Bitcoin Glossary

bitcoin logo
A

Altcoin - This is the name for cryptocurrencies that are used as an alternative to the Bitcoins. The most common Altcoins are the Litecoin, 

AML - ALM is short for anti-money laundering techniques. These techniques are to stop people who obtain funds through illegal measures. The most often make it look like they have obtained those funds in a legal manner. AML devices are perfectly legal to use. These techniques are often used with Bitcoin exchanges. 

ASIC - ASIC is short for application specific integrated circuit. They are silicone chips that are designed for a single and specific task. Bitcoins are used to process SHA-256 problems and to mine new Bitcoins. 

ASIC Miner - Equipment that contains an ASIC chip and is used to mine for Bitcoins is known as an ASIC miner. They are long board with a plug located in the back. These devices work with USB connects or they work on their own. They come with software and can connect to the internet by a wireless connection or an Ethernet cable. 

B

Bitcoin Investment Trust - These trusts are open-ended yet private. They work with Bitcoins and used the latest in technology to store them safely so the shareholders do not have to worry. This allows people to use Bitcoins without having to purchase additional safe measure or additional storage. 

Bitcoin Price Index (BPI) - The price index gives a person the average of Bitcoin prices and information on global exchanges. Developers can also use an API. 

Bitcon Wallet - A personal online Bitcoin storage system. 

The Bitcoin Whitepaper - In November 2008 a paper written by Satoshi Nakamoto was posted on the Bitcoin.org website and was titled “Bitcoin: A Peer-to-Peer Electronic Cash System.” The eight pages contained in this document explain how Bitcoins work and allows peers to generate an electronic system that does not rely on trust. This is the working elements of the cryptocurrency.The Bitcoin code was released shortly after in 2009. 

BitPay - This is a way to process payment for Bitcoins. It works for merchants and allows them to accept Bitcoins as a form of valid payment. 

Bitstamp - This is gaining in popularity as a way to exchange Bitcoins. See the latest on Bitstamp news. 

BlockChain - This full list of blocks is available since the time when Bitcoin currency was first used. The chain is designs so that each block has a different hash drawing then on the block that it precedes. This is designed to make the system tamperproof. 
 
Block Reward - The reward is given to a miner that is also to hash the codes of the transaction block. It can be coins and transaction fees depending on the policy of the cryptocurrency in question. It will also

Breakout - When price moves above or below identified support or resistance, usually resulting in a burst of volume and volatility around the breakout level. A significant event in markets as they signal a shift in market control. 

BTC - This is the abbreviation for Bitcoins. 

Buttonwood - The Buttonwood project was funded by Josh Rossi to rally a Bitcoin exchange on the New York Union Square. It takes its name from the Buttonwood agreement which helped form the New York Stock Exchange in 1792. 

C

Confirmation - To ensure validity the Bitcoin transaction must turn into a transaction block. One confirmation takes around 10 minutes to complete. That is the average time for a block to be hashed. Sensitive transactions or large transactions may require several confirmations. This means that more blocks are going to need to be hashed and a longer block chain. Every time another block is added to the chain the transaction will receive another confirmation. 

Colored Coins - These are add on features for the Bitcoins. This will give users additional features. They can be designed by the user and they are able to designated what the color stand for. They are often used to show what Bitcoins are stocks and which ones represent physical assets. This allows Bitcoins that are traded to represent property. 

CPU - The brain of the computer the central processing unit is called a CPU. The CPU was used to hash Bitcoin transactions but is not powerful enough any longer. They are still used to hash transactions involving altcoins. 

Coinbase - This is another name for a generation transaction. When the Bitcoin is mined it will not come from another user. It will show up as a reward for a miner. The reward is considered a transaction and documented as one. It will not show the user’s Bitcoin address. The transactions will some the arbitrary data that has been used for an input. This can also be to name a Bitcoin wallet. The wallet can process payments for merchants and be used to purchase Bitcoins from exchanges that have been made. 

