In recent years it seems that everyone is talking about cryptocurrencies, and even investing in them. However, there are concepts that are still unknown to most. From ExpressVPN we want to help clarify certain essential terms to understand a little more about this technological and financial ecosystem. Keep in mind that some of the links shared are in their original language, we hope they can still serve as a reference.
21
Symbolic number, since only 21 million bitcoins can exist. It is unknown why Satoshi Nakamoto chose this particular number.
100x
It refers either to the expected growth of a currency or to the leverage to be used in a margin operation. It can be a sign of extreme bullish expectation in the price of cryptocurrencies, or a willingness to take risks in trading.
51% attack
A majority of Bitcoin miners could collude using proof-of-work blockchains to attack the chain. Such an attack would not allow miners to steal the funds, but they could reverse recent confirmed transactions and block specific or general transactions, for example by freezing funds. A successful 51% attack can completely stop the system.
Address
To send bitcoins to a person, you must have their Bitcoin address; to send Ethereum, your Ethereum address is necessary, and so with each cryptocurrency with which you are working. Technically, an address is the SHA-256 hash of a public key or script, prefixed with 1, 3, or bc1. It can be encoded with base58 or bech32.
Airdrop
It is the process of allocating Altcoin or newly created tokens to cryptocurrency owners or block chain users.
Altcoin
Any cryptocurrency or token that is not Bitcoin. Bitcoin purists may refer to Altcoin as “shitcoin”, but today they are accepted cryptocurrencies in the system.
ASIC
The abbreviation of the term in English Application-specific integrated circuit (specific integrated circuit for an application). They are specialized chips to execute the SHA-256 hash functions used in Bitcoin mining.
Atomic swap
An exchange of bitcoin for an Altcoin in such a way that it does not require a depositary is known as “Atomic swap”. It is a transaction that is made on the condition that another transaction occurs and is verified using cryptography, which makes it impossible for any of the parties involved in the transaction to deceive the other. An atomic swap can be a good example of a smart contract.
Base58
Base58 is the encoding scheme used for Bitcoin P2SH and P2PKH addresses, which start with either 1 or 3. It reduces the size of large numbers and is easier to parse than binary or base10, which is used with frequency (this one uses the numbers 0 through 9). Base58 includes the numbers 1 through 9, all uppercase characters except “I” and “O”, and all lowercase characters except “I” (because it could be confused by similar characters). See also: Bech32.
Batching (lotes)
Typically, a Bitcoin transaction contains a destination output and a change output. Services that perform multiple transactions, however, have an incentive to “batch” transactions. A single transaction with multiple outputs instead of multiple transactions saves block space and fees.
Bear (os)
A person who has a pessimistic expectation about the value of bitcoin. It is a trading term.
Bearwhale (bear-whale)
A person with a large trading volume who has a pessimistic expectation or is selling a large number of coins.
Bech32
Bech32 is a new encoding scheme that makes addresses more secure, especially in the context of multi-signature schemes. These addresses start with “bc1” and are typically longer than base58 addresses.
BIP
The Bitcoin Improvement Proposal acronym is a commonly accepted procedure for proposing changes and additions to the Bitcoin code. Not all BIPs are relevant to the Nakamoto Consensus—some simply dictate procedures, good practices, or standards.
Bitcoin ATM
A bitcoin ATM sells bitcoin for paper currency. Some ATMs also distribute Altcoin and fiat currencies.
Bitcoin Cash
In August 2017, a group of Bitcoin enthusiasts changed the Bitcoin consensus rules, especially those that determined the block size. Since only a few miners and participants joined them, the network permanently forked. Everyone who held bitcoin before the fork received an equal amount of Bitcoin Cash (in what is known as an airdrop), which can be bought and sold on other exchanges.
Bitcoin Core
Bitcoin Core is the most popular Bitcoin client and node.
Bitcoind
Bitcoind, short for “Bitcoin Daemon”, is the command line-based version of Bitcoin Core.
Bitcoin-qt
Bitcoin-qt (pronounced “kiut”) is the graphical interface of Bitcoin Code, the most popular Bitcoin client. Its name is derived from the QT widget toolkit, on which it is based.
Bitcoiner
A person who uses Bitcoin. Transactions, verification, storage, and mining are uses of Bitcoin.
Block
A block contains transactions. Each block references its predecessor, forming a long chain starting at the Genesis Block. Currently, the first transaction in a block creates 6.25 bitcoins out of thin air—known as the block subsidy. On average, every 10 minutes a block is discovered by a miner. The block is then propagated through the network and accepted by the nodes as long as it conforms to the consensus rules.
