2FA (Two Factor Authentication)

Two-factor authentication is a security system that requires two separate, distinct forms of identification in order to access something. The first factor is a password and the second commonly includes a text with a code sent to your smartphone, or biometrics using your fingerprint, face, or retina.

51% Attack

A 51% attack occurs when more than 51% of the hashrate (computing power) is controlled by an individual or group of people with malicious intent. The attacker can use this ability to censor transactions and take control of mining operations and allowing them to potentially double spend. Bitcoin is the most secure computer network in existence, and would take exponential amounts of resources to even attempt to attack it.

Address

A Bitcoin address is an identifier representing a possible destination — or origin — for a bitcoin transaction. Like an email address, each Bitcoin address is unique. Creating new or additional bitcoin addresses can be done free of charge through the installed bitcoin software, or you can obtain a bitcoin wallet address from an exchange or online wallet provider. There are three different Bitcoin address formats currently in use: P2PKH, PS2H, and Bech32. Each look different, but are always operable between each other to send and receive Bitcoin.

Air Gap

An Air Gap is a Bitcoin wallet system with a two-device procedure, in which one of the devices (the one that contains the private key generation and information) is always kept without an internet connection. This ensures the most security for your keys as it ‘gaps’ the wallet from the rest of the world. This device would then communicate through Transaction signing onto the secondary device, which will be broadcast to the rest of the Bitcoin network. This is the preferred method of cold storage for Bitcoin, and is used by many hardware wallets.

Altcoin

An Altcoin is a cryptocurrency alternative to Bitcoin - derived from ‘Alternative Coin’. Since the dawn of Bitcoin, there have been many copycat approaches that try to replicate the continued success that Bitcoin has seen. While some have produced a return for some people, it should be seen as the penny stock/casino of the cryptocurrency ecosystem. over 99.9% of all altcoins in existence will trend to zero within a few years time. Currently, there are over 5,000 different altcoins in existence, none of which have ever come close to overtaking Bitcoin.

ASIC

An Application-specific integrated circuit, or ASIC for short, is a computer chip customized for a specific use case. In the Bitcoin industry, there are ASICs specifically designed for Bitcoin mining which are orders of magnitude more efficient at Bitcoin mining than traditional computers. These ASICs sole purpose is to mine Bitcoin, and has sprung up an entire industry of miners, and miner manufacturers, like Bitmain and Whatsminer, the two largest manufacturers.

Bitcoin

Bitcoin is the internet of money, the money layer of the internet. An engineered monetary network that allows you to transfer value, peer to peer, with no third party intermediary. Bitcoin is not an app. It is not a company or a stock. Bitcoin is simply a technology. It’s a protocol to communicate value that also offers an opportunity to store value in an asset that no government or corporation can dilute or inflate. 

Block

Blocks are the individual segments that make up the block chain. They are containers of data that hold all transactional data that has been made since the previous block, roughly 10 minutes in-between.

Block Height

The Block Height is the measure of how long the Blockchain currently is. It’s length indicates the number of Blocks from the Genesis Block to the current Block height.

Block Reward

The reward given to the miner that successfully mines a specific block. This reward is how all Bitcoins in existence were created. Initially a reward of 50 Bitcoins per block, this value has halved every four years (see: Halving), with the current Block reward now netting a miner 6.25 Bitcoins per block.

Blockchain

The Blockchain contains all data and transactions that the Bitcoin network has processed since its inception. It is a distributed database that is collectively held on tens of thousands of nodes across the world. The redundancy of many copies of the blockchain globally help ensure the Bitcoin Blockchain is not controlled by one specific entity, but is cooperatively held by many.

BTC

The common shorthand for Bitcoin. BTC is used as a ticker to denominate the currency in many markets and publications. In some markets, XBT is also used.

Centralization

Centralization is the state of, or process of an entity or action becoming owned by a small number, or one specific entity. For example, the dollar is completely centralized because all printing and regulation is done by a few entities that control the entire process.

Change Address

The portion of a Bitcoin transaction that is sent back to the sender. For example, you have 0.5 Bitcoin in your wallet and you send 0.1 Bitcoin to a recipient, the remainder that is not used by this transaction will be sent to your change address.

Cold Storage

A method of holding Bitcoin offline. By using cold storage, the aim is to have a more secure, less vulnerable holding of your coins. This can be achieved through an air-gap, hardware wallets, paper wallets, and other security measures.

Confirmation

An attribute of a sent Bitcoin transaction. Denoted by how many blocks have passed since that transaction was written on the blockchain and contained within a block. For example, if a transaction is contained on block 500,000, and the current block height is 500,006, that specific transaction has 6 confirmations.

Cost Basis

Your cost basis is the original value you purchased Bitcoin for, or the average purchase price spread across multiple buys. This number is used when calculating the potential capital gains tax one would pay upon the sale of their Bitcoin.

