Crypto Glossary

Blockchain (Public/Permissionless) – The most prominent example of a permissionless blockchain is the bitcoin blockchain. It is one in which anyone is free to operate a node on the network to verify transactions. All users may participate equally to the degree they wish or that of their technical understanding.

Blockchain (Private/Permissioned) – A permissioned blockchain is one in which potential new users must be granted access from an administrator in order to operate a node on the network. Various permission settings may be enabled to different users.

Crypto – Traditionally short for cryptography, but its use now often implies cryptocurrencies.

Consensus – Agreement among nodes (users) that any given transaction is valid.

Distributed – Bitcoin is a distributed cryptocurrency because anyone can download a copy of the bitcoin blockchain or ledger with all transactions and share that information with other nodes in the network. Mining is also distributed because anyone can compete for the new currency that is issued approximately every ten minutes. 

Fork – A fork is a copy of open source software that has been modified for a different, but often similar use for another group of people. 

Hard Fork – A full node implementation with a different set of rules that breaks consensus with the original blockchain. Hard forks result in a second blockchain which splits the network. The initial and most notable cryptocurrency hard fork was the creation of Bitcoin Cash due to disagreements on how the technology should scale globally. Forks create a second chain that often give users an equal amount of currency that they can claim on the second chain.  Purchase “The Bitcoin and Alterntive Crypto Course” to learn more about forks, precautions to take during forks, and risks to avoid when claiming money from the new chain.

Hash Power – Hash power refers to the number of random numbers or guesses a computer can generate in order to obtain the new bitcoin that is being distributed. The difficulty of the bitcoin blockchain is adjusted every 2,016 blocks or approximately every two weeks so that the computers competing for new bitcoin discover a block reward approximately every ten minutes.

Mining – Mining secures the network with hash power by making transactions on the network irreversible. The same money is unable to be spent twice because an attacker would need more computers with more hash power than then entire network of computers securing the network. Miners are rewarded with new bitcoin for securing the network. The current reward is 12.5 bitcoin plus fees. This reward is set to halve to 6.25 bitcoin in May of 2020. 

Node – A program that verifies transactions on a blockchain. Note that the entire bitcoin blockchain can still be operated from most laptops which allows most individuals to operate a node. The downside is that by choosing to keep the bitcoin blockchain small in size, it has limited bitcoin’s use as P2P cash. This has led to scaling debates and forks with larger blockchains that cannot be run on laptops, but they do enable individuals to use their blockchains as cash using various alternative wallets.

Open Source – Software that is published publicly for anyone to see how a program works and can often be copied or modified for other uses. 

Private Keys – Long number that is required to spend cryptocurrency. Below is an example of a private key which was created using  KxnMDMmy5jpHMvvdGsQBCjRXBRF7xRk3ivVSQxAy7iRLPHbA6YR1. It’s corresponding public address where another user may send bitcoin to is the following 169LhK3fchSN9eHo8nEgyXq8GYycxiTbsg. The public address was created using the elliptic curve cryptography algorithm (ECDSA). Note the private keys as the name implies should never be shared.

Public Address – Public Addresses are derived from private keys. You share your public address with anyone that you want to receive crypto from. Public addresses are not interchangeable among blockchains, so you must be sure to send the correct cryptocurrency to a correct public address or risk losing that money.

Second layer – The second layer is a scaling solution for blockchains that would allow for more transactions on the network. Transactions on the second layer are not settled on the blockchain.

Seed Words – List of 12, 18 or 24 words that wallet software creates so that users may safely store their cryptocurrency. Seed words act as the “master private key” which create unlimited private key and public address combinations to store crytpocurrencies. Seed words are not case sensitive and must be entered in the order given to users by the wallet so that users may recover their cryptocurrency. Anyone with access to seed words has the ability to spend cryptocurrencies, so you must be careful when storing these. Purchase “The Bitcoin and Alternative Crypto Course” for ideas to create your own proprietary system to safely store your seed words.

Soft Fork – Software update to a full node implementation that is backward compatible with existing consensus rules of a blockchain. 

Wallet – A cryptocurrency wallet is simply a database of private key and public address combinations that store your bitcoin or other cryptocurrencies. Most modern wallets today are “Hierarchically Deterministic” or HD wallets meaning there may be an unlimited combination of private key and public address combinations that often originate from a list of 12, 18 or 24 seed words. (Note that wallet software interacts with the blockchain. Cryptocurrency wallets are not blockchains).