Block subsidy
Also known as the block reward. For every block a miner finds, they are allowed to “create” bitcoin out of thin air. The number of bitcoins they are allowed to create is defined by the consensus rules. The bitcoins they are allowed to create are known as the “block allowance”.
The first 210,000 Bitcoin blocks contained a 50 BTC reward; the next 210,000 blocks, 25 BTC; later, 12.5 BTC and since May 2020 the reward for each block has been 6.25 BTC. The next halving will be in 2024. At this rate, 99% of all coins will be mined by 2037, there will only be around 100 bitcoins left by 2081, and the last bitcoin will be mined around 2109. This will continue until the block subsidy was halved 34 times, around the year 2145. From then on, transaction fees will be the only incentive to mine Bitcoin. See also: Halving.
Blockchain (chain of blocks)
Blocks always reference the previous block, creating a data string. This chain is known as a “chain of blocks” (in English, “ Blockchain ”) or ledger.
Blockexplorer
Explorer
Block size
The allowed size for a block on the Bitcoin blockchain. Since 2010, the limit is 1 MB. SegWit’s soft fork allows storage of signature data outside of the block, making the block size measure obsolete. Instead, the weight of the block is used. The current effective block size is double or quadruple 1 MB.
Blockspace (block space)
Bitcoin blocks are limited in size, and the amount of space available is known as “ blockspace ”. There are certain fees for using this space, and the process by which miners select transactions and include them in a block is known as the “market fee.”
Broadcast (transmission)
When a transaction is signed or a block is mined, the data in question is transmitted to the entire network. It takes a few seconds for the message to reach the entire planet.
BTC
The most widely used stock symbol for bitcoin. Most exchanges list bitcoin as BTC, but some represent and trade it under the symbol XBT.
BTM
Alternative numbers for a Bitcoin ATM.
Bull (toro)
A person who has an optimistic expectation about the value of bitcoin. It is a trading term.
Ability
Usually measured in transactions per second, or TPS, the capacity of the cryptocurrency network varies greatly depending on the type of transactions to be executed. Typically, the Bitcoin network can process up to 5 TPS, depending on the type of transactions being used (see SegWit and batching). Instead, the Ethereum network can process up to 15 TPS; Binance Smart Chain, 100 TPS and Solana 50,000 TPS, allowing for faster transaction times.
Chain split
Bifurcation
Change
When bitcoins are spent, it is necessary to reference the previous incoming transaction, so that all bitcoins are taken into account in the block chain. But it’s rare for previous entries to match the amount you want to send, so you need to pool the entries and send the remaining bitcoins as change.
Civil war
The 2017 Bitcoin Civil War occurred over the block size question. It ended with the creation of Bitcoin Cash and the activation of SegWit in the Bitcoin chain.
Client
A Bitcoin client is software that interacts with the network. It can be a full node, SPV node, or specialized software.
Coinbase
The transaction containing the block reward has no input. Instead, arbitrary data such as a number or a message is used as the coinbase. Not to be confused with the popular Bitcoin exchange of the same name.
Coinjoin
A technique that mixes transactions from multiple people to hide which inputs correspond to which outputs.
Cold storage
Bitcoins stored on a medium (such as a computer, USB drive, or paper) that is not connected to the internet.
Colored coins
A transaction can be identified (or colored) to give it a specific meaning, such as representing a notarial act. This notarial act can be moved and stored like any other bitcoin transaction, with no risk of it getting mixed up or spent with your other bitcoins.
Confirmation
When a transaction is included in a block by a miner, it is considered to have a confirmation. Each block that is subsequently discovered adds an additional confirmation. Only transactions that are sufficiently confirmed are considered “final.” Due to the potential for attacks, it is possible to roll back a transaction that only has one or two confirmations. But after six confirmations, a transaction is generally considered irreversible; however, depending on the size of the transaction, it may not be feasible to double spend much sooner. Unconfirmed transactions are often considered insecure, although attacks are rare.
Cryptocurrency
Cryptography-protected money on a blockchain.
Cryptography
Cryptography is a compendium of techniques to hide information and protect and authenticate communications.
Cyberpunk
An artistic and literary genre, characterized by presenting a combination of advanced technology with a dystopian society in which poverty is widespread. Bitcoin is often associated with such a future because of its ability to function without the need for government controls. Not to be confused with Cypherpunk.