Cryptocurrency

The asset class that Bitcoin created. A Cryptocurrency is a digital asset governed by a (usually) decentralized system using cryptography, rather than by a centralized authority. Bitcoin is the first, the most significant, and the safest Cryptocurrency available.

Cryptography

The practice and study of techniques for secure communication, the writing or solving of codes. This is the root of ‘Crypto’ in Cryptocurrency. In Bitcoin it refers to the algorithms used to make the Bitcoin protocol the most secure computer protocol in the world.

Custody

In reference to third party solutions to holding Bitcoin. In the event that one’s Bitcoins are held on an online exchange, those Bitcoins are in the custody of that exchange. (See: Not Your Keys, Not Your Coins)

Custodian

The entity that holds Bitcoin on behalf of an investor. This can be an exchange, treasurer, or another third party that has access to the Bitcoins themselves.

DCA (Dollar-Cost-Averaging)

The act of spreading out your Bitcoin purchases over time by slowly investing rather than a lump sum investment once, removing the work of trying to time the market perfectly. By Dollar Cost Averaging, an investor aims to weather the dips and peaks of the investment, instead looking at the long-term performance. This can be done through purchases daily, weekly, monthly, or at an irregular interval.

Decentralized

An asset, process, or network in which there is no singular entity that controls the planning and decision making. The more entities that have control or a say in the process, the more decentralized that process is. In Bitcoin, decentralization can be used to describe a number of factors, like the Blockchain, nodes, and mining.

DeFi

DeFi, (or “decentralized finance”) is an umbrella term used for financial services that reside on public blockchains. It is the movement that is transforming traditional financial products into new-age protocols that can run without a third party involvement.

Deflationary

In economics, deflation occurs when the inflation rate falls below 0%. Deflation inherently makes your money not lose value overtime, and is an intrinsic property built into Bitcoin. Instead of the supply of Bitcoin growing exponentially, the pool of newly minted Bitcoins shrinks and slows down the supply after every halving.

Difficulty Level

The measure of how difficult it is to mine the next block in the blockchain. Bitcoin is a self-regulating protocol, and the difficulty level adjusts itself so that the next block will always be statistically 10 minutes after the previous block. This makes the block rewards and therefore the supply of Bitcoin a predictable phenomenon.

Digital Asset

An asset that exists purely in the digital realm with no physical counterpart. It is a collection of 1’s and 0’s that contain data, or contain the information of who owns that data. In the case of Bitcoin, a digital asset refers to the digital representation of something of value.

Digital Signature

Like a physical signature, a digital signature is used to denote proof of ownership or identity. In Bitcoin, a user’s digital signature is irrevocable proof that the person signing has authority to do so, as they are using the private key of a specific Bitcoin address to create that signature.

Double Spend

Double-Spending is the act of sending the same transaction twice, and was a major flaw of digital assets before Bitcoin. Digital information can easily be duplicated, which is where the need for Double-spend prevention was necessary. It is easy to copy/paste data, or send the same .jpeg image you have on your hard drive to multiple people via email. Bitcoin’s decentralized ledger removes this ability to do the same with Bitcoin spend, and therefore allows for safe and secure digital transactions.

Dust

Dust refers to the very small amounts of Bitcoin that can be leftover or unspent from a transaction. They are usually so small that they would not be worth the effort to make a transaction on the Bitcoin blockchain with them. For example if you have 0.00000002 BTC in your wallet, this amount may be so small that you can not create a valid transaction as it can not cover the transaction fee.

ETF (Exchange Traded Fund)

A Bitcoin ETF is a Fund that mimics the price of Bitcoin, it is a bridge from the traditional financial sphere to Bitcoin, as it allows for an indirect investment into Bitcoin through a publicly traded stock exchange.

Exchange

An Exchange is a third party entity that facilitates the transfer of fiat to Bitcoin and vice versa. It exists as an on and off ramp from the traditional financial world to Bitcoin. You can visit the 1Bitcoin.ca online exchange here!

Faucet

Faucets were prevalent in the early days of Bitcoin, and acted as a way to spread Bitcoin to the masses freely. The most notorious faucet circa 2010 would reward users 5 Bitcoins each time they solved a CAPTCHA phrase. This faucet distributed almost 20,000 Bitcoins over its existence.

Fiat Currency

Government issued currency that is not backed by a physical commodity such as gold. These are free floating currencies and they derive their value solely from the trust that people place on it.

FOMO (Fear of Missing Out)

The feeling of apprehension that one is either not in the know, or is missing out on information, events, or experiences. FOMO may drive a person to invest into Bitcoin, or make an impulse decision based on the emotional response FOMO entails.

