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. This gives them control over the network, including the power to:
Issue a transaction that conflicts with someone else’s.
Stop someone else’s transaction from being confirmed.
Spend the same coins multiple times.
Prevent other miners from mining valid blocks.
51% attack: Consider this concept as sort of a “hostile takeover” of a cryptocurrency; it’s possible in theory, but most industry experts doubt it’s very likely. The process of mining blocks of digital currency data often takes considerable computing time and energy. It’s conceivable that a miner or mining pool could expend the computing resources necessary to control more than 50% of the total computing power devoted to the currency’s network, and once they have majority control, they could “take over” and do some damage. For example, they could reverse current and new transactions, and could keep new data blocks and currency from being created. They would create more of an interruption than anything else, but they would not be able to “steal” currency or hack other investors’ accounts. Gaining more than 50% of a digital currency network’s computing time would take a lot of energy and computers, which in and of itself would be very expensive. Additionally, that percentage would have to be sustained over a decent period of time in order to do any damage. While it’s a potential threat—and since it’s dramatic, it makes for good media copy—it’s unlikely to happen. The work-to-reward wouldn’t be worth it.
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).
Address: In cryptocurrency, address is used for sending and receiving transactions in the network. This address can be either a QR code or alphanumeric characters.
Altcoin: The collective name for cryptocurrencies offered as alternatives to bitcoin. Litecoin, Feathercoin and PPcoin are all altcoins.
Altcoin: The alternative currencies to PPcoin, Feathercoin, Litecoin and Bitcoin are collectively known as Altcoin.
AML: Anti-Money Laundering techniques are used to stop people converting illegally obtained funds, to appear as though they have been earned legally. AML mechanisms can be legal or technical in nature. Regulators frequently apply AML techniques to bitcoin exchanges.
AML: AML stands for Anti-Money Laundering and AML techniques are often applied by regulators upon Cryptocurrencies exchanges.
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.
Application Specific Integrated Circuit (ASIC): An Application Specific Integrated Circuit (ASIC) is a computer chip created to perform one specific function, and only that function. Since mining of cryptocurrency data blocks can demand a lot of computer space and time, some miners set aside entire devices—or partition off a section of their computers—to do nothing but mining.
ASIC: ASIC stands for Application Specific Integrated Circuit and it’s actually a chip of silicon that processes the problem of SHA-256 hashing in Bitcoin.
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.
ASIC Miner: ASIC miner is a particular type of device that comes with the silicon ASIC chip and programmed to mine for bitcoins.
ASIC Mining: Out-of-the-box computer systems that you buy at electronics stores usually don’t include the processing power that’s necessary for the cryptocurrency mining process. As a result, many miners purchase separate computing devices set aside solely for mining. As an alternative, they can also get an Application Specific Integrated Circuit (ASIC); this is a specially-designed computer chip created to perform one specific function, and only that function—in this case, mining calculations. ASICs reduce the processing power and energy required for mining, and can help reduce the overall cost of the process in that way. Whether the ASIC—a term that refers to the specialized chip itself—is integrated into an existing computing system, or functions as a stand-alone device, the term “ASIC” is often used generically to refer to the overall system itself, and not just the chip.
Asymmetric Key Algorithm: This is the algorithm used to generate public and private keys, the unique codes that are essential to cryptocurrency transactions. In a symmetric key algorithm, both the sender and receiver have the same key; they can encrypt and exchange information privately, but since both parties have the decoding information, they can’t keep information private from one another. With an asymmetric key algorithm, both parties have access to the public key, but only the person with the private key can decode the encryption; this assures that only they can receive the funds.
Learn more about crypto trading in our comprehensive exchanges section.
Bear Trap: This is a manipulation of a stock or commodity by investors. Traders who “set” the bear trap do so by selling stock until it fools other investors into thinking its upward trend in value has stopped, or is dropping. Those who fall into the bear trap will often sell at that time, fearing a further drop in value. At that point, the investors who set the trap will buy at the low price and will release the trap—which is essentially a false bear market. Once the bear trap is released, the value will even out, or even climb.
Bitcoin: This was the first type of cryptocurrency introduced to the public. Satoshi Nakamoto published a white paper spelling out its concepts and mathematics in 2008, and it came into being the following year. (Nakamoto was originally considered a pseudonym for the person or persons who created Bitcoin, and up until March 2014, their true identity was unknown. At that time, it was revealed in an expose in Newsweek Magazine that Satoshi Nakamoto was the currency’s creator’s real name.) As it was the first cryptocurrency—and had no competition for over two years—Bitcoin is easily the most famous, and to date the most popular. Bitcoin uses the SHA-256 mining algorithm, and is mined by the proof-of-work method.
Bitcoin ATM: A bitcoin ATM is a physical machine that allows a customer to buy bitcoin with cash. There are many manufacturers, some of which enable users to sell bitcoin for cash. They are also sometimes called ‘BTMs’ or ‘Bitcoin AVMS’.
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): For the first few years of Bitcoin’s existence, it was difficult for investors to firmly establish what their accounts were worth; the comparative value of Bitcoins against other currencies would vary from exchange to exchange—and sometimes vary quite wildly. In September 2013, digital currency news organization CoinBase decided to remedy the situation, and they created the Bitcoin Price Index (BPI). The BPI gathers information from the largest and most influential Bitcoin exchanges in the world, and applies the aggregated statistics to reach a more balanced and realistic picture of the currency’s market value. The BPI has a set of criteria—best practices guidelines for the exchange industry, if you will—and exchanges that don’t meet or accept these criteria aren’t included in the BPI statistics. The strict adherence to these standards—and the accurate information that results—have given the BPI a strong reputation in the cryptocurrency trading industry.
Bitcoin Price Index (BPI): The 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.
Bitcoin Sentiment Index (BSI): The Bitcoin Sentiment Index is a measure of whether individuals feel the digital currency’s prospects are increasing or decreasing on any given day, and is powered by data collected by Qriously.
Bitcoin Market Potential Index (BMPI): The Bitcoin Market Potential Index (BMPI) uses a data set to rank the potential utility of bitcoin across 177 countries. It attempts to show which markets have the greatest potential for bitcoin adoption.
Bitcoin Whitepaper: In November 2008, a paper, authored (probably pseudonymously) by Satoshi Nakamoto, was posted on the newly created Bitcoin.org website with the title ‘Bitcoin: A Peer-to-Peer Electronic Cash System’. The eight-page document described methods of using a peer-to-peer network to generate “a system for electronic transactions without relying on trust” and laid down the working principles of the cryptocurrency.
The paper describes the bitcoin protocol in detail, and is well worth a read. Satoshi Nakamoto followed this by releasing the bitcoin code in 2009.
Block: This is a collection of transaction data, one of the fundamental elements of cryptocurrency. As transactions are made, the pertinent information for each one is collected—and when the gathered data reaches a predetermined size, it’s bundled up as a block. As soon as possible after blocks are created, they’re processed by investors for transaction verification; this process is known as mining.
Blockchain: The full list of blocks that have been mined since the beginning of the bitcoin cryptocurrency. The blockchain is designed so that each block contains a hash drawing on the blocks that came before it. This is designed to make it more tamperproof. To add further confusion, there is a company called Blockchain, which has a very popular blockchain explorer and bitcoin wallet.
Block Chain: Blocks of cryptocurrency transaction data don’t stand alone. As they’re created and processed, they’re interlinked with other blocks into what’s known as a block chain. On rare occasion, errors in transaction data are not found immediately, or in the block in which their information is embedded; however, as the processing, or mining, continues, information in the block chain is reviewed repeatedly. Therefore, the further down the chain a transaction is, the more secure and correct its details are.