Cypherpunk
A social movement that aims to empower and empower the individual through the dissemination of technology, particularly cryptography. Bitcoin was first advertised on crypto-themed email lists, where many cypherpunks congregated and discussed the proposals. The term is a pun of “Cyberpunk” (see the previous entry) and “Cypher” (“figure” or “code” in English) A slogan attributed to the movement is “Cypherpunks program” “ Cypherpunks code ”).
Dark wallet (wallet oscura)
An experimental Bitcoin wallet that uses stealth payments and coinjoin to allow for more anonymous transactions.
Days destroyed
It is a measure of when coins that have been stored for a long time suddenly wear out. For example, one hundred Bitcoins spent after sitting in a wallet for one year count as 36,500 (365 x 100) “Days Destroyed”. A sudden spike in this indicator could indicate that a bearwhale is selling its coins.
Difficulty
Miners are supposed to find blocks every 10 minutes, on average in the Bitcoin network. As more and more miners join, they find new blocks faster and faster. The difficulty is adjusted every 2016 blocks (approximately every 2 weeks) to slow down the creation of new bitcoins. When the miners turn off their equipment, the difficulty eventually decreases.
Doubled spend
The fundamental problem solved by the Nakamoto Consensus. On the Bitcoin blockchain, no one can spend a bitcoin twice after a certain amount of time has elapsed and the transaction has been confirmed.
In a double spend attack, a user attempts to defraud a participant by sending a coin, getting one or two confirmations, and then attacking the blockchain by mining a contradictory block of the same height as the block containing the transaction. This gets easier the more hashing power an attacker has (51% attack) and harder the more confirmations the block has. After six confirmations, the transaction is considered essentially irreversible, even if millions of dollars are spent on the attack.
ECDSA
The elliptic curve digital signature algorithm is the algorithm used by Bitcoin to generate private and public key pairs, and to verify their signatures. It is not clear why Satoshi Nakamoto chose this algorithm, because it was relatively unknown at the time of Bitcoin’s first issuance.
Escrow
A contract between two business partners and a third party acting as an agent, who is only expected to intervene if requested by one of the parties. For example, if something goes wrong with the agreement.
It is relatively expensive to create a trust for traditional funds compared to cryptocurrencies, where a trust can be established affordably using a 2 of 3 multi-signature wallet. If the contract is fulfilled, both parties involved can move the funds without need third party intervention, unlike what happens in traditional transactions, in which the broker always has to intervene. Another advantage of cryptocurrencies is that the funds are never fully controlled by the intermediary. Funds can only be stolen if they collude with at least one of the parties involved in the transaction.
Exchange
A platform where other tokens or fiat currencies can be bought and sold in exchange for bitcoin and other cryptocurrencies. Exchanges typically specialize in OTC, fiat currencies, or tokens.
Explorer
An explorer (or “blockexplorer”) is a tool or website that allows you to conveniently navigate data stored on a blockchain. This includes looking up addresses and their associated balances, pending or confirmed transactions, and metadata such as the OP_Return.
Rate
Due to the limited block space, a transaction must pay a fee to be included in a block. Ideally, the optimal rate is discovered in a functional rate market. In the long run, fees will end up being the main incentive for miners to keep mining, as the block subsidy will eventually go to zero.
Rate Market
Due to limitations in block space, a transaction has to pay a fee to be included in a block. Ideally, a well-functioning market will determine the amount of these fees. At times of congestion, a higher fee must be paid to confirm a transaction, while a lower fee allows the transaction to stay in the mempool until a time of less congestion. The RBF is an important tool for the rates market.
Fiat money (Fiat)
Fiat money is money issued by a government.
Flood attack
Similar to a DDoS attack, a flood attack “floods” the mempool with transactions. In a functional fee market, this increases transaction fees and limits network capacity. Flood attacks can be costly for the attacker: they will have to pay transaction fees to miners or, if they are miners themselves, bear the opportunity cost of not including other payment transactions.
Fork
When all participants no longer agree on the state of the network, the network has forked. This can happen as a result of a bug, an error, or a deliberate act. For example, an expansion of the rules (such as an increase in the block size or the number of bitcoins in existence) inevitably leads to a fork in the network. See also hardfork and softfork.
Genesis block
All blockchains have a “genesis block”, which is the first block in the blockchain. In the Bitcoin blockchain, the genesis block is inscribed “ The Times | 3/1/2009 | Chancellor on Brink of Second Bailout for Banks .” Bitcoins in the genesis block cannot be spent.
