Crypto Terminology

These crypto definitions will help you in your whitepaper research. We will update the crypto dictionary with new terms regularly!

51% Attack

51% Attack is the situation where more than half of the computer power running a blockchain are controlled by one person or one group of people with bad intentions. That person or group with the majority power can manipulate transactions in his favor. By preventing new transactions from being included in the blockchain and/or reversing transactions so they can spend the same money again and again, known as a double-spend.

Abstract

A summary of a larger written written document. Abstracts are common in the beginning of cryptocurrency whitepapers and technical documents to briefly describe the entire document.

Anti-Money Laundering or AML

A set of laws designed to prevent converting illegally earned money into what appears to be legally earned money. Laundering just means cleaning something that is dirty. Money laundering is the process of making illegally earned money (dirty money) appear to be legally earned (clean money). Anti-money laundering rules and laws are designed to make it difficult for criminals to launder their money.

Airdrop

Is the process of freely distributing a new cryptocurrency to people hopefully creating more demand.When a new cryptocurrency is created, it needs to gain users. One way of doing this through an airdrop. The group issuing the airdrop hopes new users will begin researching and sharing the coin creating more demand.

Altcoin

Any cryptocurrency except for Bitcoin. “Altcoin” is a combination of two words: “alternative Bitcoin” or “alternative coin”

Algorithm

A series of steps that will solve a problem. In cryptocurrencies, algorithms are used to hide and reveal information.

Atomic swap

Atomic swaps are a mechanism where one cryptocurrency can be exchanged directly for another cryptocurrency, without the need for a trusted third party such as an exchange.

Blockchain

a system (ledger) in which a record of transactions made in cryptocurrency are maintained across several computers that are linked in a peer-to-peer network.

The validity of each cryptocurrency’s coins is provided by a blockchain. A blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography.[23][26] Each block typically contains a hash pointer as a link to a previous block,[26] a timestamp and transaction data.[27] By design, blockchains are inherently resistant to modification of the data. It is “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way”.[28] For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks, which requires collusion of the network majority.

Blockchains are secure by design and are an example of a distributed computing system with high Byzantine fault tolerance. Decentralized consensus has therefore been achieved with a blockchain.[29] Blockchains solve the double-spending problem without the need of a trusted authority or central server, assuming no 51% attack (that has worked against several cryptocurrencies).

Block Height

The number of blocks in the chain between any given block and the very first block in the blockchain.

Block Reward

Reward for maintaining the blockchain. Maintaining the blockchain requires computer power and electricity or risking a large amount of cryptocurrency as a guarantee that you are trustworthy. Anyone doing this work is eligible to earn a reward in digital money and sometimes brand new, virgin cryptocurrency.

Crypto 

Short for cryptography or cryptocurrency. Crypto comes from the Greek word meaning “hidden”.

Cold storage 

A type of digital data storage that takes longer to access and quite often is not connected to the Internet. Also known as a “cold wallet”.

Confirmation 

A type of proof that a transaction was recorded and verified on the blockchain. The higher number of confirmations, the more trusted that transaction is.

Decentralized 

A type of system where elements are spread out by some means, with decisions made from many points, and independence is preserved across the network. Decentralization is actually a combination of 3 parts making up a triangle:

  • Structure: A system located in multiple places across a space, is a decentralized structure.
  • Management: A system managed by my many equally powerful units, with no single ruling unit is a decentralized management.
  • Independence: A system made up of independent units working together for a common purpose is a decentralized independence.
  • Decentralized Application or dApp 

A software application that has its technology running publicly on a network of computers.

Digital currency 

Digital currency (digital money, electronic money or electronic currency) is a type of currency available in digital form (in contrast to physical, such as banknotes and coins). It exhibits properties similar to physical currencies, but can allow for instantaneous transactions and borderless transfer-of-ownership. Examples include virtual currencies, cryptocurrencies, and central bank digital currency. These currencies may be used to buy physical goods and services, but may also be restricted to certain communities such as for use inside an online game.

Digital Signature

A digital signature is a mathematical scheme for verifying the authenticity of digital messages or documents. A valid digital signature, where the prerequisites are satisfied, gives a recipient very strong reason to believe that the message was created by a known sender (authentication), and that the message was not altered in transit (integrity).

Distributed ledger 

A system of independent computers that are simultaneously recording data. With distributed ledger technology, identical copies of the recording are kept by each computer.

Double-spending 

A form of deceit using digital money where the same money is promised to two parties but only delivered to one. If completed successfully, one of the two recipients will not be paid.

ERC-20 

A proposed set of rules and standards for creating new cryptocurrency using Ethereum as the foundation. ERC-20 describes crypto made with Ethereum technology that follow these rules and standards.

Exchanges

Cryptocurrency exchanges allow customers to trade cryptocurrencies for other assets, such as conventional fiat money, or to trade between different digital currencies.

FUD

FUD stands for “Fear, Uncertainty and Doubt” and is equal to being a TROLL. It’s sort of a catch-all pejorative used to dismiss the seemingly never-ending list of concerns and criticisms that perpetually dog the digital-asset class even as it continues to grow at a breathtaking pace. Being a FUD is frowned upon in cryto circles. Its the best way to get kick out of a Crytocurrency chat.