Blockchain: The blockchain is a shared public ledger showing the entire transaction history of a respective coin. If a cryptocurrency is based on Bitcoin (and they all are except Ripple), then it has its own blockchain. Picture a long receipt for every transaction that was ever performed. In this way, addresses can calculate their spendable balance and transactions can be verified (which prevents the ‘double-spend’ to be mentioned below). The integrity and the chronological order of the blockchain are enforced with cryptography. This automated work is done by Miners. For the most part, you never have to worry about this but it is nice to look at if you want to verify that an amount was received by you or to check a balance at a known address on someone’s webpage. The blockchain is a dream come true for law enforcement. (Of course they haven’t caught on to this little fact yet, but give them time. They are too busy attacking the idea of crypto right now.) It shows all transactions and the sending and receiving addresses. If you ever want to know where funds are, it is all available and freely accessible. The blockchain only shows the address, not your name or IP, so some folks think it’s anonymous. It’s not. It can be if you know how to make it so, but that comes later in your training (and with another post on this site). Remind your friends that it’s pseudo-anonymous, not truly anonymous.
Block Chain: A complete list of blocks which have already been mined from the very first time when Bitcoin cryptocurrency was first introduced.
Block reward: The reward given to a miner which has successfully hashed a transaction block. This can be a mixture of coins and transaction fees, depending on the policy used by the cryptocurrency in question, and whether all of the coins have already been successfully mined. Bitcoin currently awards 25 bitcoins for each block. The block reward halves when a certain number of blocks have been mined. In bitcoin’s case, the threshold is every 210,000 blocks.
Block Reward: This is the “payoff” given to a miner who has successfully calculated the hash in a data block during the mining process. Since the verification of this data generates new coins, a portion of those will go to the miner. The block reward can also include a percentage of the transaction fees associated with the processed block. The new coins minted by the mining process, by the way, are called “virgin” coins, since they’re brand new and have not yet been used for any transactions.
Block Reward: When a transaction block is successfully hashed by a miner in Bitcoin cryptocurrency, he gets a reward known as block reward and that can be a mixture of transaction fees and coins as described in cryptocurrency policy.
Bot Trading:The majority of investors in digital currency use manual methods when they want to buy or sell their cryptocurrency of choice. However, there are now programs available for investors that have been created to make the process more precise and automatic. They download these programs, which monitor alternative currency exchanges and markets for them. These “bots” will carry out transactions automatically according to the price criteria the investor has set. There are those who argue bot trading is a little too reactionary, and that sales and purchases will be made on a “knee-jerk” level, rather than waiting for the market to stabilize. On the flip side of that coin, bot trading advocates insist the method will work in their favor, since they can’t personally monitor the markets 24/7.
Bubble: A bubble occurs when a market is driven upward by investors; this has happened in the dot-com and housing industries in the past decade or so. Factors such as industry popularity, speculation of potential worth, political influence, and many other things can combine to create these spikes in value. If the market is perceived to have “topped out,” or investors believe it will no longer retain its overall worth, the bubble can “burst.” This represents a massive sell-off by investors, which can make market value drop sharply.
Depending on your perspective, some cryptocurrency markets may or may not have experienced periodic bubbles. The industry’s naysayers insist the market is too volatile, and will continue to roller-coaster up and down, with no real stability in sight. Conversely, industry insiders claim these are the growing pains of a new field, and that digital currency fluctuations will smooth out over time.
Bull Trap: A bull trap is “set” by investors in a stock or commodity who will buy large amounts in order to artificially drive the value upward, or create a false bull market. Traders who are fooled by the bull trap will often buy shares at the inflated price, in the belief that the upward trend will continue and the shares they’re buying will rise in value. Unfortunately, those who fell into the bull trap will often be left holding shares for which they paid too much, since once the trap is released, the market evens out, and sometimes even drops.
Buy Order: A buy order is established when an investor approaches an exchange and wants to purchase cryptocurrency. These can range from very simple orders (“I want to spend x amount of dollars on Bitcoins”) to complex ones that include factors such as time frame in which the order should be filled, range of price, and so forth. Most exchanges allow for these to be entered online, but some investors prefer to go over the details directly with an exchange representative. Buy orders don’t necessarily guarantee your purchase; if your price is too low, for example, the offer may expire without being filled unless you make adjustments.
BTC: The short currency abbreviation for bitcoins.
Candlestick Chart: This is a popular at-a-glance type of chart that is commonly used in stock and commodity exchanges. Some charts use a dot to show where a certain stock or commodity closed on a given day; while this is valuable information, it doesn’t show the range of price the commodity experienced during the trading day. With a candlestick chart, a vertical bar is used to show the scope of activity in a trading day; the upper edge of the bar will be the opening price (in a bear market), and the lower edge denotes the closing price (also in a bear market; in a bull market, the two are reversed). Lines extend out of the top and bottom of the bar, showing the highest and lowest trading prices for the commodity for that day (thus forming the “wick” of the candle). Candlestick charts are ideal for showing day-to-day market activity in a concise—but still accurate—way, denoting the full range of activity for that period.
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.
Client: A program or software installed on your smartphone, laptop or desktop computer is termed as a client and it connects you to the cryptocurrency network for making transactions.
Confirmation: The act of hashing a bitcoin transaction successfully into a transaction block, and cementing its validity. A single confirmation will take around 10 minutes, which is the average length of time for a transaction block to be hashed. However, some more sensitive or larger transactions may require multiple confirmations, meaning that more blocks must be hashed and added to the blockchain after the transaction’s block has been hashed. Each time another block is added to the blockchain after the transaction’s block, the transaction is confirmed again.
Confirmation: When a block of transaction information is successfully processed, or mined, all the transactions within that data block are considered confirmed, or validated. Depending on the type of cryptocurrency, the confirmation time for transactions can vary anywhere from 30 seconds to several minutes; longer validation times—though considered a small inconvenience to those making transactions—are generally considered to be more secure, since a “closer look” is being given to the data as it is mined.
Since all data blocks are linked together in what is called a data chain, re-confirmation takes place for several blocks after the one containing the original transaction data. For each block that is mined, past the block containing the original data, another level, or generation, of confirmation is considered to have taken place. For example, let’s say Transaction X’s information is contained within Data Block 1 (we are heavily oversimplifying for this example). When the mining of Data Block 1 is completed, that’s one generation of confirmation for Transaction X; after Data Block 2 is mined, Transaction X has two levels of confirmation, and so forth. For most intents and purposes, a transaction is considered “official” after one level of confirmation; however, some exchanges and merchants will wait until several levels of confirmation have taken place before the funds related to the transaction are unfrozen. This practice helps guard against double-spending of digital currency, or using the same currency for more than one transaction.
Continuation Graph Pattern:When you take a look at a market value graph on a digital currency exchange site, you’ll be able to see at a glance the upward (“bull” market) and downward (“bear” market) trend lines. However, on occasion you’ll see graph patterns that show fluctuations that go against the flow of the current trend, only for the trend to continue in the same direction afterward. This type of graph pattern is known as a “continuation” type; though there may be momentary up-and-down movement in a currency’s value, from a macro view the trend hasn’t really changed direction. Continuation graph patterns show that investors have tested the current trend and found it to be sound—therefore, it continues.
Colored coins: A proposed add-on function for bitcoin that would enable bitcoin users to give them additional attributes. These attributes could be user-defined, enabling you to mark a bitcoin as a share of stock, or a physical asset. This would enable bitcoins to be traded as tokens for other property.
Colored Coins: For Bitcoin users this an add-on function which lets you add additional user-defined attributes so that you can mark your bitcoins as physical asset or share of stock or something else.
CPU: Central Processing Unit – the ‘brain’ of a computer. In the early days, these were used to hash bitcoin transactions, but are now no longer powerful enough. They are still sometimes used to hash transactions for altcoins.
Cryptocurrency: A form of currency based on mathematics alone. Instead of fiat currency, which is printed, cryptocurrency is produced by solving mathematical problems based on cryptography.
Cryptocurrency: Crypto is a word root that comes from the Greek for “hidden” or to hide;” for example, cryptography is the process of coding written messages. Cryptocurrency is a financial tool that takes the form of long blocks of alphanumeric code, and this alternative currency is traded between investors and used as a form of payment for goods and services to merchants who accept it.