Halving (halving)
For the bitcoin network, every 210.00 blocks, the block reward is halved. From a first figure of 50 BTC per block in 2009, it currently stands at just 6.25 BTC after 3 halvings. The next halving is scheduled for 2024. Eventually, the block reward will hit zero after 33 halvings. Also known as “Halvening” (a combination of the words “halving” and “happening”), this event is popularly celebrated, just like the Bitcoin New Year.
Hardfork (“hard” fork)
Any change that extends the existing rules (meaning that something is allowed that was not allowed before) is considered a hardfork. Unless all participants update their software, such a rule change will lead to a split in the chain, known as a fork.
Hardware wallet
A specialized chip that contains a secure enclave in which you store your private key. It is only considered a hardware wallet if the private keys cannot be extracted.
Hash
A hash is the output of a function -> hash. A Bitcoin address is the result of applying the SHA-256 function twice to the public key. Bitcoin miners use the same hash function to let computers prove that they used a certain amount of electricity in Bitcoin’s proof-of-work algorithm.
Hash function
A hash function is a “one-way” cryptographic function that compresses data into a number known as a “hash”. This number can be used as a fingerprint for any data. A hash function is considered secure if the output cannot be predicted, and if no two known strings compute the same hash.
Hash bowl
The number of hashes that a Bitcoin miner can run.
Header
Each block has a header (header) that measures 80 bits in length. It contains the version number, the hash of the previous block, the Merkle Root of all transactions, the difficulty target, and the nonce.
Height
Each block has a certain height, which is its sequence in the blockchain, starting from Block 0, on January 3, 2009.
HODL
An incorrect spelling (on purpose) of the English word HOLD (which means “to maintain”). It represents the philosophy of saving or selling and planning for the long term, as opposed to spending all the cryptocurrencies one has. Although often criticized for a perceived “hoarding” mentality, many cryptocurrency enthusiasts prefer to save their tokens and plan their finances for the long term. On Twitter and on cryptocurrency social media, it is sometimes said that HODL is actually an acronym for “Hold On for Dear Life”, literally: “Don’t drop [coins] for the world”.
Hot wallet
A wallet that runs on a computer or phone connected to the internet. See also: Cold storage.
Input and output
A bitcoin transaction typically references one or more inputs as the source of funds, and two or more outputs. The output that does not point to a payee is a change output. Only coinbase transactions have no inputs, because they create the bitcoins out of thin air.
Ledger
Another name for the Bitcoin blockchain. Generally speaking, a general ledger is a record of transactions and assets, similar to a balance sheet. On the Lightning network, each participant has their own ledger, while on the Bitcoin network, everyone shares the same ledger.
Red Lightning
The Lightning network is a network that is “above” the Bitcon. Participants can connect to the network by depositing bitcoins into specialized smart contracts. They can then make an infinite number of transactions with each other at very low fees and without being constrained by Bitcoin’s capacity restrictions.
Lock time
One smart contract functionality used in the Lightning Network is the concept of “Check-Locktime-Verify” or CLTV. Creates a transaction that can only be claimed after a certain amount of time has elapsed.
Mainnet
The name given to a real Bitcoin network, as opposed to a Testnet.
Malleability
A bug in standardized bitcoin transactions that allows anyone to change the transaction ID before the transaction has been mined. This bug makes it difficult to chain uncommitted transactions together. It was corrected by introducing a new transaction standard called SegWit.
Margin call
When trading bitcoin using leverage, your position is only protected to the point where your losses equal your collateral. If this happens, you get a “margin call” and your collateral (ie your bitcoin) is sold, leaving you rekt.
MAST
The acronym of the English ” Merkelized Abstract Syntax Trees ” ( Merklized Trees of Abstract Syntax ). Bitcoin MASTs are intended to make it easier to create more complicated smart contracts on Bitcoin. They allow you to specify a set of conditions under which bitcoins can be spent without having to disclose all these conditions at once. Instead, they are individually hashed into a Merkle Tree.
Perfectionist
A person who only owns or uses bitcoin and believes that it is the only cryptocurrency or blockchain system worth the time and effort. It is often linked to the belief that network effects will lead to a single cryptocurrency dominating payments globally.
Mempool
Each client keeps a record of all unconfirmed transactions. This list makes up the mempool. A transaction is removed from the mempool if a client considers it too old or if it is included in a block.
Combined mining
In merge mining, one blockchain accepts work done for another blockchain as valid work. This allows a miner to mine on two blockchains at the same time. The Namecoin was a popular combo mining coin. Dodgecoin and Litecoin are two well-known coins that use merge mining.
Root of Merkle
The individual hash at the bottom (or top) of a Merkle Tree is called the Merkle root. None of the values in the Merkle Tree can be changed without also changing this root. This root is included in the block header.
