***Defenitions*** Flashcards
51% ATTACK
A single miner or group having a controlling stake of the computing power in a cryptocurrency network. This could enable them to issue transactions that could conflict with someone else’s, stop transactions going through, spend their currency multiple times over and prevent other miners from mining.
ADDRESS
The presence that allows you to send/receive transactions as part of the bitcoin network. It also acts as the public key to your bitcoins.
ALTCOIN
Altcoin is the name given to the group of ‘alternative’ cryptocurrencies separate to bitcoin.
AML
Anti-Money Laundering (AML) techniques. This ensures that all transactions on the network are being carried out by genuine traders and not those converting illegal funds.
ASIC
An Application Specific Integrated Circuit (ASIC) is designed specifically to process the SHA- 256 hashing equation used to mine bitcoins.
ASIC MINER
Able to calculate the SHA-256 equation far quicker than a CPU or GPU.
BITCOIN INVESTMENT TRUST
A sort of bitcoin syndicate, the Bitcoin Investment Trust invests exclusively in this cryptocurrency,
and uses secure protocols to keep them safe on behalf of members. This is one way to invest in
bitcoin without purchasing the hardware required yourself.
BITCOIN PRICE INDEX (BPI)
Devised by Coin Desk and shows the average bitcoin prices across the leading global currency exchanges.
BITCOIN WHITEPAPER
The bible of the bitcoin network, this whitepaper was written by the currency’s ‘founder’, Satoshi
Nakamoto, in 2008. It gives a comprehensive description of the bitcoin protocol, and is a good read
for newbies and experienced bitcoin traders alike.
BITPAY
A payment channel that processes transactions on behalf of merchants.
BITSTAMP
A bitcoin exchange platform.
BTC
BTC is the abbreviated version of bitcoin, similar to USD.
BUTTONWOOD
A project designed to create a bitcoin exchange in New York’s Union Square. Named after the Buttonwood Agreement (upon which the New York Stock Exchange was formed). It was founded by bitcoin aficionado Josh Rossi.
CLIENT
This is the software program which connects a machine – whether a desktop computer, laptop or mobile device – to the bitcoin network. It may also be the home to your bitcoin wallet.
CONFIRMATION
The successful hashing of a transaction into the block. It can take up to ten minutes, although larger transactions may require more than one confirmation, as more blocks need to be hashed and added to the block chain. Once another block is added to the chain the transaction will be confirmed again.
COLOURED COINS
Allows users to define their own attributes of the currency. The idea is that users could mark a bitcoin as a physical
asset, which could then be traded as a token for other property.
CPU
This is the Central Processing Unit of a computer, and one that has been used in the past to mine bitcoin – before it was usurped by ASIC and GPU set-ups. CPU’s are still sometimes used to mine altcoins with less taxing hashing calculations.
COINBASE
- The input of a bitcoin’s transaction. Once a bitcoin has been mined, the reward is recorded as a transaction using this input data.
- The name of a bitcoin wallet operator.
COIN AGE
Formula = (Currency Amount) X (Period of time owned)
CRYPTOCURRENCY
One that is deemed legal tender and based on mathematical formulas alone, rather than exchange rates.
CRYPTOGRAPHY
This is the name given to the process of using maths to create the codes used to conceal information. This is the basis of the mathematical equation inherent in bitcoin mining.
DDOS
Distributed Denial of Service is a cyber-attack used to drain the resources of a target. This is done by sending small amounts of network traffic to tie up the target’s bandwidth –
preventing it from providing its services to its clients. Bitcoin exchanges have been subject to sporadic DDoS attacks in the past.
DEFLATION
Experienced when the price of something decreases over time. This happens when the supply outweighs demand, or where there is only a finite amount of currency around.
DIFFICULTY
How difficult it is to hash a new block. The lower the number, the harder it is to produce a hash value that fits the block. Difficulty is fluid and can change based on the amount of computing power in the network. So if large numbers of people left the network its difficulty would decrease. If a currency grows in popularity then its difficulty increases as computing power expands.
DOUBLE SPENDING
This is the immoral act of spending the same bitcoins twice. The user completes a transaction using their bitcoins and then makes a second trade from someone else using the same coins. The user must then convince the network that only one transaction has taken place by hashing it in a block. This is why zero-confirmation transactions are risky.
DUST TRANSACTION
A transaction that takes up space in the block chain but is ultimately worth very little. The developers of bitcoin are taking steps to minimize the amount of dust transactions that take place by introducing a minimum transaction amount.
ECDSA
Elliptic Curve Digital Signature Algorithm, is the formula in the Bitcoin protocol used to sign transactions.
