07 December 2022

NOAH's Crypto Glossary

Want to learn about crypto but don't know where to start? Check out our comprehensive glossary of terms.

NOAH's Crypto Glossary

    Understanding crypto often requires a working knowledge of many different concepts, technologies, and terms. This glossary is designed to help you understand some of the most common words you'll encounter in cryptocurrency.

    As you become more familiar with the space, you'll likely encounter other terms that aren't included here. However, this glossary should provide a solid foundation to build upon as you continue your journey into the exciting world of cryptocurrency.

    1. Airdrop — a promotional activity where a blockchain project or company distributes free tokens or coins to the community. Developers airdrop tokens to the community to promote their project, disperse tokens equitably, decentralize their project or company, and build a strong user base.
    2. Altcoin — also known as alternative coin, an altcoin is a digital currency that uses cryptography for security and is decentralized in nature. Altcoins are aptly named as alternatives to Bitcoin, the first and most well-known cryptocurrency. Altcoins are technologically similar to Bitcoin but seek to accomplish different goals.
    3. Anti-money laundering (AML) — the process of preventing, detecting, and reporting money laundering. AML regulations are typically designed to stop criminal organizations from using the financial system to launder money obtained through illegal activities, such as drug trafficking or terrorism.
    4. Atomic Swaps — a type of smart contract technology that enables the exchange of cryptocurrencies across different blockchains in a trustless and secure manner. They are typically used to facilitate the exchange of tokens between two parties without the need for an intermediary.
    5. Austrian Economics: a school of economic thought that emphasizes the importance of individual actions, free markets, and the subjective nature of economic value. It stresses the significance of property rights, entrepreneurship, and the process of price discovery as the primary drivers of economic growth and prosperity.
    6. Block reward — a reward given to a miner who successfully hashes a transaction block, a collection of transactions on the blockchain. Also called a block subsidy, block reward incentivizes miners to verify blocks of transactions and secure the network. In the Bitcoin blockchain, the block reward halves approximately every 4 years, and as of 2022, the block reward is currently 6.25 BTC per block.
    7. Bitcoin — a decentralized digital money secured by cryptography and powered by a global peer-to-peer network. Bitcoin is the most robust, tamper-proof global financial network ever created. Bitcoin transactions are verified by "mining," which incentivizes miners to use their computing power and secure the network.
    8. Bitcoin Paper Wallet — a physical copy or printout of a Bitcoin wallet's public and private keys. It allows for offline storage of cryptocurrency and serves as a secure way to store Bitcoins for long-term holding.
    9. Bitcoin Pizza Day — on May 22, 2010, Laszlo Hanyecz made the first real-world purchase with Bitcoin when he bought two pizzas for 10,000 bitcoin. This event is now commemorated as Bitcoin Pizza Day, one of the most important days in cryptocurrency history.
    10. Bitcoin Unspent Transaction Outputs (UTXOs) — the fundamental unit of value in the Bitcoin blockchain, representing an unspent amount of Bitcoin that can be used as an input for future transactions. Each UTXO contains the recipient's address, the amount of Bitcoin, and a cryptographic signature, ensuring secure ownership transfer when spent.
    11. Blockchain — a digital ledger of all cryptocurrency transactions. Groups of transactions, called blocks, are verified by miners and then added to the blockchain. Blockchains are transparent and publicly verifiable. While blockchains aim to be decentralized, many lack true dispersion and are controlled by small groups of validators and developers.
    12. Blockchain Trilemma — the challenge of achieving scalability, security, and decentralization simultaneously on a blockchain network. Once thought of as an impossible challenge, the trilemma hypothesis is losing steam as scaling solutions such as the Lightning Network prove that it's possible to have all three qualities in a single network.
    13. Bullish — an adjective used to describe investors who are optimistic about an asset's price or future development.
    14. Bearish — an adjective used to describe investors who are pessimistic about the price or future development of an asset.
    15. CeFi — an abbreviation for "centralized finance," CeFi refers to traditional financial institutions that are centralized in nature, such as banks or exchanges. CeFi platforms are typically regulated by governments and are subject to compliance measures, such as KYC/AML.
    16. CoinJoin — a privacy-enhancing Bitcoin protocol designed to enable multiple users to combine their transactions into a single transaction, making it difficult to determine which inputs correspond to which outputs.
    17. Consensus — the overall agreement of all network participants on the transaction data's validity. For a blockchain, a consensus is reached when all nodes in the network agree on the order and contents of the blocks in the blockchain.
    18. Cold storage — the practice of storing cryptocurrency offline to prevent theft or seizure. Cold storage can take various forms, such as a paper wallet or a hardware wallet.
    19. Cryptocurrency — a digital or virtual asset that uses cryptography for security. Cryptocurrencies aim to be decentralized and seek to revolutionize the global financial system.