Unlike traditional bill-and-coin currency such as the US dollar, cryptocurrency is not directly tied in to any government, corporation or bank, and is therefore not susceptible to inflation, regulations or charges and fees that affect traditional legal tender. Cryptocurrencies are relatively new; the first to be publicly introduced was Bitcoin in 2009. Cryptocurrency is also known by the terms “digital currency” and “alternative currency.”
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.
Cryptography: Usage of mathematics for developing ciphers and codes which are used to make transaction hidden from unauthorized users.
Cup and Handle Pattern: This is a pattern that appears on market value graphs when investors want to test the validity of an upward, or “bullish,” trend in a commodity market.
The upward trend, due to investor buying and selling, will gradually slope downward, then back up again, in a gently-sloping “Letter U” shape. After this “cup” is formed, the market will be tested again briefly, making a quick downward slope that’s considerably smaller (and shorter in duration) than the “cup” preceding it; this forms the “handle” to the teacup shape. The cup and handle is considered a “continuation” pattern, in that, once the handle is formed, the upward trend will continue.
Coin age: The age of a coin, defined as the currency amount multiplied by the holding period.
Coin Age: Age of a coin is calculated by multiplying holding period with the amount of currency.
Day Trading: This is the practice of buying and/or selling a stock or commodity, with the beginning-to-end process of the trade taking place all within the same calendar day. Day traders look for small price shifts minute-to-minute, and do their best to maximize their profits (or at least minimize their losses) by making several transactions a day—but without leaving any business unfinished overnight. Day traders depend on “micro-trends,” which are minuscule shifts in market value, as compared to regular traders, who may observe the trends of a stock or commodity over several days, weeks or months before taking action.
Dead Cat Bounce: In market trading terms, this somewhat unsavory phrase relates to a momentary recovery in a downward trend for a stock or commodity, such as cryptocurrency. When there’s a bear market—that is to say, a market in which a commodity’s values are steadily moving downward—there are two types of recovery. The first type is a true recovery, in which the downward slide is reversed over a long period of time, and prices trend upward consistently. The second type is the “dead cat bounce.” The price trend—which has been going downward for a long period of time—shifts upward briefly, usually for no more than a week or two at most. Dead cat bounces can occur in miniature—over the space of a few hours or days—but most analysts consider this version a minor blip in the market as opposed to calling it a “true” dead cat bounce. No matter the bounce’s duration, it’s a false recovery, and the downward trend in valuation continues afterward. The term comes from an old—and slightly disturbing—saying, “Even a dead cat will bounce if it falls from a great height.”
Decentralized: This is a term you’ll hear often when cryptocurrency is being discussed. In this context, it means the currency isn’t issued or controlled by a centralized authority, such as a bank or government. While this means cryptocurrency isn’t directly affected by inflation or governmental regulations—which its advocates insist makes for a more level international playing field—it also means its investors carry more responsibility for its well-being. They should be aware of the risks inherent with cryptocurrency, such as value fluctuation and the lack of institutional protections against theft and fraud. There’s no FDIC for digital currency—as there is in the centralized US banking system—so once it’s stolen, it’s gone forever.
DDoS: A distributed denial of service attack uses large numbers of computers under an attacker’s control to drain the resources of a central target. They often send small amounts of network traffic across the Internet to tie up computing and bandwidth resources at the target, which prevents it from providing services to legitimate users. Bitcoin exchanges have sometimes been hit with DDoS attacks.
Distributed Denial of Service (DDoS): To anyone who maintains any kind of online presence, this term represents a potential nightmare. The letters DDoS are almost always followed by the word “attack,” because that’s exactly what it is. A DDoS attack begins when the attacker rounds up hundreds, if not thousands, of “zombie” computers; this is achieved by downloading trojans or viruses onto remote computers without the owner knowing. Once the zombie network is in place, the attacker targets one website, email server or network, and directs all the zombie computers to flood the victim with tasks or requests. This coordinated attack can bring a website or network to its knees; DDoS attacks commonly crash servers and make websites temporarily disappear until the attack can be traced and halted. Several cryptocurrency exchanges have been the targets of DDoS attacks, which are often politically or personally motivated.
Webmasters and server owners can avoid DDoS attacks with powerful security measures such as firewalls, but the main issue remains in the hands of individual computer owners. Since the “zombie” trojans and viruses tend to work invisibly in the background, the members of a zombie computer network never know they’re part of it. In order to avoid such an infestation, computer owners should download a current (and easily updated) security program that searches their systems for malware and spyware.
DDoS: Distributed denial of service attack which brings a large number of computers under the control of the attacker. Attackers perform this to drain resources and to hinder regular service to actual users. Cryptocurrency may sometimes go through such DDoS attack.
Deflation: The reduction of prices in an economy over time. It happens when the supply of a good or service increases faster than the supply of money, or when the supply of money is finite, and decreases. This leads to more goods or services per unit of currency, meaning that less currency is needed to purchase them. This carries some downsides. When people expect prices to fall, it causes them to stop spending and hoard money, in the hope that their money will go further later. This can depress an economy.
Deflation: Generally speaking, in the financial sense deflation refers to a decline in prices of consumer goods. On the surface, this may seem like a good thing; after all, you’re paying less for your groceries, clothing and so forth. However, a sustained period of deflation can have negative effects on an economic system overall, because it represents reduced spending power in the population at large. Longer periods of deflation can lead to recessionary periods, and—in severe cases—depression. Governments and banks will often take steps to induce temporary inflation, or the rising of prices, to curb the effects of long-term deflation. As history has shown, these actions have had varied degrees of success.
Deflation can also refer to the falling prices or values of assets, such as homes, cars and investments such as cryptocurrency. Severe asset or equity deflation can result in an “underwater” situation; for example, if you are a homeowner, and the current appraised value of your house is less than what you paid for it, in that specific case you would be considered underwater. The same can happen with a digital currency portfolio; however, most periods of deflation tend to be corrected over time—so knee-jerk reactions such as selling off an investment can, in the long run, prove to be unwise.
Demurrage: This is a charge levied against the accounts of investors who don’t use their digital currency for transactions, but just leave it sitting as a long-term investment. Some cryptocurrencies use this as a way to keep their currency in circulation, and to prevent hoarding. After all, it’s in the issuer’s best interest to keep their currency active; it makes it more stable and supports its value. If you’re looking to invest in cryptocurrency—and not necessarily use it for purchases—you’ll want to shop around to see which ones carry demurrage fees.
Difficulty: This number determines how difficult it is to hash a new block. It is related to the maximum allowed number in a given numerical portion of a transaction block’s hash. The lower the number, the more difficult it is to produce a hash value that fits it. Difficulty varies based on the amount of computing power used by miners on the bitcoin network. If large numbers of miners leave a network, the difficulty would decrease. Thus far, however, bitcoin’s growing popularity has attracted more computing power to the network, meaning that the difficulty has increased.
Difficulty: The term “difficulty” here refers to how easily a data block of transaction information can be mined successfully. Each type of cryptocurrency has algorithms (such as SHA-256 and Scrypt) that determine the mining difficulty for their corresponding coins—and adjust those difficulties as circumstances warrant.
Setting the difficulty for cryptocurrency mining is a challenge, one that needs to strike a delicate balance. Make the process too easy, and miners will flood the market with too many new coins created by the mining process. Make it too difficult, and miners will lose interest in taking part. The latter has become an issue with more popular digital currencies like Bitcoin; its difficulty has risen to the point that most individual miners can’t justify the added cost of specialized mining machinery. Collective mining (where miners can contract mining power from third parties) has eased this somewhat, but many prospective miners are looking for newer and “easier” currencies to mine.
Double Bottom Pattern: A double bottom pattern forms on a market chart when investors buy and sell to test a downward trend in value. Buying and selling will take place, and over time this will form two distinct and almost-equal valleys on the chart’s trend line. Once the second valley has formed, an upward trend will develop past the point of the peaks or tops formed during the pattern’s formation. Once that happens, the market is likely to be “bullish,” or upward-trending, for a while; thus the double bottom pattern is considered a “reversal” pattern, transitioning from a bear to a bull market.
