.
Volatility — a measure of price change for a traded financial asset (for example, Bitcoin) over period of time.
Wallet — a figural title for a personal BTC storage (Account), which contains a collection of public and private keys. Sometimes the term “wallet” is also used in the meaning of software, which allows an individual to make electronic commerce transactions.
Wire transfer —electronic money transfer from one entity to another.
Worker — a piece of hardware (CPU/GPU/FPGA/ASIC etc.) used to mine Bitcoins for a certain individual or a pool.
Zerocoin — A protocol designed to make cryptocurrency transactions truly anonymous.
Zero-confirmation transaction — a transaction, in which an entity provides a product or a service before the Bitcoin’s transmission has been confirmed and added to the block chain. Zero-confirmation transactions carry a risk of double spending.