Merkle tree
At the top (or bottom) of a Merkle Tree, all transaction IDs are contained within a block. At each level, the IDs are hashed together in the next layer until only one hash: root ->.
Micropago
Any payment that is unusually small is considered a micropayment. Paying for a coffee or the bus ticket can be considered micropayments. The Lightning network allows payments less than 1 Satoshi.
Miner
A cryptocurrency miner is a machine connected to the cryptocurrency network that executes hashes one after another, known as proof of work. “Miner” also describes the person who operates the machine.
Mnemonic phrase
Seed Phrase
Month
How far will the value of bitcoin go? To the moon! (What is the same, the price is growing astronomically)
MtGox
A cryptocurrency exchange that, in the past, came to host almost all of the bitcoin trading volume. He became infamous in 2014, declaring bankruptcy after losing most of his clients’ money.
Multisig
A contraction of the English term “multiple signatures”, which literally means “multiple signatures”. A multisig is a type of address that allows multiple parties to control funds collectively. A 2-of-2 multisig consists of two parts, both of which are required to confirm each transaction. It is frequently used on the Lightning network. 2-of-3 multisig addresses are often used for cold or trust storage.
Consenso Nakamoto
The main innovation of bitcoin is based on the application of proof of work. It is named after the inventor (or inventors) of Bitcoin, Satoshi Nakamoto.
Namecoin
The only other cryptocurrency conceived by Satoshi Nakamoto, Namecoin was intended to create a blockchain that would store login names, similar to URLs or usernames.
Red
The Bitcoin network is made up of nodes, which can be mining or verification. SPVs or “thin clients” are only used to make transactions.
Nocoiner
A derogatory term for a person who does not own cryptocurrency, who is also frequently ignorant of the concept itself.
Node
A computer running a Bitcoin client that verifies the integrity of the block chain and new transactions, and also passes the new transactions and blocks to its peers. By default, your Bitcoin node connects to eight other nodes, and can be configured to allow more incoming connections. Since the network does not depend on any specific node, it is extremely difficult for an individual party to interfere with the communication of its other peers with each other.
Non-fungible tokens
Non-fungible tokens (NFTs) are digital items that can represent real-world objects such as artwork, music, videos, and even objects within video games. The buying and selling of NFTs is recorded on a chain of blocks. The NFT on a digital wallet proves that the digital file is the original.
Nonce
The nonce is a part of the block header. The miner freely chooses the nonce, with the intention of finding a block that hashes a value with a certain number of zeros. The number of zeros will depend on the target difficulty.
Notary service
A bitcoin notary service proves the existence of a certain data set (such as a document or image) before a certain amount of time has elapsed. By including a block hash in the data, it is possible to prove the existence of this data after a certain time, giving a relatively short interval (around 10 minutes) in which it will have been created. However, this does not prove the authenticity of that document or image, only its existence.
One-way ATM
A one-way ATM is a machine that is used to buy bitcoins and other cryptocurrencies with cash, or also with a credit card (the latter is less frequent). Unlike two-way ATMs, it does not dispense cash.
Operation Codes (OP)
The opcodes define the bitcoin scripting languages. There are almost 200 OP codes, although many are disabled because they have no particular use, or present unnecessary risks.
OP_Return
This OP code makes an output invalid. However, it is still useful for integrating arbitrary data into the Bitcoin blockchain for use in other tools, such as notary services.
Orphan
When two blocks are found at the same time, only one of them can be valid. The invalid block is “orphaned” because no successive blocks can be built on top of it. In rare cases, the blockchain can temporarily fork, for example due to a bug or malicious attack. In this case, there will be either two permanent strings or one orphan string.
P2P
Peer-to-Peer
P2Pool
The P2Pool was a pool (or “pool”) in which miners were paid proportionally to the work they did, thus lowering the barrier of entry to becoming an individual miner by distributing the probability of finding a block among a large number of users and guaranteeing a stable source of income.
P2SH
It is the acronym for the English “Pay to Scrip Hash” (in Spanish: “Hash to pay for script”). Instead of sending the bitcoins to a public key, they can also be sent to a script. In order to claim these coins, the owner must reveal the script, and the script must execute successfully. With this technique, it is possible to create smart contracts in bitcoins. P2Sh addresses start with the number 3, instead of 1 as P2PKH addresses do.
P2PKH
It is the acronym for the English “Pay to Pubkey Hash” (in Spanish: “Hash to pay for public key”). It is the oldest standard used for bitcoin transactions, in which a payment is made to the hash of a public key. You need to have a valid ECDSA signature to spend the money, unlike P2SH, which allows you to create more complex smart contracts. P2PKH addresses typically start with 1.