Coin Age - This is the time the currency amount has been multiplied by the time in the holding period. 

Cryptocurrency - This is a form of currency based on mathematic principals. Fait currency is printed while cryptocurrency comes from solving cryptography math problems. 

Cryptography - This uses math to make codes and solve their meaning. The information is concealed in these codes. This is used to verify and secure the transactions using Bitcoins. 

D

DDoS - 
This is the distribution denial of service attacks involving many different computers. The attacker is able to drain the resources from 

Deflation - Over time the prices in any economy will be reduced. This happens when the good or services increase faster than the supply of money used to purchase then. If there is a finite supply of money the value of it decreased. Less more is needed to purchase the goods or services which leads to a reduction in price. When people are waiting for prices to fall they stop spending money. They hope that in the near future they will be able to make the money go further. This can lead to an economic depression. 

Difficulty - This determine how difficult it is going to be to hash a new block. There is a maximum number given to the transaction of the block hash. The lower this number is the more difficult it is to find a hash value that is going to fit it. This can vary based on the computing power used by miners. This will decrease if miners leave the network. The growing popularity of Bitcoins has attracted more use making the difficulty increase. 

Double Spending - This is when Bitcoins are spent twice. This can happen when a transaction is made using Bitcoins and then a purchase is made by someone else using the same Bitcoins. Only one of these transactions is confirmed though hash blocking. This is not an easy thing to do but the way the network operates it is a risk by those that accept zero confirmation transactions. 

Dust Transaction - This transaction uses a very small amount of Bitcoins. There is little financial value but it will still take up space on the block chain. The development team has taken measure to eliminate this by increasing the minimum transaction amount. 

E 

ECSDA - 
The Elliptic Curve Digital Signature Algorithm is used to sign Bitcoin transactions.

Escrow - This is the accord of holding funds in a seperate account

Exchange - This is where currency is traded for goods and services. Bitcoins are used to exchange currencies. 

F

Faucet - A number of coins distributed freely from websites

Fiat Currency - Currency has value because people say it does, there is nothing tangible to back it up. This is closely watched by regulators since money launderers and terrorists use this method. This is not related to Bitcoins. 
 
FinCEN - The United States Treasury Department created the Financial Crimes Enforcement Network. This regulates the exchange of Bitcoins. 
 
Fork - This is an ongoing block chain since a miner has begun to hash different sets of transaction blocks. Miners may begin to take control of a network on accident or on purposes. A fork is successful if it becomes a long version of a block chain. 
 
FPGA - The Field Programmable Gate Array is a processing chip that can be used to add customized functions after production. This is an empty silicon slate where things can be written. These can be produced as

G

Genesis Block - This is the first block in a block chain series. 
 
Giga hashes/Sec - This is the number of hash attempts that are possible in a second. This measurement is measured in the billions of hashes or by the thousands of 
 
GPU - A silicon chip specifically designed to perform the complex mathematical calculations to convert millions of polygons into modern computer game graphics. 

H

Hash - A mathematical process that takes in various amounts of data and outputs a shorter version. This is significant for two reasons: 1) it is almost impossible to determine what the original input data was by looking at the output and, 2) the slightest alteration in the input data will produce a totally different output. 

Hash Rate - The number of Hashes a Bitcoin miner can perform in a very short time period (A second, for example). 

I

Inflation - The relationship between currency and goods. When the value of currencies 

Input - That part of a Bitcoin transaction indicating where the transaction originated. Normally, this refers to the Bitcoin address, unless, of course, it is a generation transaction, which means that the Bitcoin in question has just been mined. 

K

Kilo-Hashes/sec - The number of hashing attempts possible in a second. These attempts number in the thousands. 
 
KYC - Refers to a set of rules that force financial institutions to carefully vet the people they do business with to ensure that they are legitimate financial partners. 

