Bitcoin Vocabulary- Terms in Cryptocurrency




bitcoin vocabulary

The terms used in the cryptocurrency world can be confusing. We have assembled many Bitcoin Vocabulary here for you. Hopefully, knowing the Cryptocurrency terms will help you get started in Your new cryptocurrency adventure!

51% ATTACK
This cryptocurrency term is one of the bitcoin vocabulary, a condition in which more than half of 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 a transaction block. This gives them control over the network, including the power to:
  • Issue a transaction that conflicts with someone else's.
  • Stop someone else's transition from being confirmed.
  • Spend the same coins multiple times.
  • prevent other miners from mining valid blocks.
WALLET
A wallet is a place where you store your cryptocurrency. There are hot wallet (Online software-based) and cold wallet (Offline on a device)

Wallet ADDRESS
A wallet address is similar to a physical address or an email. It is the only information you need to provide for someone to pay you with any crypto. An important difference, however, is that each address should only be used for a single transaction.

BLOCK
In Bitcoin Vocabulary, "Blocks" are links in a chain of transaction verification. outstanding transactions get bundled into a block and are verified roughly every ten minutes on average. Each subsequent block strengthens the verification of previous blocks. Each block contains one or more transactions.

BLOCKCHAIN
The blockchain is a public record of crypto transactions in chronological order. The blockchain is shared among all Bitcoin users. It is used to verify the permanence of crypto transactions and to prevent double-spending.
Each block includes the difficult-to-produce verification hash of the previous block. This allows each subsequent block to be linked to all previous blocks.
These blocks are linked together to verify transactions within the block is called the blockchain.

SMART CONTACT 
This is an algorithmic program that enacts the terms of a contract automatically based on its code. One of the main value propositions of the Ethereum network is its ability to execute smart contracts.

BLOCK REWARD
When a Bitcoin miner finds a block, it receives newly minted bitcoins known as the "Block Reward". The reward (aka subsidy) is halved every four years and is responsible for bitcoin's controlled supply.

HALVING
This is a feature written into Bitcoin's code in which after a certain number of blocks are mined (typically every four years) the amount of new Bitcoin entering circulation gets halved. The halving sometimes has an impact on the bitcoin price.

BRANCHING POINT
The block at which the blockchain diverges into multiple chain branches.

CHECKPOINT LOCKING
Every once in a while, an old block hash is hardcoded into Bitcoin software. Different implementations choose different checkpoint locations.
Checkpoint prevents various DOS attacks from nodes flooding unusable chains and attacks involving isolating nodes and giving them fake chains.

COINBASE
"Coinbase" is another name for a generation transaction. The input of such a transaction contains some arbitrary data where the scriptSig would go in normal transactions-- this data is sometimes called the "Coinbase", as well.

CONFIRMATION
To protect against double-spending, a transaction should not be considered as " confirmed" until a certain number of blocks in the blockchain confirm, or verify that the transaction is "n/unconfirmed" until 6 blocks confirm the transaction.

CRYPTOGRAPHY
Cryptography is the branch of mathematics that lets us create mathematical proofs that provide high levels of security. Online commerce and banking already use cryptography. In the case of Crypto, cryptography is used to make it impossible for anybody to spend funds from another user's wallet or to corrupt the blockchain. It can also be used to encrypt a wallet so that it cannot be used without a password.

DIFFICULTY
For every 2016 block, Bitcoin adjusts the difficulty of verifying blocks based on the time it took to verify the previous 2016 blocks. The difficulty is adjusted so that given the average estimated computing power of the whole bitcoin network, only one block will be verified on average every ten minutes for the next 2016 blocks.

The difficulty is usually expressed as a number, optionally accurate to many decimal places (eg. in block 100,000 it was 14,484.162361. The difficulty is inversely proportional to the hash target, which is expressed as a hex number with around 50 digits and is the number under which a block's generated hash must be to qualify as an officially verified block. The hash target is equal to (65535<< 208)/ difficulty). The difficulty is also often called block difficulty, hash difficulty, verification difficulty or the difficulty of generating bitcoins.

DOUBLE-SPENDING
Attempting to spend coins that have already been spent in another transaction.

FIAT CURRENCY
A currency, conjured out of thin air, which only has value because people say it does. Constantly under scrutiny by regulators due to its known application in money laundering and terrorist activities. Not to be confused with bitcoin. It is a government-issued paper currency.

FORK
What this Bitcoin Vocabulary means is a  creation of an alternative ongoing version of the blockchain, typically because one set of miners begins hashing a different set of transaction blocks from another. It can be caused maliciously, by a group of miners gaining too much control over the network (see 51% attack), accidentally, thanks to a bug in the system or intentionally, when a core development team decides to introduce substantial new features into a new version of a client. A fork I successful if it becomes the longest version of the blockchain, as defined by difficulty.

GENERATE BITCOINS
The process by which new bitcoins (aka the "Block Reward") are distributed via Mining.

HASH
This cryptocurrency term is the output of a cryptographic hash function.

HASH FUNCTION
A computer algorithm that takes an arbitrary amount of input data and deterministically produces fixed-length output, known as the data's "hash", can be used to easily verify that data has not been altered. If you change any single bit of the original data and run the hash algorithm, the hash will completely change. Because the hash is seemingly random, it is prohibitively difficult to try to produce a specific hash by changing the data which is being hashed.