    20. Cryptography — the study and implementation of techniques used to secure communications assuming an adversarial environment. Cryptography uses mathematics, computer science, and electrical engineering to design and implement protocols that protect information from unauthorized access.
    21. Crypto Rails — a digital infrastructure that facilitates the seamless transfer, exchange, and management of cryptocurrencies or digital assets, often utilizing blockchain technology to ensure security, transparency, and decentralization
    22. Custodial wallet — a wallet where the private keys are held by a third party. Custodial wallets are less secure than non-custodial wallets and self-custodial wallets, which provide more sovereignty to the user.
    23. Decentralization — the process of distributing power or authority away from a central governing body. Decentralization can refer to various areas, such as politics, economics, or computer networks.
    24. Decentralized applications (dapps) — applications that run on a decentralized network, such as a blockchain. Dapps are often open source and have token economies that incentivize users to participate in and contribute to the network.
    25. Decentralized finance (DeFi) — a financial system not subject to central control. DeFi transactions are often completed on decentralized platforms such as Ethereum. These platforms use smart contracts to automate financial transactions.
    26. Difficulty — the difficulty in mining Bitcoin is adjusting to the ever-changing hash rate. As more miners join the network, the hash rate increases, and the difficulty increases along with it. This difficulty ensures that blocks are found on average every 10 minutes.
    27. Digital asset — a digital asset is an economically valuable, intangible asset issued and controlled by a digital ledger or blockchain. Bitcoin and altcoins are the most widely known digital assets.
    28. Dollar-cost averaging (DCA) — an investment strategy used to reduce the effects of volatility by investing a fixed amount of cash at fixed intervals. When buying digital assets, DCA involves buying a small amount of the asset at regular intervals over a period of time.
    29. Elliptic Curve Digital Signature Algorithm (ECDSA) — a cryptographic algorithm used to sign and verify digital messages, which is based on elliptic curve cryptography.
    30. Ether (ETH) — the native cryptocurrency of the Ethereum platform. It is used to pay for transactions on the Ethereum network and is often referred to as the "fuel" that powers the Ethereum platform.
    31. Ethereum — a decentralized platform that employs smart contracts to facilitate online transactions. Using blockchain technology, Ethereum creates a secure and tamper-proof record of transactions that executes automatically when specific conditions are met.
    32. Fiat money — a government-issued legal tender not backed by a physical commodity, such as gold or silver. Fiat money has value "by decree" and is the global financial system's primary form of currency.
    33. Fungible — a type of asset that is interchangeable and can be divided into equal parts that have equal value. For example, money, gold, and silver are fungible assets.
    34. FX Liquidity — the ability of a currency pair to be bought or sold without causing significant price changes in the foreign exchange market. High FX liquidity suggests easy transaction execution, minimal slippage, and generally lower transaction costs due to a large number of buyers and sellers.
    35. Genesis Block — generated by Satoshi Nakamoto, the Genesis Block is the first block ever recorded on the Bitcoin blockchain. It represents the start of the Bitcoin network and is the basis for all subsequent Bitcoin blocks and transactions.
    36. Halving — a programmed reduction in the block reward that occurs every 210,000 blocks (approximately every four years). This event reduces the inflation rate of Bitcoin and serves as an economic incentive for miners to continue participating in the network.
    37. Hard fork — a permanent divergence in the blockchain, often resulting in the creation of a new cryptocurrency. For example, divisions among developers and miners can lead to a hard fork as they fight over which chain to follow. The Bitcoin—Bitcoin Cash hard fork in 2017 is the most notable example.
    38. Hash — a function that converts an arbitrary amount of data into a fixed-length value. A hash value can be used to identify data, verify its integrity, or verify that it has not been tampered with.
    39. Hashrate — the cumulative hashing power of all the computers in a given network. It measures the speed at which a given network can generate new blocks.
    40. ICO — an initial coin offering, a new form of crowdfunding that allows startups to raise capital by selling digital tokens. ICOs are similar to initial public offerings (IPOs) for stocks, except that instead of equity, ICOs offer digital tokens that can be used to purchase goods and services on the company's platform.
    41. Immutability — the inability to change or be changed. When applied to data, it means that it cannot be altered once data has been written to a blockchain. This is a crucial feature of blockchain technology that ensures the security and integrity of the data.
    42. Inflation — an increase in the price of goods and services over time, a measure of the rate at which the purchasing power of money decreases.
    43. Keynesian Economics: a school of economic thought emphasizing the importance of government intervention in managing the economy through policies that stimulate demand during times of economic downturn. This approach is based on the works of economist John Maynard Keynes, who argued that government spending and taxation policies could be used to stabilize the economy and promote full employment.