Fork

A Bitcoin fork occurs when there is a change in protocol. This can occur either as a hard fork, or as a soft fork. This is dependent on the consensus of the community. The most notorious hard fork occurred in 2017 and was a result of the Block Size debate.

FUD (Fear, Uncertainty, & Doubt)

FUD is anything which intends to instill fear, uncertainty, or doubt in a reader’s mind by portraying a misleading or biased opinion. It is used to either dissuade someone from investing or using Bitcoin, usually as a tactic to keep people to the traditional financial system. There is a difference between FUD and criticism, as the latter promotes a healthy discussion and can have points be addressed.

Fungibility

The attribute of an asset such as money or a commodity that enables each individual to be identical in value to another and are interchangeable. E.G. one dollar is the same as any other dollar, one barrel of oil is the same as any other barrel of oil, and most importantly - 1 Bitcoin is equal to 1 Bitcoin.

Genesis Block

The first block in the Bitcoin Blockchain, also known as Block Zero. Mined on January 3rd, 2009 at 10:15 AM by Satoshi Nakamoto, every other block in the blockchain stems from the Genesis Block. This block also contains the oldest Bitcoins in existence, as it contains the first Block Reward, 50 Bitcoins at the time. On this block, Satoshi Nakamoto wrote a hidden message about the failing state of the current financial system with "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks".

Halving

The Halving (or halvening) is an event that occurs roughly every 4 years - exactly every 210,000 blocks. It signifies the important time in which the block reward that is created for every block from that point forward, will be half of the previous 210,000 blocks. It is imperative to the deflationary nature of Bitcoin. The first halving took place in November 2012, when the block reward halved from 50 BTC per block, to 25BTC. two halvings later and we currently have a block reward of 6.25 BTC per block. The next halving will take place at some point in 2024 when the block reward will be set to 3.125 BTC. This is a completely autonomous process that is as old as Bitcoin itself.

Hard Fork

Adding a new rule to the codebase creates a fork in the blockchain that node operators have to accept. A hard fork signifies a radical change in which the new additions to the chain and the nodes on that chain are no longer compatible with the old chain. A hard fork differs from a soft fork in that some node operators continue to operate on the old chain, causing two blockchains to emerge, with the chased. This has happened in the past with Bitcoin and why you can still find a small number of node operators running what are now different cryptocurrencies.

Hash / Hash Function

A hash is a mathematical function that transforms an input into an encrypted output of a fixed length. There are many different hashing algorithms that each follow a different process of converting that input into an output. Bitcoin uses the SHA-256 hashing algorithm. The most important aspect of this being that the process is one-way. You can not derive the input just from looking at the output given.

Hash Rate

The hashrate is a measure of how many hash functions a computer can process per second. These can be denoted by using different prefixes like Megahash, Gigahash, Terahash, for a million, billion, and trillion hashes respectively. or MH/s, GH/s, and TH/s. When looking at the Bitcoin network as a whole, figures can easily climb into the Petahash or Exahash territory (quadrillion and quintillion) in the amount of computations per second.

HODL

HODL is a common slang among Bitcoin holders that stems from an early forum post in 2013 where a user mistakenly wrote “I AM HODLING” in reference to his inability to time to markets and how just buying Bitcoin and holding it would be a better suited strategy. It has since become the mantra of a large portion of the Bitcoin community. Since then, acronyms have been made after the fact that refer to HODLing as “Holding On for Dear Life”.

Hot Wallet

A hot wallet is the most popular type of Bitcoin wallet, as it is one that allows for easy transactions to be made on the blockchain by having the wallet on a device that is connected to the internet. This is also the key difference between a hot wallet and a cold wallet.

Hyperbitcoinization

The inflection point at which Bitcoin reaches maturity as a currency and is adopted as the default value system of the world - the end goal for many Bitcoin maximalists. This is a fundamental shift for our world and how we look at and perceive value moving forward as a species.

Hyperinflation

A phenomenon in an economy at which the rate of inflation is exponentially accelerating and erodes the real value of the local currency. This has happened in many countries in history, most notably Germany, Hungary, Venezuela, Zimbabwe, and many others. An unstable currency has ripple effects everywhere in the affected area, and leads to mass exodus out of the economy and into more stable currencies - for the ones that are lucky enough to get out.

Immutable

One of the key features of Bitcoin and its blockchain. Immutable transactions make it impossible for any individual, government, or entity to manipulate, replace, or falsify data on the blockchain. Once data is there, its there, it is irreversable. It is an literal permanent record of everything that has happened on the network for all to see. And is one of the many reasons that Bitcoin is sound money.

Keys

Bitcoin is a two-key system comprised of private keys and public keys. These are used cryptographically to hide and reveal data. The main difference being public keys are inherently safe to be shared publicly as they can not be used to access your data/coins, but private keys can. A bitcoin public/receiving address is derived from the public key, which in turn is derived from the private key.

