This glossary explains terms, acronyms, and ideas found in the cryptocurrency space. Tell your friends.
Bitcoin – Bitcoin is the first decentralized cryptocurrency built on a blockchain. Bitcoin most often references the Bitcoin network, whose native asset’s ticker is BTC. It may also refer to the software, the protocol – broadly, or any of the forks of Bitcoin which use variations of the same protocol.
Fork – Cryptocurrency forks are a manifestation of software forks, applied to money. In open source software development, a fork creates an identical version of a program for the purpose of parallel development of the same project, or improvisation on that project. Cryptocurrency forks create an initially identical codebase and ledger. Users with cryptocurrencies on the original network have the same account balances on the fork.
Blockchain – Blockchain takes its name from the chain of blocks of transactions. A blockchain is highly redundant databases which record movement of an asset native to the network. Blockchains make incorrectly appending the database prohibitively expensive through economic incentives.
Block – Blocks are batches of transactions which miners append to the transaction history of the entire network – that is, the blockchain.
Block reward – Block rewards are given to miners for honestly maintaining a network. Block rewards are issued according to emission schedules defined in the software and subject to difficulty adjustments.
Miners – Cryptocurrency miners maintain a blockchain database, and are rewarded for honest maintenance through transaction fees, and newly minted cryptocurrency.
Proof-of-work – Proof-of-work is the system designed by Satoshi Nakamoto which keeps miners from defrauding users or each other by committing real resources – electricity, computers – to the network to vest their interests in properly maintaining the network.
Hash (cryptography) – A hash function is a cryptographic function which changes a number from an arbitrary length to a fixed length. Hashes are pseudo-randomly generated by miners to satisfy the network difficulty requirement and receive a block reward.
Difficulty (mining – Difficulty gatekeeps the emission of block rewards to ensure a cryptocurrency’s supply is not issued all at once. Difficulty scales exponentially with total hash rate.
Hash rate – Hash rate refers to the number of guesses being thrown at the block reward by all mining nodes.
Node – A node is an instance of the software. Non-mining nodes are specified as such, while node refers to either miners, or an instance of a specific implementation of the software (E.g. Bitcoin Core, Bitcoin Unlimited).
Fees – see transaction fees
Stablecoins are cryptocurrencies designed to hold their value against another asset. Most stablecoins are stable against fiat currencies like the US dollar. Examples of this include Tether (USDT), Circle (USDC), HonestCoin (USDH). Stablecoins are most often issued as tokens on a blockchain, rather than as a native asset.
Equation of exchange – The equation of exchange illustrates the self-evident relationship between a currency’s price and its use as a medium of exchange. It was first derived by John Stuart Mill, and more recently popularized by Milton Friedman.
Issued supply – Issued supply refers to the supply of a cryptocurrency which has been emitted already. Contrasts with circulating supply and total supply.
Circulating supply – Circulating supply refers to the amount of a currency used in circulation. It is appropriate to use circulating supply when calculating a cryptocurrency’s price floor.
Total supply – Total supply refers to the eventual total number of units of a cryptocurrency at the end of its emission curve.
Hodl – Hodl is a misspelling of ‘hold’ which became a meme following this BitcoinTalk post.
Chainalysis – Chainalysis is a company and an eponym which refers to their analysis of blockchain data. Chainalysis can be in the context of financial surveillance, or economic analysis using on-chain data.
SWIFT – SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication. It is a centralized payment network which is used to send currencies like the US Dollar, British Pound between banks and across borders.
Value capture – Value capture is a concept described by Peter Thiel in Zero to One. It is the counterpart to value creation, which are the two components of production of a good or service. Value capture is the value retained and recorded by the producer of a good. Cryptocurrencies generate tremendous value, but their prices may not reflect this. Cryptocurrencies’ poor value capture leaves a positive externality to the consumers, who benefit from the value they bring.