    44. Know-your-customer (KYC) — the process of verifying a customer's identity. In the financial world, KYC prevents money laundering and other illegal activities. For example, in cryptocurrency, KYC is often required by exchanges and wallets to comply with anti-money laundering (AML) regulations.
    45. Ledger — a record of financial transactions. A digital ledger, such as a blockchain, is a decentralized and tamper-proof record of digital transactions.
    46. Lightning Network — a second-layer payment protocol that uses smart contracts to facilitate instant, nearly-free payments. The Lightning Network is designed to scale the Bitcoin network to handle many transactions per second.
    47. Lightning Address — a simple address used to send and receive payments on the Lightning Network. Lightning Address takes the alphanumerical characters of a Bitcoin address and maps them to a shorter format, like an email address.
    48. LNURL — a protocol that allows for easy communication between Lightning wallets, services, and applications. LNURL enables users to easily connect to Lightning Network services without having to go through complicated setup processes or node management.
    49. Market cap — the total value of an asset in a given market. It is calculated by multiplying the price of an asset by the number of units in circulation.
    50. Mempool — the Bitcoin network's transaction queue. When a user broadcasts a transaction to the network, it is first verified by miners and then added to the mempool. A portmanteau of "memory" and "pool," the mempool is designed to hold verified transactions until they can be added to a block.
    51. Merkelized Abstract Syntax Trees (MAST) – part of the Taproot upgrade, MAST captures different scripts in a Bitcoin address to expand the flexibility and utility of Bitcoin contracts.
    52. Merkle trees — data structures used to store and organize data in a way that is efficient and secure.
    53. Mining — verifying and adding transaction records to a blockchain. Miners are rewarded with cryptocurrency for their work, an incentive to continue verifying and securing the network.
    54. Multi-party computation (MPC) — a type of cryptography that allows two or more parties to jointly compute a function on their respective inputs without revealing those inputs to each other.
    55. Multi-sig — a type of cryptography that requires multiple parties to sign a transaction for it to be valid. With multi-sig, each party knows the entire private key, but no single party can sign a transaction independently.
    56. MuSig — a protocol facilitating the Schnorr signature aggregation of multisig transactions.
    57. Node — a computer that participates in a blockchain network. Nodes relay transactions, propagate new blocks to other nodes and maintain a copy of the blockchain.
    58. Non-custodial wallet — non-custodial wallets bridge the gap between custodial and self-custodial wallets. With non-custodial wallets, there is no single entity that has control over your private keys. Put simply; your private keys are sharded and spread out among different servers. As a result, no single entity has control over all the shards, making it impossible for any one actor to hijack control.
    59. Non-fungible — a type of asset that is not interchangeable and cannot be divided into equal parts that have equal value. For example, real estate, works of art, and collectibles are non-fungible assets.
    60. Off-chain — any activity that takes place outside of a blockchain. Off-chain transactions are not recorded on the blockchain unless they are eventually brought back onto the chain. For example, in Bitcoin, the Lightning Network (off-chain) enables instant, nearly-free payments that can be completed without ever touching the main blockchain.
    61. On-chain — any activity that takes place on the main blockchain. In the crypto space, there is difficulty scaling blockchains to handle a large number of transactions per second. This has led to the development of off-chain solutions, such as the Lightning Network (LN), which can handle many transactions without overloading the Bitcoin blockchain.
    62. PayJoin (P2EP) a type of CoinJoin where both parties in a transaction cooperate to create a single bitcoin transaction.
    63. Pay-to-Public-Key (P2PK) – used in legacy addresses, locking bitcoin to a public key and ensuring it can only be spent by the owner of the private key which corresponds to the public key provided.
    64. Pay-to-Script-Hash (P2SH) – used in SegWit addresses, P2SH is a hash of a script that has certain spending conditions rather than the hash of the public key.
    65. Private key — a string of data that allows you to access your cryptocurrency. Private keys must be kept secret, as they are used to sign transactions and provide ownership of your coins. If someone has access to your private keys, they can access your funds.
    66. Proof-of-work (POW) — a consensus algorithm requiring miners to compete to solve complex mathematical problems to add new blocks to a blockchain. The first miner to solve the problem is rewarded with cryptocurrency.
    67. Proof-of-stake (POS) — a consensus algorithm that allows anyone with a stake in the network to validate transactions and add new blocks to the blockchain. The more cryptocurrency you staked, the more likely you will be chosen as a validator. While POS is less energy-intensive than POW, it is often criticized for being more centralized, as those with the most cryptocurrency have the most power.
    68. Proof of Reserves — a method of demonstrating that a service provider has the cryptocurrency it claims to have, usually in a wallet. This is designed to give customers peace of mind that their funds are safe and secure and that the service provider is not running a fractional reserve.