KYC (Know Your Customer)

Guidelines in financial services that require compliant organizations to verify the identity of, and risks involved with clients that they maintain a business relationship with. These procedures fit within many AML (Anti-Money-Laundering) and Anti-Terrorism policies. It makes businesses make sure their clients really are who they say they are.

Layer 2

In reference to a secondary structure build on top of the existing blockchain, also called ‘off-chain’. This is created as a result of the scare and limited space available on the main layer of the blockchain. For example, Bitcoin’s main layer has a transaction capacity of roughly 400,000 transactions per day, or around 4.5 transactions per second. Further transactions can take place on secondary networks like the lightning network, or other solutions that aim to increase the transaction capacity. The main advantage of using Layer 2 means the main-chain doesn’t need to go through any forks or structural changes. Keeping the security and stability of Bitcoin as strong as possible. Layer 1 allows for security, Layer 2 allows for scalability.

Ledger

A record keeping system. Bitcoin’s blockchain is a distributed digital immutable ledger as copies of the ledger are kept by tens of thousands of computers globally across nodes. These ledgers keep track of transactions, balances, and the movement of Bitcoin. A popular brand of hardware wallet, Ledger, can also be seen to share the same name.

Lightning Channel

Lightning Channels comprise the Lightning Network as a Layer 2 solution on top of the blockchain. These are what enable users on the Lightning Network to send and receive Bitcoin to and from other users. They are channels that are opened on the main Bitcoin blockchain that can then allow the free flow of Bitcoins around without the need for creating new transactions on the main chain. These channels have a Bitcoin capacity that was set when the channel was opened from the main chain.

Lightning Network

The net of all Lightning Channels makes up the Lightning Network. This structure allows for the free flow of layer 2 transactions without the need to set up a channel to every individual you wish to pay. As long as there is a route of channels that can end up at the recipient, without any channel cap being less than the transaction amount, a lightning payment will be able to be routed. For example, if person A and B have a channel open with each other, and person B and C have a channel open with each other, person A will have the ability to transact with person C without needing a dedicated channel, as the payment will be able to automatically route through the Lightning Network.

Market Capitalization / Market Cap

The market cap is a common measure of the amount of value contained within an asset. It is calculated by multiplying the value of a unit by the amount of that unit in existence. This can be used for stocks to determine the value of a company (stock price multiplied by the amount of stock in existence), or in the case of Bitcoin, the price of a single Bitcoin multiplied by the total circulating coin supply. In 2021, The market capitalization of Bitcoin reached the $1,000,000,000,000 (One Trillion) USD figure, the fastest asset to reach $1T USD in the world.

Market Depth

Market depth refers to a market’s ability to absorb large market orders without significantly impacting the price of the asset. This is useful for determining the strength of a market as weaker markets may have a very shallow market depth, allowing for a single entity to drastically change the price of the asset through a sale or purchase.

Maximum Coin Supply

A superset of the total circulating coin supply. The maximum coin supply denotes the total number of coins that will ever exist in the lifetime of a cryptocurrency. For Bitcoin, the maximum coin supply is 21,000,000 coins, and has been that was since the genesis block.

mBTC

mBTC, or milli-bitcoin, is a denomination of Bitcoin that has been broken down into a smaller amount. Just as 100 cents make up a dollar, 1,000 milli-bitcoin make up 1 Bitcoin. 1 Bitcoin = 1000 mBTC

Merkle Tree

Merkle tree is defined as a way data is organized so that if it were visualized, it would look similar to a tree. Merkle trees are used for efficiently summarizing, verifying, and securing large amounts of data. The process of making a merkle tree involves a mathematical hash function.

A Merkle tree works like this:

1. Two units of information are individually hashed. These are known as Merkle leaves.

2. Those two hashes are then hashed together. These are known as Merkle branches.

3. Multiple branches are hashed together finally getting one single hash. This is known as a Merkle root.

Mempool

A memory pool, or mempool for short, is a node’s mechanism for storing unconfirmed transactions. It acts as a waiting room for transactions that have yet to be included in a block. Miners choose which transactions to put into the next block based on the transaction fee each transaction pays. This creates a priority list within the mempool of the transactions that are closest to being confirmed next. The sharing of transactions propagate within the mempool from a node to its peers until the transaction is widely recognized by nodes.

Mining

Bitcoin mining is the process of adding blocks and transactions to the blockchain ledger, thus creating new bitcoin by solving computational puzzles. These are most commonly done by ASICs as they are the most efficient at Bitcoin mining, through their exceptional hashrate. Bitcoin operates under a PoW (Proof of Work) mechanism that uses energy in exchange for running ASICs and securing the Bitcoin network. Individual miners may choose to pool their hashrate together in a mining pool to increase the odds of of collectively finding a block amongst them. This aims to turn the block reward they receive as a miner into more of a consistent income rather than a lottery system of finding a block as an individual.