ESCROW
A type of online wallet that holds funds securely to protect them during a transaction. It is used where two parties cannot exchange bitcoins in public, and want the added reassurance
that their currency cannot be ‘stolen’ digitally.
EXCHANGE
Where users can come together and swap different cryptocurrencies.
FAUCET
The method of mining a pre-defined number of coins when launching a new cryptocurrency, and then giving these away in order to kick-start interest.
FEATHERCOIN
A popular altcoin based on the Scrypt algorithm, and one that is thus suitable for CPU and GPU rigs.
FIAT CURRENCY
Another name for money used across the world that has a value inferred by its owner. This is commonly used in money laundering and illegal activities.
FINCEN
Financial Crimes Enforcement Network, a US Treasury Department agency created to impose regulations on bitcoin exchanges.
FORK
When one set of miners starts hashing a different set of transaction blocks.This can be a malicious tactic or undertaken accidentally. It can even be a deliberate ploy where the bitcoin development team introduces a new version of the client. A fork is considered successful if it goes on to become the longer version of the chain.
FPGA
Field Programmable Gate Array is another form of processing chip that can be tailored to bitcoin mining. As these are sold in larger numbers ‘off the shelf’ and then re-configured after sale, they
are usually far cheaper to buy than ASIC chips, although they are less effective.
FREICOIN
Created by Silvio Gessell and founded on the principle of being
inflation-free.
GENESIS BLOCK
The original block in a chain.
GIGAHASHES/SEC
Measurement that determines how quickly your machine can mine – it is the number of hashtag attempts possible per second, measures in a billion hashes (a Gigahash).
GPU
Graphical processing unit, as found in your standard PC graphics card. As a GPU is designed specifically to render polygons in pixel-heavy computer games, they are also perfect for the calculations required in cryptocurrency mining.
HASH
The mathematical process required in bitcoin mining. It is complex – to protect the sanctity of the currency – and hard to decipher and alter the output.
HASH RATE
The number of hash calculations that can be performed per second. This generally dictates how successful a miner is likely to be.
INFLATION
The opposite of deflation: as the value of money drops, the price of goods and services increases exponentially. This gives consumers less purchasing power, so there’s more motivation to spend a
currency quicker.
INPUT
This is where a bitcoin transaction starts, and will be denoted by a bitcoin address. That is unless it is a generation transaction of a newly-mined bitcoin.
KILOHASHES/SEC
The number of hashes calculated per second in thousands of hashes (a Kilohash).
KYC
This is Know Your Client, a regulation that forces financial institutions to thoroughly vet the people they do business with to ensure they are legit.
LEVERAGE
Utilizing leverage in foreign currency trading enables you to multiply your ‘real funds’ and achieve significant profit. Leverage can be used by a trader to essentially lend another person funds, which
they can then earn back in commission.
LIBERTY RESERVE
A former giant of the digital currency processing world, Liberty Reserve was shut down by the US government after it was found to be money laundering.
LITECOIN
A type of altcoin that uses the Scrypt hashing formula.
LIQUIDITY
Ensures that the price of a good stays similar among all trades, ensuring that it is easy to buy and sell. If there’s a decent-sized community of traders then the price will remain stable and
‘liquid’. An illiquid market results in extreme price fluctuations, and makes it harder to value a good.
MARGIN CALL
Takes place when an exchange believes a trader does not have sufficient funds to cover their leveraged trades.
MEGAHASHES/SEC
The number of hashes possible per second measured in millions of hashes (a Megahash)
MARKET ORDER
Placed at an exchange when you want to buy or sell bitcoins instantly, and at the going market rate.
MBTC
A minuscule amount: one thousandth of a bitcoin (0.001 BTC).
MICRO-TRANSACTION
MICRO-TRANSACTION
Paying a minute amount as part of a transaction online, these are hard to carry out under conventional payment systems.
MINING
Can be undertaken by anyone wanting to generate some new bitcoins for their wallet. You must solve cryptographic equations using the relevant algorithm.
MIXING SERVICE
The art of mixing in your bitcoins with another person’s, and then sending you back the same amount but with different inputs and outputs. This is a measure that helps protect the privacy of your account, as your currency cannot be traced back to you.
MT. GOX
This was perhaps the original bitcoin exchange back in 2010, and was certainly the most popular at the time. Based in Japan, Mt. Gox has subsequently closed.
NAMECOIN
A unique altcoin that provides an alternative to standard Domain Name Systems
(DNS). Users can utilize .bit domains – only accessible via proxy servers – by paying with Namecoin.