    69. Progressive Web App (PWA) — a web application that uses modern web technologies to provide a user experience similar to that of a native app. PWAs are designed to be fast, reliable, and engage users even in situations where there is poor internet connectivity. NOAH is a PWA that increases accessibility to users worldwide.
    70. Protocol — a set of rules that govern how a system works. In cryptocurrency, protocols are often decentralized and open-source, meaning anyone can contribute to their development. Protocols delineate the rules of how networks function and form the foundation of a blockchain.
    71. Public key — a string of data that allows others to send you cryptocurrency. Public keys are derived from private keys but cannot be used to sign transactions or provide ownership of your coins. To use a simplified analogy, if private keys are the keys to your house, public keys are the address of your home.
    72. Remittances — the cross-border payments individuals initiate to send money back to their families in their home countries. Remittances account for large portions (as high as 40%) of some countries' GDPs, and Bitcoin remittance services have the potential to drastically reduce the cost of these payments.
    73. Satoshi Nakamoto — the pseudonym used by the unknown person or persons who invented Bitcoin. No one knows the true identity of Satoshi, their whereabouts, or whether they are still alive.
    74. Satoshis (sats) — the smallest unit of Bitcoin. One Satoshi equals 0.00000001 BTC or one hundred millionth of a Bitcoin. Sats provide a convenient way to price goods and services in cryptocurrency without dealing with fractional amounts.
    75. Schnorr signature — a cryptographic signature algorithm designed to improve Bitcoin scalability and privacy by aggregating several multi-sig transactions.
    76. Seed phrase — a list of words that can be used to generate a private key. Seed phrases are typically 12-24 words long and can be used to back up and restore cryptocurrency wallets.
    77. SegWit — abbreviation for Segregated Witness, a Bitcoin protocol upgrade that increases block capacity and improves transaction speed by separating signature data from transaction data.
    78. SegWit address – separates a Bitcoin transaction signature from the transaction data, thereby using less space and attracting less fees. An updated version that uses even less space is called Native SegWit.
    79. Self-custodial wallet — cryptocurrency wallets where you, and only you, have control over your private keys. While you have complete sovereignty over your funds, self-custodial wallets can be more complex and riskier than custodial wallets and non-custodial wallets.
    80. SHA-256 — the cryptographic hash function at the heart of the Bitcoin blockchain. The Bitcoin protocol uses SHA-256 to verify that blocks have been correctly hashed and added to the blockchain.
    81. Smart contract — a programmable contract that can automatically execute transactions on a blockchain network. With smart contracts, you can create decentralized applications (dapps), automated trading platforms, and advanced payment systems that don't require intermediaries or third-party custodians.
    82. Stablecoin — a type of cryptocurrency pegged to a stable asset, such as the US dollar. Stablecoins are designed to minimize price volatility, making them a popular choice for those looking to use cryptocurrency for day-to-day transactions.
    83. Staking — the process of holding and committing cryptocurrency funds as collateral to help validate transactions and secure a proof-of-stake (PoS) blockchain network. In return, stakeholders receive rewards in the form of new cryptocurrency or transaction fees.
    84. SWIFT — A global cooperative headquartered in Belgium that provides secure, standardized messaging services for over 11,000 financial institutions in more than 200 countries, enabling efficient international money and security transfers. Notably, SWIFT itself does not transfer funds but sends payment orders to be settled at correspondent accounts.
    85. Tapscript — the scripting language integral to the Taproot upgrade which enables new transaction types.
    86. Taproot — a soft fork that introduces a flexible system of smart contracts and transactions on the Bitcoin network. Taproot enables a single transaction to express a complex set of interactions between multiple parties.
    87. Token — a type of cryptocurrency that represents a digital asset or utility. Crypto projects often use tokens to fundraise and to power their protocols and networks. However, not all tokens are created equal — very few tokens actually have utility on their own blockchain, and even fewer are needed to run their network. More often than not, tokens are simply a way for crypto projects to raise money without having to go through traditional VCs.
    88. Unspent transaction output (UTXO) — a record of an amount of cryptocurrency sent from one address to another, which is tracked on the blockchain ledger. It is an output of a transaction that has not yet been spent.
    89. Validity Rollups — a type of scaling solution for the Bitcoin blockchain that aim to improve its transaction throughput by allowing multiple transactions to be processed and verified in a single on-chain transaction. This is done by aggregating the transaction data and using a cryptographic proof to ensure the validity of the rollup transaction.
    90. Whirlpool — a CoinJoin implementation developed by Samourai Wallet that enables users to anonymize their Bitcoin transactions by mixing them with other users' coins, making it difficult for third parties to trace the origin of coins.
    Please be aware that: Cryptocurrencies are unregulated in the UK; Cryptocurrencies are not protected under Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS); Profits may be subject to capital gains tax; The value of investments can go down as well as up.

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