Mining Pool

A mining pool is an organization that acts to give miners an advantage of working collectively instead of on their own to find the next Bitcoin Block. While one individual miner make take ten years to find a block, a pool of ten miners of the same hashrate would take only one year on average to find a block. The larger collective hashrate in a pool, the more consistently a pool can find blocks and consistently pay out the miners that comprise it.

Mnemonic Phrase

See: Seed Phrase

Monetary Policy

Monetary policy is a set of rules and tools that a nation’s central bank has available to them to control and regulate their country’s currency. This usually includes macroeconomic numbers such as a nation’s GDP (Gross Domestic Product), inflation, money supply, etc.

Multi-Sig

In reference to a requirement of multiple keys to authorize a Bitcoin transaction, in comparison to one key from one entity. Multi signature solutions can be in either m of n configurations, where n refers to total number of signatures that have the authorization to act on the signature, and m denotes the number of those signatures needed for a valid transaction. m can be less than or equal to n.

No-Coiner

Someone who believes Bitcoin has minimal value and is doomed to fail. They don’t hold any Bitcoin and are vehemently against the idea of a world where Bitcoin succeeds. We believe that No-Coiners are just Pre-Coiners that just don’t know it yet.

Node

A Bitcoin node is any computer that keeps a record of the Bitcoin blockchain locally. Full nodes maintain a complete copy of the Bitcoin blockchain, which is over 500 gigabytes in size. They make sure that transactions and blocks on the blockchain adhere to the rules of Bitcoin, (e.g. no double spending) such that only valid transactions are given the green light.

Non Custodial

Non-custodial ownership means you are in full control of your coins. It refers to the fact that no third party has access to the information necessary to move your Bitcoin on your behalf. An exchange for example, is holding your Bitcoins for you, and in the event that an exchange is compromised, your coins may potentially be unsafe. Non-Custodial is always the preferred method to ensure safety and security on a personal level. (See: Not Your Keys, Not Your Coins)

Not Your Keys, Not Your Coins

A mantra of many Bitcoiners that are proponents of keeping your Bitcoin solely under your own ownership by taking them off exchanges and other custodial locations. It refers to the fact that if you are not in control of the private keys to your Bitcoin holdings, you run a security risk of potentially losing your coins if the person/entity that does control them gets compromised. At 1Bitcoin.ca we encourage everyone to take proper security measures when handling their Bitcoin, because at the end of the day 1Bitcoin.ca is not a hardware wallet that you should use as cold storage.

Off-Chain

“Off-chain” refers to a transaction that happens outside of the main blockchain and isn’t published there. The most intuitive form of a second layer (or off-chain) transaction is for two parties to agree to a debt between them. If we establish that I owe you one Bitcoin, our agreement is a “transaction” that stays valid by virtue of the fact that we trust each other. There are much more structured versions of off-chain transactions however, such as Layer 2 solutions like the Lightning Network, or how you can trade Bitcoin on the 1Bitcoin exchange without needing that transaction to be written on the blockchain.

On-Chain

On-chain transactions refer to Bitcoin transactions that occur on the blockchain and remain dependent on the state of the blockchain for their validity. On-chain transactions are considered valid only when the blockchain has been updated to reflect the transactions on the public ledger, such as a confirmation. On-chain transactions offer security and transparency since they can't be altered once they're verified and recorded on the network, they are immutable. However, there are some drawbacks to on-chain transactions, which include higher fees and slow processing times.

Open Source

Open source refers to a software program or platform with source code that is readily accessible and which can be accessed by anyone. Open source access grants users of an application permission to fix broken links, enhance the design, or improve the original code. This transparency is a huge advantage as people are openly able to read the source code and see vulnerabilities. In the case of Bitcoin, improvements can not be made to the code haphazardly, but users can always contribute suggestions that may gain traction in the broader community of developers.

Orphaned Block

Orphan blocks, or stale blocks, are blocks that are not accepted into the blockchain due to a time lag in the reporting of the block in question (compared to a qualifying block) to the network of miners. Orphan blocks are technically valid and verified blocks but have been rejected by the chain. The transactions on the orphaned block are not lost as they are then accepted by a subsequent accepted block.

OTC (Over-The-Counter)

The OTC Bitcoin market generally operates in the same way the global financial OTC markets do. It acts as an alternative to formal exchanges. Over the Counter Bitcoin purchases allows users to buy large amounts of currency without moving the markets and subsequently, the price of their transaction. Buyers looking to purchase 500 BTC, for instance, can opt to risk significant price slippage on an exchange due to market depth, or go straight to a crypto OTC desk and order 500 BTC instantly at a fixed price.