Double Spending: Those who turn a critical and skeptical eye on the cryptocurrency industry insist that double spending is the biggest flaw in the concept. Since digital currency is 100% electronic, the argument goes, there’s no accounting for one electronic coin being spent more than once. And, indeed, it has been tried many times; a holder of an alternate currency coin will spend it in one place, and will turn around and use its unique code for a transaction somewhere else.
This cynical argument, however, tends to assume there are no safeguards in place for this kind of fraud—and that couldn’t be further from the truth. For all types of cryptocurrency, there is a validation system in place, and it happens as data blocks are mined, or verified. For example, if Coin A is used for Transaction B, all is well and good; when the data block for that transaction is mined, the transaction is confirmed, and that’s that. But, let’s say our unscrupulous coin holder turns around and tries to use the code for Coin A for Transaction C a little while later. When the data block for Transaction C is mined, a red flag is raised, because the code for Coin A—which has already been electronically “spent”—has been duplicated. As a result, Transaction C will not be confirmed; instead, it will be rejected. So, yes, in theory double spending is an issue with cryptocurrency. But in practice, security measures built into the mining process doesn’t allow it to happen.
Double Spending: Double spending happens when you use the Bitcoin to make a transaction and then again use that same Bitcoin to make another transaction from someone else.
Double spending: The act of spending bitcoins twice. It happens when someone makes a transaction using bitcoins, and then makes a second purchase from someone else, using the same bitcoins. They then convince the rest of the network to confirm only one of the transactions by hashing it in a block. Double spending is not easy to do, thanks to the way that the bitcoin network operates, but it is nevertheless a risk run by those accepting zero-confirmation transactions.
Double Top Pattern: A double top pattern forms on a market chart when investors buy and sell to test an upward trend in value. Buying and selling will take place, and over time this will form two distinct and almost-equal peaks on the chart’s trend line. Once the second peak has formed, an downward trend will develop past the point of the dips or valleys formed during the pattern’s formation. Once that happens, the market is likely to be “bearish,” or downward-trending, for a while; thus the double top pattern is considered a “reversal” pattern, transitioning from a bull to a bear market.
Dust transaction: A transaction for an extremely small amount of bitcoins, which offers little financial value, but takes up space in the blockchain. The bitcoin developer team has taken efforts to eliminate dust transactions by increasing the minimum transaction amount that will be relayed by the network.
Dust Transaction: Bitcoin transaction of so small amount which has very little financial value is known as dust transaction and developers set minimum amount of transaction for eliminating dust transaction.
ECDSA: The Elliptic Curve Digital Signature Algorithm is the lightweight cryptographic algorithm used to sign transactions in the Bitcoin protocol.
ECDSA: ECSDA stands for Elliptic Digital Signature Algorithm and it is used in the Bitcoin protocol to sign transactions.
Escrow: The act of holding funds or assets in a third-party account to protect them during an asynchronous transaction. If Bob wants to send money to Alice in exchange for a file, but they cannot conduct the exchange in person, then how can they trust each other to send the money and file to each other at the same time? Instead, Bob sends the money to Eve, a trusted party who holds the funds until Bob confirms that he has received the file from Alice. She then sends Alice the money.
Escrow: This is the act of having a third party store the funds for a transaction in a temporary account until the details of the trade can be acknowledged and approved by the two chief parties involved. Digital currency exchanges often use escrow accounts when large amounts of currency are being traded; this allows the traders to do research not only on each other, but on other factors that may affect the transaction. When the payer and the payee are both satisfied with the transaction details, they notify the escrow holder (in this case, the exchange representative), who releases the funds to the recipient.
Escrow: The system in which assets or funds are held in a third party account for ensuring protection at the time of an asynchronous transaction.
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.
Exchange: An exchange is a service where cryptocurrency investors go to buy and sell their currency of choice. That’s the heart of an exchange—a secure third-party location where transactions can take place—but not all exchanges are alike. For example, some sell cryptocurrency directly to investors—and buy from them as well—whereas some simply offer a platform where buyers and sellers can connect. Investors can find market values, exchange rates, and other trading information on exchange web sites, and many exchanges offer wallet services, too. Several exchanges also maintain directories of merchants who accept cryptocurrency as payment.
Exchange Rate: With traditional currency, this term refers to the comparative worth of one government-issued currency to another. For example, if you’re an American looking to make a purchase from a merchant in England, in order to do so you’d want to take a look at the exchange rate between the US dollar and the British pound before making your purchase. This way, you’ll know exactly how much you’ll be spending in your currency as it applies to the other.
Since cryptocurrency is international in nature, and has the same worth no matter what country you’re in, the term “exchange rate” takes on a different meaning. With digital currency, it can mean one of two things: How the currency compares to a traditional currency such as the US dollar, or how it stacks up against another type of cryptocurrency (such as Bitcoin to Litecoin).
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.
Faucet: If you’re a business owner, and you want to generate publicity for your product or service, what’s the best way to do that? Well, free stuff, of course! People will line up around the block for a chance to pick up something for nothing. This lesson hasn’t been lost on the cryptocurrency industry, and there are many places online where those interested can stop by and request some shiny virtual coins for free. The sites that offer free digital currency are called “faucets.”
Of course, those running the faucets aren’t just doing it out of the kindness of their sainted hearts. The amounts of currency given away on faucet sites are quite small, and they offer just enough of a taste to get potential investors interested in picking up more—and not for free this time around. Faucet owners also tend to offer advertising on their sites as another way to offset the cost of giving away some of their currency for nothing. On occasion, either lack of investor interest or shortage of funding will cause a faucet site to shut down; when that happens—in keeping with the terminology—that faucet is said to have “gone dry.”
Faucet: When an altcoin is launched for the first time this technique is applied. For encouraging people to mine themselves some pre-mined coins are given away for free.
Feathercoin: Scrypt-proof-of-work Lightcoin based altcoin.
Fiat currency: A currency, conjured out of thin air, which only has value because people say it does. Constantly under close scrutiny by regulators due to its known application in money laundering and terrorist activities. Not to be confused with bitcoin.
Fiat Currency: “Fiat” is the Latin word for “it shall be,” so that translation isn’t of much help to us here. In a nutshell, a fiat currency is a financial tool that is not backed up by any physical commodity or goods; essentially, it exists and flourishes simply because the people who use it believe in it. While that might sound like a somewhat shaky proposition, it should be pointed out that the majority of currencies in the world—including cryptocurrencies—are fiat currency systems. They can be used for transactions—and are viable for trade in their own markets—because those who use them—be they governments, banks, or individual investors—have faith in their validity as a financial entity. Should that faith be lost—the Confederate States of America currency, or the “Dixie Dollar,” is a prime example—the currency loses its value. In theory, all fiat currencies have the potential to become worthless—banks can fail, governments can fall—so they rely very heavily on that faith.
In contrast, a lot of people don’t realize the United States dollar wasn’t always a fiat currency. All currency issued in the US used to be backed by a proportional amount of silver or gold; if you hear the terms “gold standard” or “silver standard,” that is what they used to mean. However, due to economic factors, by 1973 the US dropped both the gold and silver standards, making the dollar a full fiat currency.
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.
FinCEN: FinCEN stands for The Financial Crimes Enforcement Network which is the agency of US Treasury Department and also the only regulators of cryptocurrency trading in the USA.
Fork: The 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 is successful if it becomes the longest version of the blockchain, as defined by difficulty.
FPGA: A Field Programmable Gate Array is a processing chip that can be configured with custom functions after it has been fabricated. Think of it as a blank silicon slate on which instructions can be written. Because FPGAs can be produced en masse and configured after fabrication, manufacturers benefit from economies of scale, making them cheaper than ASIC chips. However, they are usually far slower.