Bitcoin maximalism – The idea that the version of Bitcoin with the ticker BTC will or must succeed as the only cryptocurrency which eventually sees worldwide adoption.
Adoption – In the contexts which Eat Sleep Crypto writes about it, adoption refers to use of a cryptocurrency as a medium of exchange. It may also refer to the adoption of a cryptocurrency for other features, but not for speculation or as an investment vehicle.
Total addressable market (TAM) – Total addressable market is the size of a niche addressed by use cases of a cryptocurrency, denominated in fiat.
Fiat – Fiat currencies are those issued by government orders. Unlike commodity money, fiat currencies have no underlying utility, but increase in price relative to their use as a medium of exchange.
M, Monetary base – Monetary base is the total value of the currency supply, calculated as circulating supply * price.
V, Velocity – Velocity refers to the number of times a unit of currency changes hands. The velocity of fiat currencies are measured by central banks; the velocity of transparent-ledger cryptocurrencies can be estimated using on-chain data.
P, Purchases – P stands for the average purchase amount using a currency in the equation of exchange.
Q, Quantity – Q is the number of average purchases.
PQ, Total purchases – P and Q are often measured together (e.g. total addressable market, total sales volume). PQ is essentially value transferred in a particular cryptocurrency over the defined time period.
Discounted expected utility value (DEUV) – Discounted Expected Utility Value comes from Chris Burniske’s work Cryptoassets and his article Cryptoasset Valuations.
Bitcoin Cash – Bitcoin Cash is a fork of Bitcoin which seeks to increase transaction throughput while maintaining low (< $0.01) transaction fees.
Austrian economics – Austrian economics is a field of economics which espouses laissez-faire capitalism. The “Austrian school” of economic thought contrasts with the Chicago school, which also advocates free markets in that the Austrians are more prone to thought experiments, while the Chicago school prefers to measure phenomena directly and thus place emphasis on practical application and equations. The equation of exchange aligns more with the Chicago school. Eat Sleep Crypto is heavily influenced by both.
Scaling – Blockchain scaling refers to the increase in transaction throughput of a blockchain network. Scaling challenges arise from the tradeoffs of decentralization, and the limits of current technology – both hardware and software.
Bitcoin Core – Bitcoin Core is the developer group which maintains the Bitcoin code. It may also refer to the specific implementation of the Bitcoin software which is used by >95% of all nodes.
Transaction fees – Transaction fees are commissions paid to miners for processing a users’ transaction. They are manually adjustable according to the needs of a user in cases of high network congestion on chains like BTC.
Initial Coin Offering (ICO) – ICOs are a means of raising funds for blockchain development. Because most ICOs are not regulatorily compliant, the SEC and other agencies are pursuing leaders of projects which raise large amounts for these projects outside the financial system.
Speculation – Speculation may refer to the projection of assumptions into the future in order to justify gambling on cryptocurrencies, or the subscription the “Number go up” philosophy of investing.
Investment – Investment refers to the purchase of an asset with an expectation of future returns. In the context of cryptocurrencies and Eat Sleep Crypto’s articles, speculation is not synonymous with investment. Investment is characterized by putting money into a rationally justified and articulated opportunity (e.g. purchase of a cryptocurrency below its price floor).
Price floor – Price floors are prices at which cryptocurrencies have fundamental support. Cryptocurrency price floors are most reliably created through use as a medium of exchange and may be identified using models with this premise.
Tokens are assets recorded on a blockchain which can be used for specified applications, or redeemed for other assets (e.g. stablecoins). Tokens are distinct from the native assets of a blockchain and are unable be sent on their own.
Decentralization is the property of minimal – but never zero – central points of failure. Decentralization exists on a spectrum and has no mainstream metrics by which to measure it.
CBDC stands for Central Bank Digital Currency. CBDCs are a recent initiative by countries world wide to maintain monopolies on money. In general, CBDC’s use permissioned blockchains and are strongly surveilled through manditory KYC/AML.