OTP (One-Time Password)

A one-time password (OTP), is a password that is valid for only one login session or transaction, on a computer system or other digital device. OTPs avoid several shortcomings that are associated with traditional (static) password-based authentication; a number of implementations also incorporate two factor authentication (2FA) by ensuring that the one-time password requires access to something a person has (such as a small keyring fob device with the OTP calculator built into it, or a smartcard or specific cellphone) as well as something a person knows (such as a PIN). OTP generation algorithms typically make use of pseudo-randomness or randomness to generate a shared key or seed, and cryptographic hash functions, which can be used to derive a value but are hard to reverse and therefore difficult for an attacker to obtain the data that was used for the hash. This is necessary because otherwise, it would be easy to predict future OTPs by observing previous ones.

P2P (Peer-to-Peer)

Peer-to-peer refers to the direct exchange of some asset, such as a digital currency, between individual parties without the involvement of a central authority. A strictly peer-to-peer exchange of currency was the primary goal driving the creation of Bitcoin. This contrasts fiat transactions, which require a middleman such as a bank, escrow, or third party to facilitate transactions through wire transfers or online marketplaces.

Paper Wallet

A paper wallet contains a public and private key pair for making crypto transactions. It is generally created with a key generator program and printed on paper as two strings of characters and two QR codes. It is not recommended to use paper wallets if you are looking for the most secure solution to storing your Bitcoin. This is due to the fact that it requires passing your private keys through a printer that may or may not be connected to the internet. There are now more secure methods of storing your Bitcoin, such are hardware wallets.

Payment Channel

Payment channels are a solution to higher transaction capacity on the Bitcoin network. — they are a trustless layer 2 solution. A Payment Channel is class of techniques designed to allow users to make multiple Bitcoin transactions without committing all of the transactions to the Bitcoin blockchain. The Lightning Network for example, is one of the most popular.

Phishing Attack

Phishing attacks are the practice of sending fraudulent communications that appear to come from a reputable source. It is usually done through email. The goal is to steal sensitive data like credit card and login information, or to install malware on the victim's machine. In Bitcoin, phishing attacks are used to try to gain access to a user’s Bitcoin exchange account, wallet file, or seed phrase. It is important to have proper security practices in place and always be on the lookout for scams.

Precoiner

Someone who has not yet invested in bitcoin, possibly because they have not yet been exposed to the technology or attempted to learn about it. At 1Bitcoin we believe everyone will eventually be on the Bitcoin standard, even potentially without knowing it. This can be compared to how Linux is the most used operating system in the world, even though many people don’t know what Linux is.

Private Key

A private key in the context of Bitcoin is a secret number that allows bitcoins to be spent. Every Bitcoin wallet contains one or more private keys, which are saved in the wallet file. The private keys are mathematically related to all Bitcoin addresses generated for the wallet. Because the private key is the "key" that allows someone to spend bitcoins, it is important that these are kept secret and safe. Remember, Not Your Keys, Not Your Coins. Private keys themselves are almost never handled by the user, instead the user will typically be given a mnemonic phrase that encodes the same information as private keys.

Proof of Stake (PoS)

Proof-of-stake is a type of consensus mechanism used by blockchain networks to achieve distributed consensus. It requires users to stake their cryptocurrency to become a validator in the network. Validators are responsible for the same thing as miners in proof of work cryptocurrencies - ordering transactions and creating new blocks so that all nodes can agree on the state of the network. Validators with large holdings can have excessive influence on transaction verification leading to higher rates of centralization.

Proof of Work (PoW)

Proof of work (PoW) is a form of cryptographic proof in which one party (the miners) proves to others that a certain amount of a specific computational effort has been expended. Verifiers can subsequently confirm this expenditure with minimal effort on their part. Bitcoin miners perform PoW calculations using ASIC computers, solving SHA256 hashes. The entire Bitcoin network does in excess of 150,000,000,000,000,000,000 hashes per second. The purpose of proof-of-work algorithms is not proving that certain work was carried out or that a computational puzzle was "solved", but deterring manipulation of data by establishing large energy and hardware-control requirements to be able to do so.

Pseudonym

A pseudonym is a fictitious name that a person or group assumes for a particular purpose, which differs from their original or true name. It differs from being complete anonymity as someone who is anonymous is able to operate or speak in a way that makes them unidentifiable. Someone who is pseudonymous operates or speaks in a way in which they can be identified, but their identification shields who they actually are.

Public Key

A public key allows you to receive cryptocurrency transactions. It’s a cryptographic code that’s paired to a private key. While anyone can send transactions to the public key, you need the private key to “unlock” them and prove that you are the owner of the cryptocurrency received in the transaction. The public key that can receive transactions is usually an address, which is simply a shortened form of your public key.