Fill or Kill: This is a simple type of buy order made with a cryptocurrency exchange. The investor dictates how much currency they want, and at what price, and establishes a cutoff date for the order. The exchange will then do their best to fill the order according to those criteria. If the exchange hasn’t found an appropriate match for the order by the cutoff date, the order is canceled and left unfilled. In other words, fill this order according to these guidelines and within this time frame. If you can’t, kill it.
Flag Pattern: This pattern forms on market value charts when investors want to test a current trend in a commodity’s value. The buying and selling that takes place during this testing period—which generally last one to three weeks—forms fluctuations that can be bracketed by parallel diagonal lines, forming the “flag” shape.
Flag patterns can occur during both upward-trending (“bear”) and downward-trending (“bull”) markets. Since they don’t signify the current trend is going to reverse, the flag pattern is considered one of the “continuation” pattern types. Once the pattern is formed, the trend will continue moving in the direction it had been beforehand.
Fontas: This isn’t so much a “what” as it is a “who.” Fontas is a mysterious investor or group of investors who has been using pump and dump schemes to manipulate the value of various digital currencies. That is to say, he/she/they have been buying large amounts of currency at low prices, then they’ve used misleading information to get other investors to buy, falsely inflating the currency’s price. At that point, Fontas sells a large chunk of their cryptocurrency investment for a sizable profit. Thus far, Fontas’ focus has been on Bitcoin, but they are trying to do the same with Litecoin and Namecoin; however, investors are on to the scheme. Needless to say, Fontas is not exactly the most popular investor in the alternative currency industry. However, even savvy investors who weren’t taken in by Fontas’ scheme have to grudgingly admit its effectiveness.
Genesis block: The very first block in the block chain.
Genesis Block: In the cryptocurrency mining process, blocks of data are processed and validated one by one, and each of these blocks are linked in chronological order, forming what is called a block chain. But every chain has to start somewhere, and the very first block of data mined in order to launch an alternate currency is known, appropriately enough, as a “Genesis block.” The main way in which a Genesis block differs from all the other blocks on the chain following it is that the Genesis block will have its “previous hash” data set to all zeroes. This indicates that no other data was processed before the block in question; all other blocks will have other numbers in this data field.
The most famous Genesis block generated was Block 0 of the Bitcoin chain, created by the currency’s founder, Satoshi Nakamoto, in January 2009. Genesis blocks are almost always mined by the creator of a given digital currency—and sometimes several other subsequent blocks, as well—to establish the coin before it’s released to the general public. In comparison, for cryptocurrency types that have failed and no longer exist, the final block of data mined for such a currency is referred to as the “Omega block.”
Genesis Block: In a block chain the very first block is known as genesis block.
GPU: Graphical Processing Unit. A silicon chip specifically designed for the complex mathematical calculations needed to render millions of polygons in modern computer game graphics. They are also well suited to the cryptographic calculations needed in cryptocurrency mining.
GPU: A silicon chip used as Graphical Processing Unit for performing cryptocurrency mining through complex cryptographic calculations.
Graph Gaps: On occasion, gaps will appear in trend lines on market value graphs. These gaps indicate a visible drop or rise in a commodity’s value that hasn’t necessarily happened due to trading. These can be the result of closed markets, statistical adjustments by analysts, or by strong news about the commodity. There are three types of gaps:
1. Breakaway Gap. These appear at the beginning of a strong upward or downward trend, and represent very high-volume trading.
2. Runaway Gap. These occur during an upward or downward trend, and represent a quick momentary intensification of that trend.
3. Exhaustion Gap. This occurs toward the end of an upward or downward trend, and tends to indicate a small trend in the opposite direction.
Hash: A mathematical process that takes a variable amount of data and produces a shorter, fixed-length output. A hashing function has two important characteristics. Firstly, it is mathematically difficult to work out what the original input was by looking at the output. Secondly, changing even the tiniest part of the input will produce an entirely different output.
Hash: This is a random and complex mathematical formula used in the verification of blocks of transaction data in the process known as mining. Once a miner calculates the proper hash in a block, they’re rewarded with coins and a percentage of the transaction fees embedded in that block. Achieving the right hash in a given block can take several tries and calculation adjustments—and some blocks, even though properly processed, may not “pay out.” The difficulty of calculating the hash in a block is set fairly high, so the rewards aren’t distributed at too fast a rate; after all, mining also helps create new coins, and the mathematics are set so this doesn’t happen too quickly—that could destabilize the currency.
Hash rate: The number of hashes that can be performed by a bitcoin miner in a given period of time (usually a second).
Hash Rate: The hash rate is the speed at which complex mathematical calculations are performed in the mining of cryptocurrency data blocks. What this measurement boils down to is: the higher the hash rate of a mining system, the more data blocks can be successfully mined—which in turn means more block rewards for the miner or miners involved. As some types of digital currency become more popular—and the mining as a result becomes more competitive—the hash rates required for successful mining can increase as a result. Higher hash rates often require specialized computing equipment, and the use of more energy. Also, more complex mining algorithms such as SHA-256 require higher hash rates than simplified systems like Scrypt.
The following terms are used for mining hash rate measurement:
KH/s: Kilohashes per second, or one thousand hash computations per second
MH/s: Megahashes per second, or one million hash computations per second
GH/s: Gigahashes per second, or one billion hash computations per second
TH/s: Terrahashes per second, or one trillion hash computations per second
PH/s: Petahashes per second, or one quadrillion hash computations per second
Hash Rate: This is the number of hashing a miner can perform within a second.
Head and Shoulders Pattern: The head and shoulders pattern forms on a market value chart when two smaller fluctuations in value bracket a larger one in the middle.
There are two types of head and shoulders patterns, both of which are illustrated in the image above. One is the traditional head and shoulders, viewed “right side up” if you were looking at the bust of a human being. The fluctuations forming the head and shoulders represent investors buying and selling to test a current trend. The regular head and shoulders pattern represents a reversal from a “bull” (upward-trending) market to a “bearish” (downward-trending) one, whereas the inverted head and shoulders pattern shows the opposite, from bear to bull. Because of these characteristics, the head and shoulders pattern is listed among those of the “reversal” type.
Hybrid Wallet: This is a cryptocurrency storage and maintenance system that is a combination of a software wallet (stored on your home computer) and a web wallet (stored on a third-party server). The bulk of your digital currency account information is stored on the wallet host’s server—except for one important detail. Your private key (the code that uniquely identifies you) is stored only on your own device. When you make a transaction, your private key is encrypted on the way to the exchange’s server, so they never know what your private key is. This is an impressive security feature, but access to your private key also includes a password that—again–only you know. If you lose or forget that password, access to your account could be denied, and you could potentially lose your account balance forever.
Inflation: When the value of money drops over time, causing prices for goods to increase. The result is a drop in purchasing power. Effects include less motivation to hoard money, and more motivation to spend it quickly while the prices of goods are still low.
Inflation: In financial terms, inflation indicates the general trend of rising prices for consumer goods and services. As a result—unless consumers’ income matches the rate of inflation—it means consumers have a lower level of purchasing power as prices go up. Banks and governments often do whatever they can to stop long periods of excessive inflation, just as they do the same for its opposite, deflation—or a sustained drop in prices. Though inflation is a natural financial process, most countries try to keep the rate of inflation at a more manageable level of 2-3%; the majority of consumers are able to adapt more readily to these rates.
Inflation can also apply to assets, such as a home or an investment portfolio. In the spirit of “buy low, sell high,” many savvy investors will wait until a given commodity has shown a long and sustained period of asset inflation before selling (at a substantially higher price than they initially paid), and will often then turn around and buy a commodity that shows indications of an oncoming inflationary trend. Like most commodity trading, this concept applies to cryptocurrency investing.
Input: The part of a bitcoin transaction denoting where the bitcoin payment has come from. Typically, this will be a bitcoin address, unless the transaction is a generation transaction, meaning that the bitcoin has been freshly mined (see Coinbase).