HASH RATE
The "hash rate" cryptocurrency term is the measuring unit of the processing power of the Bitcoin network. The Bitcoin network must make intense mathematical operations for security purposes. When the network reached a hash rate of 10 Th/s, it meant it could make 10 trillion calculations per second.

LOW PRIORITY
See Priority.

MAIN-CHAIN
The longest BlockChain.

MEMORY POOL
Generators store transactions waiting to get into a block in their memory pool after receiving them. Received transactions are stored even if they are invalid to prevent nodes from constantly requesting transactions that they've already seen. The memory pool is cleared when Bitcoin is shut down, causing the network to gradually forget about transactions that haven't been included in a block.

MERKLE ROOT
Every transaction has a hash associated with it. In a block, all of the transaction hashes in the block are themselves hashed (sometimes several times-- the exact process is complex), and the result is the Merkle root. In other words, the Merkle root is the hash of all the hashes of all the transactions in the block.
The Merkle root is included in the block header. With this scheme, it is possible to securely verify that a transaction has been accepted by the network (and get the number of confirmations) by downloading just the tiny block headers and Merkle tree-- downloading the entire blockchain is unnecessary. This feature is currently not used in Bitcoin, but it will be in the future.

MINER
Computer software is designed to repeatedly calculate hashes to create a successful block and earn coins from transaction fees and new coins created with the block itself. The term reference an analogy of gold miners who dig gold out of the ground and thus "discover" new gold that can be used to create new coins with a similar kind of discovery occurring with a successful hash to create new Bitcoins.

MINING
This cryptocurrency term 'mining' bitcoin is the process of making computer hardware do mathematical calculations for the Bitcoin network to confirm transactions and increase security. As a reward for their services, Bitcoin miners can collect transaction fees for the transactions they confirm, along with newly created bitcoins. Mining is a specialized and competitive market where the rewards are divided up according to how much calculation is done. Not all Bitcoin users do Bitcoin mining, and it is not an easy way to make money.

NODE
This crypto term refers to each Bitcoin client currently running within the network is referred to as a node of the system.

NONCE
A nonce is an otherwise meaningless number that we used to alter the outcome of a hash. Each time Bitcoin hashes a block, it increments a nonce within the block which it is trying to verify, If the numeric value of the effectively random hash is below a certain amount determined by the block generation difficulty, the block is accepted by other clients and gets added to the chain

ORPHAN BLOCK
An orphan block is a block that has no known parent in the currently-longest blockchain. Not to be confused with a Stale Block (which has a known parent, but is no longer part of the longest chain).

ORPHAN ROOT
The root (first) block in an orphan blockchain.

P2P
Peer-to-peer refers to systems that work like an organized collective by allowing each individual to interact directly with the others. In the case of Bitcoin, the network is built in such a way that each user is broadcasting the transaction of other users. And, crucially, no bank is required as a third party.

DEFI
Decentralized Finance (DEFI) is an ecosystem that operates independently, free of third parties or exchanges. Defi involves the use of decentralized exchanges and wallets to trade tokens.

CEFI
CeFi involves the use of companies operating exchange platforms like Binance, FTX etc.

EXCHANGE
Exchange platforms are digital marketplaces where you can buy and sell cryptocurrencies such as Binance, PooCoin. Etc.

WHITE PAPER
A white paper is a document that outlines what a cryptocurrency is created to do and how it will achieve it.

TOKENS
There is a difference between Coins and Tokens. A coin is an asset that is native to its blockchain. E.g Bitcoin, Ethereum, Solana.

Tokens are created on existing blockchains. i.e Every cryptocurrency created under BSC, SOL, ETH or any other blockchain is not a coin but a Token. E.g Lovecoin Token

Tokens are the backbones of DEFI & exist to be used with DEX.

NFTs
Non-Fungible Tokens (NFTs) are the units of value used to represent the ownership of unique digital items like art or collectables. NFTs are most often held on the Ethereum blockchain.

TOKENOMICS
This term means the combination of Token and Economics. It helps to understand the supply and demand characteristics of a cryptocurrency.

ICO
ICO stands for "Initial Coin Offering", which is where a new cryptocurrency gives away some coins at a discounted rate usually to finance the project.

STABLECOIN
Stablecoin is a cryptocurrency that pegs its value on paper money or commodity. Stablecoin represents a fiat or government-backed currency on the blockchain. It is not volatile like other cryptos. E.g Tether, Busd etc.

GAS
This is a fee that developers have to pay to the Ethereum network or Binance network to use the system. Gas is paid in either or Bsc, the native cryptocurrency of Ethereum and Binance Smart Chain respectively.

HODL
This crypto term stands for " Hold on for Dear Life" the term originated from a user typo on a Bitcoin forum in 2013. It refers to a passive investment strategy in which people buy and hold onto cryptocurrency instead of trading it, with the hope that it would increase in value.

IDO
This crypto term stands for 'Initial DEX Offering' refers to the launching of a cryptocurrency on a decentralized exchange (DEX) usually at a price lower than the listing price to raise funds.

MARKET CAP
The total trading value of a cryptocurrency Calculated by (Current Price X Circulating Supply = Mcap)


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