Recovery Seed Phrase

See: Seed Phrase

Replace by Fee

Replace by Fee, or RBF, is a method that allows replacing an already transmitted transaction by transmitting another transaction with a higher fee. This only works on transactions before they have been confirmed on the blockchain. This mechanism exists to allow users to respond if the network becomes congested and transaction fees rise unexpectedly. If a user sends a transaction with a low fee, and finds that it is taking too long to confirm, the user can raise the fee they pay to confirm their transaction faster.

Satoshi / Sat (unit)

A satoshi, or sat, is a denomination of Bitcoin that has been broken down into a smaller amount, named after the pseudonymous creator of Bitcoin, Satoshi Nakamoto. Just as 100 cents make up a dollar, 100,000,000 satoshis make up 1 Bitcoin. It is a measure used most commonly in calculating transaction fees, or Bitcoin transactions of smaller amounts. 1 Bitcoin = 100,000,000 sats

Satoshi Nakamoto

Satoshi Nakamoto is the pseudonymous name used by the creator(s) of Bitcoin and author of the Bitcoin whitepaper. Although the name Satoshi Nakamoto is often synonymous with Bitcoin, the actual person that the name represents has never been found, leading many people to believe that it is a pseudonym for a person with a different identity or a group of people.

Second Layer

See: Layer 2

Seed Phrase

A seed phrase, or mnemonic phrase, is list of english words that wallet softwares use to recover/access a wallet. This can be a list of 12, 16 or 24 words, that are chosen out of a list of 2048 words. A seed phrase can be used to generate all the key pairs within a wallet, and recover a wallet in the case of losing it.

Segregated Witness, or SegWit

SegWit, or Segregated Witness, is the name given to a Bitcoin protocol upgrade, which was implemented on August 23rd, 2017. This soft fork fixed an issue called transaction malleability, which enabled BTC transaction data to be changed before the network processed these transactions. By allowing signature (i.e., “witness”) information to be stored outside of (i.e., “segregated” from) a block of relevant transactions yet still verify them, SegWit allows Bitcoin to keep the integrity of transactions while also packing more of them into any single 1 megabyte block. This resulted in a faster and safer Bitcoin.

SHA256

The SHA 256 algorithm, is one of the most widely used hash algorithms, and is used by Bitcoin. While there are other variants, SHA 256 has been at the forefront of real-world applications. It is the process of scrambling raw information to the extent that it cannot reproduce it back to its original form. It takes a piece of information and passes it through a function that performs mathematical operations on the plaintext. This function is called the hash function, and the output is called the hash value/digest.

Smart Contracts

A smart contract is a computer program or a transaction protocol which is intended to automatically execute, control or document legally relevant events and actions according to the terms of a contract or an agreement. Taproot is a technology that aims to improve Bitcoin's privacy and ability to create complex smart contracts.

Soft Fork

A change to the software protocol where only previously valid blocks/transactions are made invalid. Soft forks are easier to resolve in the bitcoin community. Hard forks may cause a permanent split in the chain, where new cryptocurrencies are formed and split off from the main branch. By contrast, soft forks can often be resolved by consensus and will include more cohesive backward-facing activity on the chain.

Sound Money

Sound money literally refers to real wealth, with a natural, unmistakable signature of authenticity, as opposed to the paper, plastic, and electronic debt instruments used almost exclusively today.

Stablecoin

Stablecoins are altcoins that attempt to peg their market value to some external reference. Stablecoins may be pegged to a currency like the U.S. dollar or to a commodity's price such as gold.

Store of Value

A store of value is any commodity or asset that would normally retain purchasing power into the future and is the function of the asset that can be saved, retrieved and exchanged at a later time, and be predictably useful when retrieved.

Taproot

Taproot was an upgrade to Bitcoin which introduced several new features. Taproot integrated the Schnorr digital signature scheme into Bitcoin, upgrading Bitcoin's core cryptography. Taproot builds on the SegWit upgrade to improve Bitcoin's privacy and lower transaction fees.

Testnet

Taproot was a soft fork that improved Bitcoin’s scripts to increase privacy and improve upon other factors related to complex transactions and smart contracts. Transactions on the Bitcoin network can use various features that make them more complex, including timelock releases, multi-signature requirements, and others.

Total Circulating Coin Supply

The circulating coin supply is derived directly from the block height and refers to the amount of Bitcoin in existence. While only 21,000,000 Bitcoin will ever exist, the amount circulating is much lower than that as many Bitcoin have yet to be mined in future blocks. As of 2021, only 18,500,000 Bitcoin exist, with 2,500,000 remain to be mined in the future. This number does not take into account lost Bitcoin, or burned Bitcoin - and in reality the true amount circulating may be much less than the 18.5M BTC figure as well.