L

Leverage - Leveraging involves increasing the funds in your account (usually by borrowing) and investing those funds in trades with the hope that the return will far outweigh the amount borrowed. There is a lot of 
 
Liberty Reserve - A financial institution located in Costa Rica. Specifically, it was a digital currency payment processor, but the institution was shut down by the U.S. Government when it was found guilty of money laundering. 
 
Litecoin - An alt-currency based on script proof. 

Liquidity - The ability to buy and sell assets quickly with little or no variation in pricing. An example of a liquid asset is currency. Currencies can be bought and sold for goods and services instantly while its value is still the same. On the other hand, an illiquid market would require drastic price cuts in order for the asset to sell quickly. 
 
Long - A speculative position in which a trader buys an asset in hopes of price appreciation so that he/she can “buy low and sell high” for a profit. 

M

Margin Call - If a trader does not have sufficient funds to meet the margin, the brokerage house, or exchange, will issue a margin call. The investor will then have to increase his deposit or close out the account. 
 
Market Order - A notification given to the exchange to buy or sell an asset at the going rate. Similarly, a market order in a Bitcoin exchange would allow you to buy or sell Bitcoins right away, instead of waiting for a set of conditions to occur to trigger the sale and ensure a profit. 
 
MBTC - mBTC is shorthand for one-thousandth of a Bitcoin (0.001 BTC). 
 
Micro-transaction - A form of online trading that allows you to pay for an asset with only a fraction of the price. Under conventional payment systems this kind of transaction would be very difficult given the amount the commissions would accrue. For example, using a credit card to purchase an item valued at a nickel wouldn’t be very economical or cost effective. 
 
Mining - The process of generating Bitcoins by using computers to solve complex cryptographic problems. 
 
Mixing Service - Involves mixing your Bitcoins with someone else’s and returning Bitcoins to you with different input and output data than the ones you sent in. this technique preserves your privacy since it makes it impossible for anyone to trace a particular Bitcoin to you. Unfortunately, this technique can also be used for money laundering. 

N 

Namecoin - Designed to provide traditional domain name systems (DNS) with and alternative. 
 
Node - The name given to a computer connected to the Bitcoin network that relays transactions from one Bitcoin user to another. 
 
Nonce - Is a random string of data used as input when hashing a transaction block. Its purpose is to try to produce a digest that fit the numerical parameters set by the Bitcoin difficulty. A different nonce is used with each hashing attempt, meaning billions of nonce is generated when attempting to hash a transaction block. 

O

Orphan Block - Refers to that part of the valid block chain that has been discarded. 
 
OTC Exchange - Allows traders to make deals without the auspices of an intermediary like an exchange or brokerage house. 
 
Output - Refers to the destination address of a Bitcoin transaction. A single output can have multiple destinations. 

P

P2P - Refers to the decentralized interactions between two people in a highly interconnected network. P2P is the direct opposite of the hub-and-spoke arrangement in which you have multiple participants involved in a transaction, deal with each other through a centralized mediation point. 
 
Paper Wallet - Is a printout of one or more Bitcoins addresses with their corresponding private keys. Some people feel that this is a more secure way to store Bitcoins than software or web wallets which can be corrupted or hacked, or outright disappear. 
 
Pool - Refers to a collection of clients who work together to mine a block and then split the profit. Mining pools can significantly increase the chances of successfully mining a block, as the difficulty will continue to rise. 
 
PPcoin - Variously known as peer-coin or p2p coin, is alt-coin that uses proof of stake along with proof of work. The PPcoin is based on Sunny King and Scot Nadal’s thesis. 
 
Pre-mining - Mining of a crypto-currency by its founder before making a public announcement. This technique is typical of many scam-coins, though not all pre-mined coins are scam-coins. 
 
Prime-coin - This is an alt-coin developed by Sunny King, which uses the proof of work system to calculate prime numbers. 
 
Private Key - This is a user’s secret alphanumeric string. It is designed to send the user a digital communication when a public key is used to hash it. The private key is designed to be used in concert with a public key, which serves as the Bitcoin address. 
 
