Bitcoin Glossary

because words MEAN something

This is Something Interesting, an independent, ad-free roundup of interesting Bitcoin and economics news along with my commentary and perspective. You can get Bitcoin news and commentary in your inbox for free by clicking here.

This is my ongoing and ever updating list of Bitcoin terms and terminology, gathered here both as a resource for anyone who needs it but also as a way for me to cite those terms in the Something Interesting newsletter without needing to define them every time. Feel free to share or to suggest/request additions.

Glossary

  • Block Reward - Bitcoin miners are paid in bitcoin by the network for their work in helping to secure it. That payment is in two parts: (1) transaction fees collected from the transactions included in blocks they mined and (2) the 'block reward' - a fixed quantity of newly minted Bitcoin created in that block and awarded to the miner. The block reward was a way to distribute Bitcoin fairly and also to subsidize mining at the beginning when there weren’t yet enough transactions to meaningfully reward the miners. The original block reward was 50 btc/block but it cuts in half every four years. At time of writing it is 6.25 btc/block.

  • cypherpunk - A philosophical movement started in the 1980s on an email list oriented around the idea of using encryption and privacy technology to effect social change, particularly change that improved individual autonomy, privacy and freedom.

  • Darknet Markets - The darknet is the set of websites that use Tor and related technologies to hide who is running the website. Darknet markets are like variations of Craigslist or eBay for the darknet. They generally sell drugs but are often used to sell anything illegal: guns, identities, credit card numbers, child porn. The most well known darknet market was the Silk Road, which was shut down by the FBI in 2013 - but there are still several dozen operating today.

  • exit scam - A previously operating business or project that closes down and steals user or developer funds. The term became prominent in crypto from darknet markets that would sometimes abruptly confiscate all the money in every user’s account and then shut down the marketplace.

  • fork - The point of a blockchain is for everyone on the network to agree about the state of the network - in Bitcoin’s case the goal is for everyone to agree about how many bitcoins there are and who has them. Disagreements can still sometimes happen in this process - they are known as forks because everyone agrees on the history but after the disagreement the chain "forks" into two (or more) directions. They can be temporary (such as those caused by unintended bugs) or they can be permanent (when the disagreements are philosophical and split the community).

  • Halving, The (see also halvening): Miners are rewarded for their work on the Bitcoin network by being paid in bitcoin through both transaction fees and the block reward. The block reward started at 50 btc/block but is cut in half every four years as part of the predetermined supply schedule that will eventually result in 21M Bitcoin being minted. The halving is designed to wean the network off of the subsidy used to bootstrap mining at the beginning of the network.

  • Initial Coin Offering - A style of unregulated fundraising for new cryptocurrencies that was widely used in the 2017 bull run but is now generally regarded as prohibited by the SEC. While in use it was quite successful at raising large sums of money from retail investors in very short time and with little scrutiny. Over 2017 and 2018 approximately ~$14B was raised this way.

  • KYC/AML - Know Your Customer / Anti-Money Laundering. The set of banking and exchange regulations intended to restrict criminal movement of money.

  • Lightning Network - a smart contract network that builds on top of the Bitcoin blockchain and uses clever time-locked transactions to let users transact much more quickly and cheaply while still keeping most of the security guarantees of Bitcoin. You can learn more at https://lightning.network/

  • Non-fungible Token (NFT) - Most cryptocurrencies are fungible, which means that they are all the same. You don’t have to care which Bitcoin you have because they are all the same. You only care about how many. Non-fungible tokens are the opposite: each one is unique. They are used to represent ownership of some unique object like a video game item or a work of art.

  • Smart Contract - A self-executing contract where the terms of the agreement are expressed in code that can be autonomously run on a decentralized network. A smart contract is like a legal agreement that can’t be broken because the decentralized network enforces the terms.

  • Stablecoin - A cryptocurrency token that is intended to be price-pegged so that it always trades $1:1 with some other asset like a particular stock or $USD.

  • Yield Farming - Yield farming is using any kind of automated strategy to deploy and redeploy capital to capture the highest possible return (or yield) across multiple different investments, most frequently in the DeFi markets.

Meme Archive

  • Bear - Someone who believes the Bitcoin price will fall.

  • Bull - Someone who believes the Bitcoin price will rise.

  • CryptoTwitter - Shorthand for the conversation about cryptocurrencies on Twitter and/or major participants in that conversation. The more prominent cryptocurrency accounts tend to follow and interact with each other, so at any given time most of the people talking about crypto on Twitter will be talking about the same small handful of things.

  • CeFi / DeFi - Short for centralized finance and decentralized finance, respectively. Usually used to distinguish between crypto services that rely on a traditional centralized company (like Coinbase) from services that are built on a smart blockchain of some kind (like Uniswap). CeFi is often used derisively.

  • HODL - Back in 2013 during one of Bitcoin’s many crashes someone drunkenly posted to bitcointalk.org forums about how they were continuing to hold but misspelling it as hodl. The Bitcoin community has ironically taken up the phrase 'Hodl' to mean "hold" but especially to mean "hold even when you look and feel stupid." Hodling is a statement that you don’t intend to let price swings shake you out of owning Bitcoin. It absolutely does not mean "hold on for dear life" anyone who tells you that is a no-coiner normie.

  • Hopium - A portmanteau of hope + opium meant to describe a thought that is more pleasant than realistic - anything that makes you feel optimistic but you know isn’t really a convincing argument.

  • Millionthaire - A person who owns at least 21 Bitcoin - i.e. at least 1/1,000,000th of the total supply of 21M Bitcoin.

  • Rug Pull - When the founder or lead developer of a project sells their stake and abandons the project, leaving the investors holding now worthless tokens.

  • Whale - A person who owns and/or trades a large quantity of Bitcoin.