Cryptocurrency and Blockchain Dictionary

Terms commonly used in the world of blockchain and cryptocurrency

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Mining

Mining – a process during which transactions are verified and added to the P2P network. It is conducted by the miners, which have to solve a cryptographic problem. In order to do it, miners have to produce the hash equal or less than the target hash; they try to do it again and again, inputting the combination of the block header and nonce into a hash algorithm, until the solution is found.

Other Important Terms

P2P

P2P – short for Peer-To–Peer. A network where all the peers are connected to each other, each peer sharing files with the other. Peers are nodes.

Fork

Fork – splitting the blockchain into two branches. There are two types of fork: Soft Fork – a change to the protocol where only previously valid blocks or transactions are made invalid. Since old nodes will recognize the new blocks as valid, a soft fork is backward-compatible. Requires a majority of the miners upgrading to enforce the new rules. Hard Fork – a radical change to the protocol that invalidates previously valid blocks or transactions. Sometimes, both the old and the new blockchain continue to coexist, separating into two different cryptocurrencies. Requires all the miners upgrading to enforce the new rules. For example, Bitcoin Cash was created by hard forking the Bitcoin protocol; both cryptocurrencies coexist now.

Cryptocurrency Exchange

Cryptocurrency exchange – a platform that allows its users to trade cryptocurrencies for other cryptocurrency or any other asset. Can be either centralized or decentralized. For example, Binance is a cryptocurrency exchange.

Long Position

Long position – a state the trader is in when he buys cryptocurrency asset expecting that its price will rise. For example, if a trader bought Bitcoin 2 months ago and still hasn’t sold, he/she is in a long position.

Bitcoin ETF

Short for Bitcoin Exchange-Traded Fund. A financial asset that is tied to Bitcoin price, allowing its holder to benefit from Bitcoin price fluctuations without having to store and trade Bitcoin itself.

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