Paper wallet
A paper wallet is a piece of paper that contains either a private key or a wallet seed. It works either as a backup to a wallet or as a type of cold storage.
Peer-to-peer
The title of the Bitcoin white paper is “Bitcoin: A Peer-to-Peer Electronic Cash System” (in Spanish: “Bitcoin: a user-to-user electronic cash system”). The term “user to user”, which is often used in English (“peer-to-peer”), means that there is no centralized architecture and that anyone can join the network and talk directly with other participants. Other popular P2P systems include BitTorrent and I2P.
Earring
A transaction that has been transmitted to the network, but has not yet been included in any block, is known as a pending transaction. It typically stays in the mempool.
Pizza day
On May 22, 2010, developer Laszlo Hanyecz bought two pizzas in exchange for 10,000 BTC. This was the first recorded occasion in which someone bought a physical product with bitcoin. It seems that Satoshi’s favorite pizza is pineapple and ham, as revealed in a comment, although there are many who think (or want to believe) that it was a joke.
Point of sale
The device or place where something is sold. In the Bitcoin context, this is typically a plugin, web app, phone app, or integration with a traditional PoS device. Not to be confused with Proof of Stake (which in English has the same acronym: PoS, for “Proof of Stake”)
Pool (set)
A set, or “pool” of miners allows its members to collaborate and find a valid solution to a block together. Solutions are “pooled” and all members receive equal payouts that are proportional to the pool’s earnings, although exact enumerations may vary.
PoS
Proof of stake or point of sale.
PoW
Proof of Work
PPS
Acronym for “Pay per Share” (in Spanish: “Pay per Action”), it is a method commonly used by pools of miners to determine how much each miner should receive. PPS implies that each miner receives a fixed amount for each hash, regardless of whether the pool finds a block or not. The pool can keep the winnings if any, but it can also go bankrupt.
Private key
A Bitcoin private key is a random number whose length is 256 bits. From the private key, the public key is derived using an ECDSA algorithm. This public key is then hashed twice using SHA-256, base58 encoded, and prefixed with 1 to determine its address. Other address formats such as bech32 and P2SH also have private and public keys, but the addresses are encoded differently.
Proof of burn
Some cryptocurrencies use proof-of-burn to allocate shares in their PoS chains. To get a share in the new system, users have to destroy (or “burn”) their bitcoins using, for example, OP_Return.
Proof of stake (proof of participation, or PoS)
Bitcoin’s proof of work is notorious for requiring energy. In the proof-of-stake model, miners produce valid blocks by voting with the coins they own on the valid chain. The idea of PoS predates Bitcoin’s proof of work, but has now been adopted by various cryptocurrencies.
Proof of work (proof of work, or PoW)
Also known as the Nakamoto Consensus, PoW is the Bitcoin consensus algorithm. Miners destroy electricity by hashing the block header with various nonces until they find a valid block based on the difficulty target. The more electricity is destroyed, the more likely they are to find a new block, which rewards them for their efforts with newly minted bitcoins, known as the coinbase transaction.
Protocol
The Bitcoin protocol is the set of rules that determine what makes a block of transactions valid and also how nodes communicate with each other. Some parts of the protocol are easy to change, while others require consensus from the entire network, making changes unlikely without forking the chain. The bitcoin protocol has no formal written specifications beyond its code.
Public key
A public key is derived from the private key. A public key is a point on an ECDSA curve. Both its “X” coordinate and its “Y” coordinate are 256 bits long, making the public key a total length of 512 bits.
RBF
Replacement fee (acronym for “Replace By Fee”). This standard allows a person to increase their transaction fee and replace their transaction in the mempool. This allows people to define a lower fee per transaction and increase it later if the level remains high, or if the transaction becomes a high priority.
Rect
It is what the fact of losing everything in cryptocurrency trading is called. It is a modified spelling (but it sounds the same in English) of the word “wrecked”, which literally means “ruined”.’ See also: Margin call.
Satoshi
In honor of its creator, Satoshi Nakamoto, the smallest unit of a bitcoin is called a Satoshi. One Satoshi equals one hundred millionth (or 1×10^-8) bitcoins. Through secondary layers, such as the Lightning network, it is possible to further divide these units down to milli-Satoshis, or 10^-11 bitcoins, allowing for micropayments.