Transaction Fee

Transaction fees are the amount a Bitcoin transaction pays to miners for the ability to take up space on the blockchain. These fees do not scale with the amount of Bitcoin sent by a transaction, but rather by the amount of data that a transaction takes up to send. It is measured is satoshis per byte. Due to the limited amount of space per Bitcoin block, 1 Megabyte or around 2,000 transactions worth of data, miners prioritize the transactions within the mempool that have paid the most in transaction fees. While during off-peak times a user can manage to send Bitcoin transactions for as little as 1-2 satoshi per byte, there have been instances of high volume where a transaction that wishes to get confirmed within 6 blocks may have to pay upwards of 80-100 satoshi per byte for an on-chain transaction.

uBTC

uBTC, μBTC, bit, or micro-bitcoin, is a denomination of Bitcoin that has been broken down into a smaller amount. Just as 100 cents make up a dollar, 1,000,000 micro-bitcoin make up 1 Bitcoin. 1 Bitcoin = 1,000,000 uBTC

Unbanked

Adults who do not have their own bank accounts. Along with the underbanked, they may rely on alternative financial services for their financial needs, where these are available. These people may not be unbanked voluntarily, but rather due to their situation. This could stem from a lack of access/infrastructure where they live, inability to meet or afford the minimum bank balances or fees, due to distrust with the banking system or a bad previous experience, or lack of a government issued ID. An estimated 10 to 20 percent of Canadians are either unbanked or underbanked.

Unconfirmed Transaction

A transaction that has not been included in the blockchain yet, and resides in the mempool awaiting to be added to a block. The process of being added to a block is also known as that transaction getting confirmed. Many places that accept Bitcoin wait for a confirmation on the transaction they are receiving to ensure finality of the transaction.

UTXO (Unspent Transaction Output)

The letters stand for unspent transaction output. UTXOs are processed continuously and are responsible for beginning and ending each transaction. The term UTXO refers to the amount of Bitcoin someone has left remaining in a particular address after executing a transaction. Multiple UTXOs can be consolidated to send a larger transaction and then the remaining change output will be a UTXO.

Virtual Currency

A virtual currency is a digital representation of value that can only be available in electronic form. It is a broader category of cryptocurrencies that can also be used to describe centralized, regulated, and privately issued currencies. They can be used as a unit of account, a store of value, and as a medium of exchange for a wide variety of use cases like online marketplaces, and video games.

Volatility

Volatility is a measure of the rate of increase or decrease of a given asset. It is a mathematical tool which is used to gauge the price fluctuations that can be deemed normal. In most cases, the higher the volatility, the riskier the asset.

Wallet

A digital wallet used to send, receive, and store your Bitcoins. These wallets can be in the form of paper wallets, hardware wallets, or software wallets.

Whale

A Bitcoin whale refers to an individual or an entity that holds a large amount of Bitcoin. This can be either from a large recent investment, or someone that has holds a large amount of dormant Bitcoin from when the price was significantly lower. These are parties that have the ability to make impacts on the market short term through the sale of their holdings.

Whitepaper

The Bitcoin Whitepaper was originally published in 2008 by the pseudonymous inventor Satoshi Nakamoto. It is arguably one of the most groundbreaking works of computer science since the internet, and lays the foundations of electronic peer-to-peer cash and its underlying blockchain technology. To read the Bitcoin whitepaper, you can visit here.

XBT

An uncommon shorthand for Bitcoin. The abbreviation "XBT" comes from the International Standards Organization (ISO) that maintains a list of internationally recognized currencies. The standard dictates that if a currency is not associated with a particular country, it should begin with an “X”, hence "XBT". Another example of this is the abbreviation for gold, "XAU".

xPub (Extended Public Key)

An extended public key is a public key that can be used to generate child public keys. It is used by wallets to derive the addresses that the wallet contains. Anyone who knows your xPub has the ability to derive all addresses associated with it, and as a result, all transactions you have made within that wallet. An xPub can not be used to generate private keys, this means that in the event that your xPub is leaked, your funds will remain safe, however your privacy will not.

xPriv (Extended Private Key)

An extended private key is any private key that can be used to generate child private keys. It is the master private key that can be derived from the seed of a wallet. If a singular private key is leaked, you risk losing the funds of that specific address, but if your extended private key is leaked, you risk losing the funds with every address in that particular wallet.

YTD (Year-to-Date)

Year-to-Date refers to the period of time beginning the first day of the current calendar year or fiscal year, up to the current date. This measure is used to calculate the performance of an asset, their portfolio, or returns.

Zero-Knowledge Proof

In cryptography, a zero-knowledge proof, or zero-knowledge protocol is a method by which one party can prove to another party that a given statement is true, without conveying any information apart from the fact that the statement is indeed true. For example, it can be used to verify that a person has a password to a computer system without the need for disclosing what the password.