PSP - A PSP, or payment service provider, is a merchant who wishes to accept online payments. 
 
Pump and Dump - The practice of inflating the value of financial assets that were produced or acquired cheaply by using aggressive advertising and/or misleading statements. The publicity causes an influx of buyers and the price rises accordingly. When the price is high enough, however, the perpetrator sells his stake in the asset causing a sudden devaluation in the asset. 
 
Process Node - Refers to the size of a transistor in nanometers produced during the chip manufacturing process. The smaller the node, the more efficient it is. 
 
Proof of Stake - The amount of digital currency you can mine based on the amount of money you hold. 
 
Proof of Work - A system that links mining capability with the amount of computational power you have, which is easy, but, when coupled with the hashing process, becomes more difficult. Since it takes time and effort to successfully hash a block, a hashed block is considered proof of work. 
 
Public Key - Contains the Bitcoin address and is used in concert with a private key. 

Q 

QR Code - This determine how difficult it is going to be to hash a new block. There is a maximum number given to the transaction of the block hash. The lower this number is the more difficult it is to find a hash value that is going to fit it. This can vary based on the computing power used by miners. This will decrease if miners leave the network. The growing popularity of Bitcoins has attracted more using making the difficulty increase. 

S

Satoshi - The smallest division of a Bitcoin. 
 
Satoshi Nakamoto - Inventor of the Bitcoin protocol. 
 
Script - Proof of work system alternative for SHA-256. It is designed to be CPU and GPU friendly, but not so much for ASIC miners. 
 
Signature - a digital digest generated by hashing public and private keys together to verify a Bitcoin address. 
 
SEPA - Stands for the Single European Payment Area and is an agreement between European Union members which makes money transfers between banks much easier. 
 
SHA-256 - The basis for Bitcoins proof of work system. 
 
Short - A speculative position in which a trader sells a borrowed asset in hopes of price depreciation so that he/she can buy it back cheaper for repayment, essentially a way to “sell high and buy low”. 
 
SPV - A Bitcoin protocol that allows nodes to verify payments without downloading the entire block chain. 
 
Stale - Refers to a Bitcoin block that has already been hashed by someone else. 

T

Taint - An analysis that tells how many steps a Bitcoin took as it moved from one address to another. 
 
Terahases/sec - Hashes measured in trillions of seconds. 
 
Testnet - Bitcoin testing block chain. 
 
TOR - Protocols that help users hide their identities. 
 
Transaction Block - Bitcoin transactions that can be hashed and added to. 
 
Transaction Fee - Fees charged for sending transactions across the network and awarded to the miner who successfully hashed the block. 

U

UBTC - a micro-Bitcoin (0.000001).

V

Vanity Address - A Bitcoin that reflects a personal preference. 
 
Virgin Bitcoin - Bitcoins that have never been transacted. 
 
Volatility - Price fluctuations. 

W

Wire Transfer - Electronic money transfer. 
 
Warning of 51% attack - This is a condition is which more than of the power of a computer that is on a cryptocurrency network which is controlled by only one miners. It can also be controlled by a group of miners. This makes the miners the authority and allows them to control the network. Every client that is on this network will this that the attackers had transaction block. Having this authority allows them to control the network and gives them the ability to: issue transactions that are not compatible with others; stop another person’s transaction from being confirmed; use the same coins more than once; block other miners from using valid mining blocks; use of addresses. 

Z

ZeroCoin - Anonymous crypto-coins. 
 
Zero Confirmation Transaction - Risky practice of delivering service or product before confirmation that the Bitcoins have been added to the block chain.  

Disclaimer: Please always do your own due diligence, and consult your financial advisor. Author owns and trades bitcoins and other financial markets mentioned in this communication. We never provide actual trading recommendations. Trading remains at your own risk. Never invest unless you can afford to lose your entire investment. Please read our full terms of service and disclaimer at the BullBear Analytics Legal.