Satoshi Nakamoto
It is the pseudonym adopted by the creator, or creators, of Bitcoin when they published the Bitcoin white paper and communicated it to their collaborators. Satoshi was last heard from in December 2010.
Company Schnor
Schnorr signatures are a new proposed scheme for signing transactions. Compared to ECDSA signatures, Schnorr signatures allow multiple signatures to be combined into one, improving the level of privacy and making multisig and smart contracts easier and more affordable.
Scripting languages
The Bitcoin scripting language, which is called “Script”, allows you to create complex rules for the redemption of an entry, such as multiple signatures and smart contracts. It is also possible to send bitcoin to a hash script instead of a public key. For security reasons, however, the number of OP Codes is limited, there are no loops, and the language is not Turing complete.
Back cover
Networks that use the Bitcoin blockchain only to fix crucial information or smart contracts. Such networks are important in order to expand Bitcoin to reach billions of users. Some examples include notary services and the Lightning Network.
Seed phrase
Instead of backing each private key in a bitcoin wallet, a seed phrase (or mnemonic phrase) can be used to generate an infinite number of random addresses. Only the phrase is needed to back them up, and this action only needs to be done once.
SegWit
A new type of transaction that solves the malleability problem inherited from bitcoin transactions. It was originally implemented as a soft fork, but when combined with the lack of block size increments, it became a controversial issue that contributed to the fork that created Bitcoin Cash.
SHA-2
SHA-1 is a family of hash functions designed by the US National Security Agency (NSA). Some members of this family are the SHA-256, SHA-384, and SHA-512 functions.
SHA-256
SHA-256 is frequently applied in Bitcoin usage, such as address creation and mining. It is part of the SHA-2 family. The number 256 refers to the fixed length of the output it produces: 256 bits.
Shitcoin
A term used to describe cryptocurrencies that are failing or have failed, and therefore have little or no value or purpose. See: Altcoins
Company
A cryptographic signature allows the user of a private key to prove that they possess that key, but without revealing it. In Bitcoin, it is mainly used to show ownership of the coins.
Signet
The signet is a version of the testnet that has centralized administration. It can be used to test whether new transaction types or modified blocks are accepted by the network, without risking loss of funds. You can join other’s signets or your own. While the signet concept is relatively new, it is expected to gain much more popularity on the testnet due to its more stable timing between new blocks.
Silk Road
Between 2011 and 2013, the Silk Road (in Spanish, “Ruta de la seda”) was a popular darknet market where drugs and contraband products were traded. It helped (in principle) Bitcoin become more popular and demonstrated the usefulness and robustness of the network. Many of the circumstances related to the creation and subsequent abolition of the Silk Road remain a mystery. Because of his alleged involvement in the Silk Road market, Ross Ulbricht is currently serving a life sentence for drug trafficking and money laundering.
Simnet
The simnet is a locally run simulation of the Bitcoin network, similar to the signet and testnet. Unlike other simulations, it can be easily created spontaneously, and can also be sped up and used to simulate the network in fast motion, rather than in real time.
Smart contract
Technically, a smart contract is a computer program or transaction protocol that runs on a distributed system, such as the cryptocurrency network. Its rules are transparent and cannot be circumvented. As such, they are considered incorruptible. Smart contracts are programmed to automatically execute or document actions according to the terms of the contract.
Softfork (“soft” fork)
A softfork, or “soft” fork, is a change to one or more rules that hardens the rules of the network. All blocks created under this new rule set are accepted by nodes that follow the old rule set, but it is not necessarily the case that all blocks created under the old rule set are still valid. Unlike a hardfork, a softfork does not imply a permanent fork if more than 50% of the hashing power supports it.
Solo mining
Solo mining implies that an identity is not part of a set but attempts to mine entire blocks by itself. Due to the enormous hash power and the luck factor involved in the process of finding new blocks, solo mining is becoming more difficult to do, and also less frequent.
Spam attacks
It is possible to spam the network by creating a large number of transactions for yourself and filling blocks with them. This increases fees and makes bitcoin generally more expensive to use, while also decreasing its capacity. Block size limits exist to reduce the potential cost that this type of attack would have on nodes, and also to ensure that even during an attack, the network remains operational. However, since miners earn transaction fees, it could be relatively cheap for them to carry out this type of attack.
Depleted output
Each of the transactions has at least one input and one output. If an output is also the input for another transaction, then it is said to be “impoverished.” To calculate your Bitcoin balance, you have to add the value of the non-impoverished outputs for which you have a private key.