Futures

A futures contract is a legal agreement to buy or sell a particular commodity or asset at a predetermined price at a specified time in the future. Futures contracts are standardized for quality and quantity to facilitate trading on a futures exchange.

Gas price 

A very small amount of ethereum and it is multiplied by an amount known as gas limit to pay people to record transactions and do other software actions.

Genesis Block

A blockchain is a digital book of records where each new page made in that book is what is known as a “block”. Those blocks are connected in one group known as the blockchain. The first block in a blockchain is known as the genesis block.

Hard Fork

Hard fork is defined as a decision to make a permanent change to the technology used by a cryptocurrency.

Hash Rate

The speed at which a computer can take any set of information and turn it into letters and numbers of a certain length, known as a “hash”. Hash rate is also the combined hash speed of every computer in the network. Hash rate is calculated at hashes per second (h/s).

Initial Coin Offering or ICO 

A time-sensitive process when a new cryptocurrency or token generally becomes available for the public to invest in.

Know Your Customer [KYC]

A customer identification process required by law for financial organizations.

Mining

In cryptocurrency networks, mining is a validation of transactions. For this effort, successful miners obtain new cryptocurrency as a reward. The reward decreases transaction fees by creating a complementary incentive to contribute to the processing power of the network. The rate of generating hashes, which validate any transaction, has been increased by the use of specialized machines such as FPGAs and ASICs running complex hashing algorithms like SHA-256 and Scrypt.

Node

Any computing device (computer, phone, etc.) that is participating in a network by way of receiving and sending data. Cryptocurrencies are supported by a network of computers each keeping a digital record of the data known as a blockchain. A computer, a phone, or any other computing device that can receive, transmit, and/or contribute to the blockchain is a node.

Peer to peer or P2P 

A connection between two or more computers that allows them to directly share information, files, or other data.

Private key 

A string of letters and numbers known only by the owner that allows them to spend their cryptocurrency. NEVER SHARE your private key unless you want someone else to be able to take all of your money!

Proof of Work or PoW 

A process for achieving consensus and building on a digital record known as a blockchain. With PoW, users compete with each other via their computers to solve a puzzle.

Proof of Stake or PoS 

A process for achieving consensus and building on a digital record known as a blockchain. With PoS, users put up a collateral of tokens (or a “stake”) and use a process that is more energy and cost-efficient than previous solutions.

Pump and Dump

Pump and dump is defined as an illegal manipulation of an asset (stock, cryptocurrency, etc.) where people increase the price (the pump) so that they can sell it at those high prices for a profit (the dump).

Satoshi Nakamoto 

The founder and creator of bitcoin, the most popular cryptocurrency. The smallest amount of bitcoin (0.00000001) was also named after him, it is called a Satoshi.

Smart contract 

An agreement to exchange goods, services, or money that will automatically execute, without third party oversight, so long as established criteria are met.

Staking

Staking is the way many cryptocurrencies verify their transactions, and it allows participants to earn rewards on their holdings.

But what is crypto staking? Staking cryptocurrencies is a process that involves committing your crypto assets to support a blockchain network and confirm transactions.

It's available with cryptocurrencies that use the proof-of-stake model to process payments. This is a more energy-efficient alternative to the proof-of-work model, which requires mining devices that use computing power to solve mathematical equations.

Staking can be a great way to use your crypto to generate passive income, especially because some cryptocurrencies offer high interest rates for staking. Before you get started, it's important to fully understand how crypto staking works.

Timestamp 

Cryptocurrencies use various timestamping schemes to “prove” the validity of transactions added to the blockchain ledger without the need for a trusted third party. The most widely used proof-of-work schemes are based on SHA-256 and scrypt. Some other hashing algorithms that are used for proof-of-work include CryptoNight, Blake, SHA-3, and X11. The proof-of-stake is a method of securing a cryptocurrency network and achieving distributed consensus through requesting users to show ownership of a certain amount of currency. It is different from proof-of-work systems that run difficult hashing algorithms to validate electronic transactions. The scheme is largely dependent on the coin, and there’s currently no standard form of it. Some cryptocurrencies use a combined proof-of-work/proof-of-stake scheme

Transaction Fee [TX Fee]

Transaction fees for cryptocurrency depend mainly on the supply of network capacity at the time, versus the demand from the currency holder for a faster transaction. The currency holder can choose a specific transaction fee, while network entities process transactions in order of highest offered fee to lowest. Cryptocurrency exchanges can simplify the process for currency holders by offering priority alternatives and thereby determine which fee will likely cause the transaction to be processed in the requested time.

Wallet 

A cryptocurrency wallet stores the public and private “keys” or “addresses” which can be used to receive or spend the cryptocurrency. With the private key, it is possible to write in the public ledger, effectively spending the associated cryptocurrency. With the public key, it is possible for others to send currency to the wallet.

Whitepaper

A collection of marketing documents that are designed to explain a complex product or service and persuade investors into believing in its benefits. The purpose of a white paper is to create interest, educate, and sell a concept to potential buyers. With crypto, white papers are created as one of the very first documents to explain what it is, what makes it unique, describe the technology behind it, and the philosophy or mission. Unlike typical sales material, a white paper is more conservative. It is less about sounding special, and more about providing facts, statistics, and explanations. They are often 6+ pages long and include a title, table of contents, introduction, pages describing the problem and solution, and a conclusion. A good white paper builds trust in potential buyers.

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