Hitchhikers Guide to Cryptocurrency Terminology
Just as I’ve often marveled at how many internet gurus take it for granted that the average person is familiar with Microsoft Word, I think the same situation will probably develop as Bitcoin and other cryptocurrencies get more into the mainstream of society and people encounter a whole new terminology they are not familiar with.
So, as a public service, here’s my non-academic, non-professional survey of some terminology that you either will need to know, might need to know, or might enjoy knowing as cryptocurrency becomes a part of your life.
It has been said that ‘imitation is the sincerest form of flattery’ and there have been plenty of groups who have come out with their own imitations of Bitcoin. Some have been more successful than others but here is a list of several of the more successful ‘alternate’ cryptocoin patterned after Bitcoin to one degree or the other. Keep in mind that alt coin pundits can be pretty snarky in their opinions and alt coins are not all created for the same purpose or by the same means. As for which one is, “x” (where x is a particular attribute)… the answer is, “It all depends.”
The original cryptocurrency launched in 2009 and based on a scholarly paper released on the internet by a mysterious figure, or possibly group of people, going by the name of Satoshi Nakamoto. Some people doubt that the originator was Japanese. Nevertheless, the paper was titled Bitcoin: A Peer-to-Peer Electronic Cash System. In January 2009, Nakamoto released the first bitcoin software, open source, that launched the bitcoin network. The first units of the bitcoin cryptocurrency were called bitcoins. Note: “Bitcoin” is the network and “bitcoin” is the payment unit used in that network.
Cryptocurrency (also cryptocoin)
A digital asset designed to work as a medium of exchange using cryptography to implement and secure the transactions and to control the creation of additional units of the currency. In practical terms for the consumer… cryptocurrency is digital money used for the same things traditional money is used for… except with certain advantages over traditional money. All bitcoins are cryptocurrency but not all cryptocurrency is Bitcoin.
The International Bank Account Number is a unique identifier helping banks process payments from person to person automatically. The IBAN contains all necessary information of the owner if a bank account such as the account number, bank and branch information and country code. Since the processes for transferring bank funds into cryptocurrencies can sometimes still be rather rigorous and tedious, this number could be seen on some paperwork.
Bank Secrecy Act
This fine work of legislative art, The Bank Secrecy Act of 1970 (otherwise known as the Currency and Foreign Transactions Reporting Act) requires financial institutions in the United States to assist U.S. government agencies to detect and prevent money laundering (as if the NSA wasn’t enough). Specifically, the act requires financial institutions to keep records of cash purchases of negotiable instruments, and file reports of cash purchases of these negotiable instruments of more than $10,000 (daily aggregate amount), and to report suspicious activity that might signify money laundering, tax evasion, or other criminal activities. Of course, in periods of inflation, even a trip to 7-11 approaches this criminal parameter thus conveniently making almost everybody a criminal.
Basic Bank Account Number. It represents a country-specific bank account number. The BBAN is the last part of the IBAN when used for international funds transfers. The average cryptocurrency user or purchaser may see it on a form.
Bank Identifier Code… an international code that banks use for financial transactions. Each bank has its own BIC. Also known as SWIft CODE. Could be 8 or 11 characters.
FinCEN is the federal agency principally charged with combatting money laundering and financial crimes. A feat they accomplish primarily through the regulation of banks and related entities, or “Money Services Businesses” (“MSBs”).
AKA: hashing or hash function. Hashing isn’t directly relative to a consumer’s use of cryptocurrency but it is a word that pops up a lot when looking at descriptions of various cryptocurrencies. It refers to a security protocol whereby a data string is jumbled up (i.e. like real “hash”) at the sender-end and then put back together at the receiver-end. Both results should match of course. Just like in the kitchen, there are different kinds of hashes.
Keys (or Crypto Keys)
In the world of cryptocurrency, ‘keys’ are small strings of alphanumeric data used to unlock a larger piece of code relating to a cryptocurrency transaction. Keys are either Public or Private and are very important to the success and security of cryptocurrency systems and processes.
An acronym for “Know Your Client/Customer” and referring to a large body of rules and regulations enacted and enforced by governments on financial institutions to presumably prevent them from doing business with criminals and terrorists. The two main facets of KYC rules are (1) traceability and (2) identification verification.
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. For some users and in some scenarios, mixing is a desirable feature because it adds extra layer of anonymity to a transaction.
1 thousandth of a bitcoin (0.001 BTC).
An exchange in which traders make deals with each other directly, rather than relying on a central exchange to mediate between them.
An alphanumeric string which is publicly known and unique to each transaction. This key is used in conjunction with your Private Key to complete a transaction.
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. This can and has happened with some alt coins and MLM cryptocoin scams.
Not a video game system but rather a Payment Services Provider. This is not a consciously important term for the average cryptocurrency user but is important to merchants who want to accept cryptocurrency…much in the same way that merchants need a ‘merchant account’ to accept Visa, Mastercard, or other credit or debit cards. Cryptocurrency PSP’s are ‘hot’ financial services right now. Note: The MyCryptoWorld block chain, when released, will incorporate all the features of PSPs for merchants and will be a very-much ‘game-changing’ development in the cryptocurrency ecosystem.
An alphanumeric string kept secret by the user, and designed to sign or authenticate a digital communication when combined with a public key.
A ‘Paper Wallet’ is the physical equivalent of a digital or e-wallet. It is a printed sheet containing one or more public bitcoin addresses and their corresponding private keys. It is 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. They are useful but require great accuracy and security.
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.
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.
An altcoin produced with the sole purpose of making money for the originator. Scamcoins frequently use pump and dump techniques and pre-mining together. A great conversation starter at a party: “Hey, have you bought any Scamcoin yet!?”
The name used by the original inventor of the Bitcoin protocol, who withdrew from the project at the end of 2010. Not to be confused with Sasushi Nakamoto who owns a sushi restaurant in Los Angeles.
The last name of the mythical inventor of Bitcoin but also used to denote the smallest subdivision of a bitcoin currently available (0.00000001 BTC).
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. Cryptocurrency transactions fees are miniscule in comparason to transaction fees in traditional banking channels. Thus no wonder that banks and ‘banking families’ are very sceptical of cryptocurrencies.
A collection of transactions on the bitcoin network, gathered into a block that can then be hashed and added to the blockchain.
An very robust, effective, and anonymous internet data routing protocol, used by people wanting to hide their identity online.
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 codes are frequently used in the buying and selling of cryptocurrencies via smartphone.
One microbitcoin (0.000001 BTC)
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.
So, that’s a starter Primer for your Bitcoin and/or cryptocurrency adventure. Of course this document is meant more to the benefit of Beginners but I do plan on updating it as time goes by because I know that getting into cryptocurrency can be a bit intimidating at first.
If you encounter a term that you think should be highlighted and clearly defined in future revisions of this list, please let me know at 713 701 1853, firstname.lastname@example.org, or by joining Markethive, the free community for Entrepreneurs (for free… here) and connecting with me there.
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