Issuer: We admit openly that we use this as a term of convenience when we talk about cryptocurrency. With traditional currency, the issuer would be the US Treasury for American bills and coins, for example. Technically, digital currency coins aren’t issued, they’re created by the mining process. There’s no central bank, no government deciding when new cryptocurrency comes into being; it’s “minted” when investors mine the data blocks. There’s really no one owner of Bitcoin, and no corporate board making the decisions; all of its investors have a vested interest and a share in it. As such, when we use the term “issuer,” we mean the investors in a type of cryptocurrency; we use it conceptually and not literally.
KYC: Know Your Client/Customer rules force financial institutions to vet the people they are doing business with, ensuring 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 based on the Scrypt proof of work. Read Litecoin news to find out more.
Litecoin: This type of cryptocurrency was introduced to the public in October of 2011, the first major player to do so since Bitcoin in 2009. Even though about 30 different cryptocurrencies have cropped up since then, Litecoin holds the number two spot behind Bitcoin, and it’s gaining ground as Bitcoin prices surge out of the range of some investors’ budgets. Litecoin uses the Scrypt mining algorithm, and is mined by the proof-of-work method.
Litecoin: A Scrypt-proof-of-work algorithm based altcoin.
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.
Market order: An instruction given to an exchange, asking it to buy or sell an asset at the going market rate. In a bitcoin exchange, you would place a market order if you simply wanted to buy or sell bitcoins immediately, rather than holding them until a set market condition is triggered to try and make a profit.
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 act of generating new bitcoins by solving cryptographic problems using computing hardware.
Mining: Cryptocurrency transactions are bundled together in packets of data that are called blocks. The timely processing of these blocks is essential to the health of cryptocurrency, and since there’s no one central entity that can carry out all this processing on their own, it’s done by the currency’s investors. This is called mining, and the miners are offered incentives to take on the task. When a block of data is properly mined, and specific predetermined algorithmic and mathematical criteria (known collectively as “hash”) have been met, the miners collect a reward of coins and a percentage of the transaction fees from the block they’ve processed. It should be noted mining is more a perk than a requirement; you can invest in cryptocurrency without mining, if you wish.
Mining serves a dual purpose; not only does it validate transactions, but it results in the generation of new cryptocurrency. For currencies that carry mintage caps, the mining reward of coins will eventually disappear when the cap is met; by that time, it’s projected—and hoped—that transaction volume will be high enough to provide adequate incentive for miners to take part in the process for their share of transaction fees alone.
Mining: When new cryptocurrency is generated through solving cryptographic problem, it is known as cryptocurrency mining.
Mining Pools: In many cases, the process of mining can be a resource hog; it can eat up a lot of processing time and space on computers. Since most individual miners don’t have the computing power or the hardware to dedicate one or more machines strictly to mining, they’ll join with other miners to distribute the processing burden. When more than one miner is involved in the processing of data blocks, this is called a mining pool. Once the mining is completed and verified, the pool’s members divide the coin and transaction fee rewards evenly.
Mintage Cap: As cryptocurrency miners process blocks of transaction data, they generate new coins as a result. Cryptocurrency is a young industry, and its issuers want enough coins to go around to satisfy new investors as they join. These new coins are mathematically designed to be turned out at a stable rate, so the value of the currency will remain relatively stable, too (there will be fluctuations, as in any other commodity market, but not as wild as they would be if the commodity was extremely limited in availability). Over time, however, the mathematics of coin creation are also designed to end, to avoid over-saturation of the market and currency devaluation. In plain English, that means most cryptocurrencies will eventually stop being created when they reach a predetermined amount known as a mintage cap. Once the last coin’s created, there won’t be any more. In most cases, the cap won’t be reached for a number of years—that’s by design, so new investors will be allowed to join up for some time to come. The majority of cryptocurrencies have mintage caps set; however, a few—like Peercoin—don’t.
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 at one time the most popular. Mt. Gox has since gone into administration. Based in Japan, the exchange was started by Jed McCaleb in 2010. Read the latest Mt. Gox news.
Multisig: Multi-signature addresses allow multiple parties to partially seed an address with a public key. When someone wants to spend some of the bitcoins, they need some of these people to sign their transaction in addition to themselves. The needed number of signatures is agreed at the start when people create the address. Services using multi-signature addresses have a much greater resistance to theft. Read more about Multisig here.
Node: A computer connected to the bitcoin network using a client that relays transactions to others (see client). If you’d like to run a bitcoin node, then bitcoin.org offers a comprehensive guide.
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.
Nonce: For hashing a transaction block some string (random) data is used as input and that is known as nonce.
Noob Trap: “Noob” is an abbreviation for the term “new blood,” and is also sometimes expressed as “newb” or “newbie.” It applies to anyone who is a newcomer to a given community—in this case, investing in digital currency. Most alternative currency investors are good folks, and are willing to lend a helping hand and advice to those who are new to the game. However, there are also folks who see noobs as an easy mark, and these unscrupulous investors often use market manipulation methods to take advantage of those who may not yet know any better. Luckily, some judicious studying of these methods can help new investors protect themselves from falling into market manipulation traps. For better understanding of the types of noob traps there are in the digital currency world, see the terms Bear Trap, Bull Trap and Pump and Dump and read our articles for more trading tips.
Offline Storage: This concept relates to how your cryptocurrency is stored. If your currency is online—on an active drive on a computer that’s turned on, or accessible through cloud computing– that means it’s also accessible by other computer users. Sometimes that access takes place without your knowledge. This can lead to hacking and theft, since cryptocurrency—by design—isn’t connected directly to any one person. As such, it’s important to keep your unique currency information offline as often as possible; it’s best to do so unless the currency is directly in use for a transaction. Two of the best ways to keep your investment info offline is to store it on an external drive that can be disconnected from your computer when it’s not needed, or to print it out and store it in a paper wallet. If you decide to take advantage of a wallet service from a cryptocurrency exchange, one of the first questions you should ask them should be about offline information storage, since digital currency theft is usually untraceable and irreversible.
Orphan block: A block which is not a part of the valid blockchain, but which was instead part of a fork that was discarded.
Orphan Block: A block of discarded fork which is not considered as a valid part of a block chain.
Output: The destination address for a bitcoin transaction. There can be multiple outputs for a single transaction.
P2P: Peer-to-peer. Decentralized interactions that happen between at least two parties in a highly interconnected network. An alternative system to a ‘hub-and-spoke’ arrangement, in which all participants in a transaction deal with each other through a single mediation point.
Peer-to-Peer: Also abbreviated as P2P, this is a concept that’s central to cryptocurrency. Transactions are made between individuals (peers), with no interruption or dictation from a centralized authority. On the plus side, all those invested in a type of cryptocurrency have a say in its well-being, without having to answer to a bank or government. On the minus side, this means people of less-than-ideal reputations are able to invest, just like anyone else. Cryptocurrency systems tend to be self-policing, but in the young industry’s growing pains there have been conflicts between keeping the riffraff out and keeping the environment as free and accessible as possible.
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.
Paper Wallet: (AKA “cold storage,” also referred to as an “off-line wallet.”) A paper wallet is a physical piece of paper you print out that stores your altcoins in a secure, off-line environment. Paper wallets are inherently impervious to hacking and other forms of internet theft but vulnerable to acts of nature (fire and flood), burglary, and human error (simply losing your wallet). Basically all a paper wallet contains is a printed public key and private key for a respective address. The data is NOT stored on a computer. Often a paper wallet has a QR code of the public and private keys to make it easy when you need to get the key values on your computer or phone — you just scan the paper instead of manually typing the keys out. Think about securing your paper wallet in a safety deposit box or a safe.
Pennant Pattern: This pattern forms on market value charts when investors want to test a current trend in a commodity’s value. The buying and selling that takes place during this testing period—which generally last one to three weeks—forms fluctuations that can be bracketed by converging diagonal lines, forming a “pennant” shape.
These pennant patterns can occur during both upward-trending (“bear”) and downward-trending (“bull”) markets. Since they don’t signify the current trend is going to reverse, the pennant pattern is considered one of the “continuation” pattern types. Once the pattern is formed, the trend will continue moving in the direction it had been beforehand.