SPV
Acronym for “Simplified Payment Verification” (simplified payment verification). In the Bitcoin white paper, Satoshi talks about the possibility of having an SPV. It would allow nodes to alert each other about invalid blocks, without needing to check the entire block each time. The SPV has not yet been successfully implemented, and it may well be impossible, because it is possible for us to prove a negative (ie the block is invalid). Not to be confused with SPV wallets.
Wallet SPV
Some wallets claim to be SPV wallets. They do not validate the entire Bitcoin blockchain, but instead use the nodes to calculate the balance. You have to be careful, because such nodes could (in theory) lie about the balance and the validity of the transactions of the SPV wallet, and that is the reason for their limited security features.
Stealth payments (secrecy payments)
Stealth payments allow two parties to make payments to each other without having to send each other Bitcoin addresses, which could be intercepted. Instead, they trade a key.
Taproot
A taproot is an extension to MAST to improve the performance of Bitcoin smart contracts, and also their level of privacy. Use Schnorr signatures to make a MAST transaction look the same as a normal Bitcoin transaction.
Goal
A number describing the current difficulty. For a block to be valid, its header hash must be less than the target.
Testnet
The Bitcoin testnet is a replica of the Bitcoin code and network. Testnet coins have no value and are used for testing applications. In relation to a testnet, the Bitcoin network is known as the Mainnet (literally, “main network”).
Ticker (stock symbol)
Stock symbols are used on stock exchanges to identify different companies and currencies. Bitcoin often uses the symbol “BTC”, but is also known as “XBT”.
Timestamp (date and time stamp)
A document can be timestamped by embedding its hash into the Bitcoin blockchain using OP_Return. See also: Notary service.
Token
A token is an object that represents a right. By this definition, Bitcoin can be thought of as a token (the right to transact on the Bitcoin blockchain). More commonly, tokens represent deeds, contracts, or physical objects. See also: Colored coins.
TPS
Transactions per second. See also: Capacity.
Transaction
A Bitcoin transaction is a signed message. It refers to the input transaction and contains at least one output. They are created by a wallet and then transferred to nodes, which keep them within their mempool. As soon as a miner has included your transaction in a block, it is considered confirmed.
Transaction ID
Each transaction has an identifier. While legacy transactions allow for a bug that makes this ID malleable, SegWit transactions have a deterministic transaction ID. This allows second layer networks, such as the Lightning network, to exist.
Turing completeness
In popular usage, a computer is Turing complete (also known as “Turing complete”) if it can simulate another computer. Named after Alan Turing, this roughly means that the machine can calculate any arbitrary computational function. Bitcoin is not Turing complete, because its scripting language has limited functionality. This limitation is a deliberate decision, because protecting a computer with limited functionality is easier.
ATM (telecajero) bidirecccional
Unlike a one-way ATM, a two-way ATM can dispense cash in exchange for bitcoin or other cryptocurrencies.
TXID
See: Transaction ID
Output not depleted
See: Depleted output
“Cosmetic” direction
A Bitcoin address that looks the same as a certain word or only consists of certain characters. It is done by quickly creating private keys, deriving the address from them, and checking with the desired result. Depending on how long it needs to be, this may take a long time or be simply unfeasible.
Vchange
Measure similar to weight. A Vbyte represents 4 units of weight.
Wallet
It is a software, hardware or piece of paper that contains your cryptocurrencies. Contains either the private key directly or a seed to generate multiple private keys. A “view only” wallet contains only public keys, but can be used to create unsigned transactions or check balances.
Weight
For Bitcoin SegWit transactions, it makes less sense to calculate the size, because they are divided between the transaction and the signature. A unit of weight represents a fraction of 1 / 4,000,000 of the maximum size of a block. An alternative form is Vbytes.
Whale (whale)
A person who trades a large amount of cryptocurrency. See also: Bearwhale.
White book
A document that summarizes the function and vision of cryptocurrencies. Bitcoin: A Peer-to-Peer Electronic Cash System is the 8-page document published by Satoshi Nakamoto on October 31, 2008, which specifies the core functionality of bitcoin.
XBT
An alternative stock symbol for Bitcoin, instead of the more common BTC. It was created to comply with ISO 4217, which states that non-government issued currencies must start with “X”.
Null knowledge
A type of cryptographic scheme that demonstrates the solution to a problem without revealing information about the problem. Proofs of zero knowledge can take various forms. For example, to show that the sum of the inputs and outputs are equal to each other, but without revealing the number.
We hope you have found this glossary useful and may feel more comfortable reading or trading cryptocurrencies until you become an expert. Remember that the most important thing is to browse safely, especially if you are making financial transactions, so that your accounts are always protected.