Phone-to-Phone Transfer: This is a mobile application feature that allows the instantaneous transfer of information from one smartphone to another. If two mobile device users want to exchange data, and both have this feature installed and activated on their phones, they can make the transfer simply by having their devices in close proximity to each other. These are also sometimes called “touch transfers.”
Platform Exchange: This is a digital currency exchange that limits the role they play in transactions made between investors. The majority of exchanges are there to facilitate these transactions, and make them easier to carry out. The exchange will sort through buy and sell orders, and will then match up investors who meet the criteria of the order in question. Their algorithms are designed so the trades being made are both secure and fair to both parties involved. Beyond that, however, the exchange does not play any “middleman” or mediating role. This is in contrast to exchanges that will hold the transaction funds in escrow, or will discuss the details of the trade with both investors before moving forward.
Pool: A collection of mining clients which collectively mine a block, and then split the reward between them. Mining pools are a useful way to increase your probability of successfully mining a block as the difficulty rises.
Pool: A group or pool of miners who mine blocks collectively and divide the rewards among themselves.
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).
Private key: An alphanumeric string kept secret by the user, and designed to sign a digital communication when hashed with a public key. In the case of bitcoin, this string is a private key designed to work with a public key. The public key is a bitcoin address (see Bitcoin address).
Private Key: This unique identifier code is issued to investors to be used as a digital signature during transactions. Compared to public keys—which are openly listed in the directories of many cryptocurrency exchanges—private keys are to be just that: closely guarded and not given out. Your private key is what you use when you receive a transfer—from an investor who encrypts it with your public key—to “sign” your approval of the transaction. Private keys should be treated just as you would your credit card or Social Security numbers.
Private Key: Your private key is a private address that is paired with your public key. Private keys allow you to spend your coins or take them out of your wallet for using. The private key looks very similar to a public key but it’s slightly longer. You can get your public key from a private key but you CANNOT get a private key from a public key. Which is precisely the point. Keep this sucker secret. It is the key to the balance of the address. Whoever holds the private key owns the value of the address.
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.
Pump and Dump: This is a market strategy that’s strongly frowned upon by conscientious investors. An individual or group will invest heavily in a stock or commodity when its price is low, and will then publicize it aggressively, often using misleading or outright false statements. This is the “pump” part of the term, and it’s designed to get other investors interested and to drive the price upward. Once that happens, the individual or group will sell off their shares at a higher price; this often results in a profit for them, but it also creates a drop in the commodity’s value. This is the “dump” part, and needless to say, does not please the other investors.
Cryptocurrency markets are just as susceptible to pump and dump strategies as other markets are. To help guard against it, heavy and aggressive over-investment is discouraged, and digital currency investors learn quickly how to sort the truth from false information.
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-Stake Mining: Rewards for this type of mining are based upon the amount you’ve already invested in the cryptocurrency in question. The more currency you hold, the higher your potential rewards for mining will be. Proof-of-stake mining, as of yet, is not used as a stand-alone method, but is used by some cryptocurrency issuers in combination with proof-of-work Mining. Peercoin and Novacoin are two major cryptocurrencies that use this combination mining method.
Proof of work: A system that ties mining capability to computational power. Blocks must be hashed, which is in itself an easy computational process, but an additional variable is added to the hashing process to make it more difficult. When a block is successfully hashed, the hashing must have taken some time and computational effort. Thus, a hashed block is considered proof of work.
Proof-of-Work Mining: The rewards for this type of mining are straightforward: you receive coins and transaction fee rewards in direct correlation to the actual mining work you do. As such, the more mining you do, the more you can make. With some major cryptocurrencies such as Bitcoin and Litecoin, this is the only type of mining option available; however, some use a combination of proof-of-work and proof-of-stake mining.
Public key: An alphanumeric string which is publicly known, and which is hashed with another, privately held string to sign a digital communication. In the case of bitcoin, the public key is a bitcoin address.
Public Key: This is a unique encrypted code issued to an investor. When they want to make a transaction with their cryptocurrency, they give their public key out—many cryptocurrency exchanges have a directory of these for their investors—so the transfer can be made. The public key is a way to positively identify someone making a transaction, even though their actual name or personal information is not embedded in the key itself. Contrast this with a private key—which is not publicly known, and should be closely guarded—which is used to accept and validate a transaction.
Public Key: Public key (AKA “address” or “public address”) is like the bank account for your personal digital currency. It is where you store your coins. If you have multiple types of coins, you must have a separate wallet for each type. A wallet is a collection of public keys. So a wallet can contain one public key or one hundred. How much you decide to put in each is up to you and there is no cost. An example of a Bitcoin public key : 13CVcPgM2pcKw8h8qaum6BHm8YT66RRawU. Anyone can send you coins or you can transfer coins to other addresses as long as you have the private key.
QR code: A two-dimensional graphical block containing a monochromatic pattern representing a sequence of data. QR codes are designed to be scanned by cameras, including those found in mobile phones, and are frequently used to encode bitcoin addresses.
QR Code: These are a lot like the rectangular bar codes you’ll find on just about anything you buy, except QR codes are square in shape and can hold more information than bar codes.
Merchants who accept cryptocurrency as payment—as well as other types of currency—will often display QR codes in their stores. All the customer has to do is scan the QR code with their smartphone, and it will direct them to a URL where they can make the purchase right then and there, without the inconvenience of waiting in line at a cash register. Most digital currency mobile apps include QR code-scanning capability.
Reversal Graph Pattern: This is a type of pattern that forms on market value charts you’ll see on many digital currency exchange websites. A reversal pattern indicates that a market that has been trending upward (known as a “bull” market) will reverse direction and start moving in a downward direction, or become a “bear” market—or vice versa. When a reversal graph pattern appears, it shows that investors have been testing the current trend, and for one reason or another they don’t find it viable or sustainable—thus the market changes direction.
Rounding Bottom: Occasionally referred to as a “saucer bottom,” this is a term for a pattern you may see on market value charts on exchange websites. The rounding bottom pattern is considered a “reversal” pattern; that is to say, it represents the transition over time of a downward-trending, or “bear” market, into an upward-moving “bull” market. The gently downward-sloping line on the left of the illustration above tracks the market as it eventually finds its bottom, or lowest market value, then—usually just as gently and slowly—the trend heads upward. This is a very long-term pattern, often taking several months to a couple of years to fully form.
Satoshi: The smallest subdivision of a bitcoin currently available (0.00000001 BTC).
Satoshi: Currently, this is the smallest possible fraction of cryptocurrency available for transactions. It refers to 0.00000001 Bitcoin, and is named after Satoshi Nakamoto, the enigmatic creator of the first publicly-available digital currency. Nakamoto wrote the white paper in 2008 that evolved into the creation of Bitcoin—and until March 2014, no one had been able to pin down the true identity of the person or persons operating under the pseudonym. An expose in Newsweek Magazine at that time revealed that Satoshi Nakamoto was, indeed, the creator of Bitcoin’s real name.
Satoshi Nakamoto: The name used by the original inventor of the Bitcoin protocol, who withdrew from the project at the end of 2010.
Sell Order: This takes place when an investor approaches an exchange with the intent to sell some or all of their cryptocurrency investment. Sometimes sell orders are simple and straight to the point (“Just sell what I have at the best price you can find”), or the investor can set criteria that have to be met before the sale can be made. This can include, price, time frame, percentage of holdings being sold, and so forth. Most exchanges have sell order forms that can be filled out, but if investors have specific questions or concerns, they can talk directly to an exchange representative before activating their order.
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: An alternative proof of work system to SHA-256, designed to be particularly friendly to CPU and GPU miners, while offering little advantage to 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. Ulbricht was later convicted on money laundering and drug distribution charges.
Silk Road: This was the notorious online black marketplace where drug deals and money laundering occurred on a regular basis. Many of the transactions on Silk Road used cryptocurrencies, which gave the entire industry a black eye for a while. After a long FBI investigation, Silk Road’s owner was arrested in October of 2013, and the entire operation was shut down.
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 used as the basis for bitcoin’s proof of work system.
SPV: Simplified Payment Verification. A feature of the Bitcoin protocol that enables nodes to verify payments without downloading the full blockchain. Instead, they need only download block headers.
Stale: When a bitcoin block is successfully hashed, any others attempting to hash it may as well stop, because it is now ‘stale’. They would simply be repeating work that someone else has already done, for no reward. The term is also used in mining pools to describe a share of a hashing job that has already been completed.
Stale Block: When a block of cryptocurrency data has been successfully processed by a miner or mining pool, that block of data is considered stale. Experienced miners know to skip stale blocks, for it would be a waste of their time to try to mine them again.
Stop-Loss Order: This is a standing “get me out of here!” sell order that investors in stocks or commodities (such as cryptocurrency) use to, well…stop their losses. Or at least minimize them.
Investors often establish a stop-loss order the minute they make a purchase. This is a sell order that specifies the price at which the currency should be sold. For example, if you buy shares of something at $100 each, you might decide to issue a stop-loss order at $60. As long as the share price remains above that number, all is well—and nothing will happen unless you contact the exchange personally. However, the second the price hits $60, all or part of your currency (whichever you specify) will be sold at your stop-loss order price. Different exchanges treat this differently; some sell immediately, and some wait to see if it’s just a momentary “hiccup” on the market; if the price falls below your stop-loss limit, you’ll get the latter amount for your shares.
SliceFeeds: SliceFeeds is Coin Pursuit’s free social network that eliminates hassle by concentrating all traders, miners and enthusiasts contacts and cryptocurrency information in one place. Members can Slice conversations, notes, rumors, tips, links and videos to fellow community members to follow. Its network is divided into three easy-to-use sections: the network page shows statistics at a glance; the Slices page displays updates as they happen; and the profile page allows members to customize their own personal network-within-the-network. Members will also be able to monetize their unique contributions to the community; for example, bloggers can offer subscriptions (payable in digital currency, of course) for access to their exclusive content, and merchants will be able to advertise their companies and products through SliceFeeds, as well. To join SliceFeeds you can register here.
Slices: Slices are member-contributed content provided by members on SliceFeeds, a social media network provided by Coin Pursuit. These Slices can consist of conversations, notes, rumors, tips, links and videos for fellow community members to follow, rate and view.
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.
Testnet: An alternative bitcoin blockchain, 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 blockchain.
Transaction fee: A small fee imposed on some transactions sent across the bitcoin network. The transaction fee is awarded to the miner that successfully hashes the block containing the relevant transaction.
Transaction Fee: Most trades and purchase made with cryptocurrency include a small transaction fee. This fee is fed into the data block that contains the transaction’s information, and all or part of the transaction fee will be rewarded to the miner or mining pool that successfully processes that block.
Trading Walls: Generally speaking, the trend line on a chart (such as those offered by digital currency exchanges) will move more or less diagonally as trades are made. However, once in a while there is a buy or sell order that comes in which will make the trend line move directly up and down, creating a vertical line that resembles a wall. These “walls” represent a temporary high demand in interest, either in buying or selling a certain type of digital currency. If a wall is created by a large buy order, it’s called a “buy wall,” and if it represents a sizable sell order, it’s called a “sell wall.” Generically speaking, these walls are called “trading walls” or “bid walls.” Once the orders have been filled—or are ignored by the market in general—the wall disappears, and the diagonal trend line continues.
Triangle Pattern: Generally speaking, triangle patterns form on market value charts when investors buy and sell to test a current trend. The highs and lows of these fluctuations can be bracketed by straight lines that define the highs and lows during that testing period; these lines form an open-ended triangular shape.
There are three types of triangle patterns:
1. Descending Triangle. This is formed when the lower line of the triangle is a horizontal line, and the upper line tilts downward from left to right. The descending triangle represents a downward-trending, or “bear,” market.
2. Ascending Triangle. This is the inverse of the descending triangle, with an upward left-to-right tilted line at the bottom, and a horizontal line at the top. Ascending triangle patterns indicate an upcoming “bull,” or upward-trending, market.
3. Symmetrical Triangle. The symmetrical triangle stands out because both lines forming the triangle are tilted. It’s also a more tricky pattern to predict, because it can continue in either an upward (“bullish”) or downward (“bearish”) direction.
Triple Bottom Pattern: A triple bottom pattern forms on a market chart when investors buy and sell to test a downward trend in value. Buying and selling will take place, and over time this will form three distinct and almost-equal valleys on the chart’s trend line. Once the third valley has formed, an upward trend will develop past the point of the peaks or tops formed during the pattern’s formation. Once that happens, the market is likely to be “bullish,” or upward-trending, for a while; thus the triple bottom pattern is considered a “reversal” pattern, transitioning from a bear to a bull market.
Triple Top Pattern: A triple top pattern forms on a market chart when investors buy and sell to test an upward trend in value. Buying and selling will take place, and over time this will form three distinct and almost-equal peaks on the chart’s trend line. Once the third peak has formed, an downward trend will develop past the point of the dips or valleys formed during the pattern’s formation. Once that happens, the market is likely to be “bearish,” or downward-trending, for a while; thus the triple top pattern is considered a “reversal” pattern, transitioning from a bull to a bear market.
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: The measurement of price movements over time for a traded financial asset (including bitcoin).
Wallet: A method of storing bitcoins for later use. A wallet holds the private keys associated with bitcoin addresses. The blockchain is the record of the bitcoin amounts associated with those addresses.
Wallet: Just like a bill-and-coin wallet, this is a place to keep your digital currency. There are four types of cryptocurrency wallets:
1.Software Wallet. These are programs you load onto your desktop or laptop computer.
2.Mobile Wallet: These come in the form of applications you install on your smartphone or tablet computer. They usually include QR code scanning and phone-to-phone transfers for on-the-go transactions.
3.Web Wallet: These are usually gotten through exchanges, and stored on third-party servers via cloud computing. They can be accessed by any computing device.
4.Paper Wallet: Your digital currency can be printed out—usually in the form of QR codes—and these hard-copy cryptocurrency “bills” can be kept in a physical wallet just like traditional money.
Wedge Pattern: These are a type of “continuation” pattern you’ll see on market value graphs; that means they represent a momentary shift against the current trend, but the trend tends to continue in the direction it was going once the pattern is fully formed. Wedge patterns can be spotted by two diagonal, but non-converging, lines that bracket the up-and-down fluctuations that occur while investors test the current trend. There are three types of wedge patterns:
1. Rising Wedge. This wedge shape is tilted upward; thus the name. However, a rising wedge occurs during a downward trend, or “bear” market. It’s a momentary upward shift, but the bear market continued afterward.
2. Falling Wedge. The falling wedge is tilted downward. It represents just the opposite of the rising wedge, in that it denotes a brief downward movement during a “bull” market, which continues once the wedge is formed.
3. Level Wedge. These appear to move in more or less a horizontal direction on a graph. Just like the rising and falling wedges, the level wedge shows a brief respite in a trend, which will continue once the wedge pattern is complete.
Wire transfer: Electronically transferring money from one person to another. Commonly used to send and retrieve fiat currency from bitcoin exchanges.
Zerocoin: A protocol designed to make cryptocurrency transactions truly anonymous.
Zero-confirmation transaction: A transaction in which the merchant is happy to provide a product or service before the bitcoin’s transmission has been confirmed by a miner and added to the blockchain. It can carry a risk of double spending.
Zero Confirmation Transaction: The processing of data for cryptocurrency transactions can take anywhere from half a minute upward to over ten minutes in some cases. Though this is necessary in order to validate transactions—and guards against fraudulent activity such as double spending—the waiting period can be inconvenient for those involved in the transactions. As a result, some exchanges and businesses that deal with digital currency are offering “zero confirmation” transactions, which are almost immediately verified without waiting for the mining process to confirm the data block.
source: http://suracoin.com/bitcoin-terminology/ & https://www.coinpursuit.com/definitions/ & http://www.coindesk.com/information/bitcoin-glossary/