(Work in progress)…

Social Terms

Bitcoin maximalist – 1) originally a pejorative coined by Vitalik in a blog post – a person who blindly believes Bitcoin to be the best in all things related to cryptocurrency.

2) a person that believes they know Bitcoin’s position is unassailable by nature of technology adoption curves, economic incentives and network effects. It is the position based on the most evidence and research. It is the logical and scientific position.

Bitcoin minimalist – a person who believes that Bitcoin’s consensus protocol layer should be kept robust and simple to minimize vulnerabilities. This is done by moving most processes, features and functions up the stack, to other layers, in the very same way the internet itself has scaled and improved.

Bitcoiner –  a term of endearment, a label for a person heavily involved in bitcoin, similar to bitcoin maximalist but not derogatory.

Buttcoin – a famous skeptical subreddit r/buttcoin. They always make fun of bitcoiners, but sometimes have good skeptical takes. They have been wrong 90% of the time on the anti-bitcoin FUD.

Casascius coin – (ca-say-tious) – an early physical bitcoin coin made by Mike Caldwell, there are large runs and limited editions, more of the story here.

Corn – slang form of bitcoin.

Fiatsplaining – A very new term coined by a patron of the show @WahWhoWah – it means that a person uses simple outdated mainstream financial arguments in a discussion with a bitcoiner.

FOMO – Fear of missing out – An emotional reaction to a price increase that makes you chase and be more likely to buy the top of a rally. The opposite of a panic reaction to a price decrease.

FUD – Fear Uncertainty and Doubt – FUD is found in any community and usually consists of unfounded rumors or claims aimed at causing an emotional reaction from other members or even outsiders. It can be targeted at different demographics within or without the community. For example, certain types of rumors can scare new traders or owners of bitcoin, but don’t affect more experienced bitcoiners. To protect against FUD you must learn as much about bitcoin as possible (technicals and history), and find sources of information you can trust.

Hodl – variant of hold – first used in a bitcointalk.org forum post. The author was drunk and furious at his poor trading performance during the December 2013 rally. He misspelled the word hold and it quickly became a viral meme in the community. Today, it has morphed into an ideology, where hodlers are people that will never sell their coins. It’s a very important concept in bootstrapping a store of value for bitcoin.

Hodler – a person who hoards bitcoin and will not sell is massive dips in price, because they are in it until the end, as it were.

Nocoiner – a recent term, even has made it into the urban dictionary now – a person who has no Bitcoin. Nocoiners (usually Socialists, Lawyers or MBA Economists ) are people who missed their opportunity to buy Bitcoin at a low price because they thought it was a scam, and who is now bitter at having missed out. The nocoiner takes out his or her bitterness on Bitcoin Hodlers, by constantly claiming that Bitcoin will crash, is a scam, is a bubble, or other types of easily refuted FUD.

The Flippening – the much anticipated event where Ethereum would overtake Bitcoin in market cap, it never came – the term was adapted to all sorts of similar events in the 2017 scaling conflict, like hashpower on rival chains, node count, etc.

The Halvening – the reduction in block reward that happens roughly every four years – funny form of halving – this term appeared in 2015 as the block reward reduction was approaching. You can watch the countdown with the halvening rocket here. The bitcoin community likes to come up with little in group sayings and this one caught on. The ending of “ening” has been adopted in other terms like “The Flippening.”

Rekt – intentional misspelling of wrecked – used to describe losing all your bitcoin, or losing an argument badly.

Technical Terms

ASIC – Application Specific Integrated Circuit – These are computer chips specifically designed to work on one or one family of algorithms. The introduction of ASICs to bitcoin caused the difficulty of mining to skyrocket, making it nearly impossible for basement miners to get a ROI. ASICs are a hotly debated issue today, because of the relative centralized manufacturing process. One major company has come to dominate Bitcoin ASIC manufacturing, Bitmain, though this is quickly changing as three new companies are beginning delivery of their chips in 2018.

Bitcoin – a set of rules that when followed by a piece of software, the software’s actions are recognized as valid by other software on the network.

bitcoin – the native asset token in the Bitcoin network with a total supply of 21,000,000.

Bitcoin Address –

Block – a file containing transactions and a block header, primarily to order transactions and provide proof of work, analogous to a page in a ledger – Blocks are “found” in the process of mining and appended to the chain of previous blocks. In Satoshi’s words from a comment in the original software:

a bitcoin block definition by Satoshi
Fig. 1 – Satoshi on blocks and the block chain.

Block chain (also written as “blockchain”) – a chain of blocks – The decentralized ledger of transactions and block headers in bitcoin. The block chain is only one piece of the whole system balanced by incentives. Block chains require proof of work and are append only. They provide a censorship resistant database at the cost of efficiency. Centralized databases are much more efficient.

Some say blockchain and block chain (“block space chain”) are different. “Blockchain” has come to mean a friendlier more palatable-to-suits version of bitcoin. While “block chain” is a decentralized ledger created through proof of work. The word block chain did not appear in the whitepaper, but did make its first appearance written by Satoshi in the original software, see Fig. 1 and Fig. 2:

definition of a bitcoin block chain by Satoshi
Fig. 2 – Satoshi on the block chain.

Block reward – also known as block subsidy – the reward of bitcoin for finding a block, the incentive for miners to mine. When a miner finds a block they create a special transaction called a coinbase transaction where they create virgin coins at their own address. There is a decreasing maximum amount of reward, halved every 210,000 blocks, roughly every 4 years. The block reward started at 50 coins, halved to 25 in 2012, and halved again in 2016 to the current 12.5 coins. In 2020, the reward will be halved again to 6.25 coins.

The block reward is a very important part of the incentive structure of bitcoin. It provides an incentive to miners to maintain the block chain and order transactions into a block to prevent double spending. It is the sole incentive for miners. Some say miners also have a second incentive to mine, that being the right to vote on upgrades, but that is a perversion of the incentive structure and also impossible to implement.

Cold wallet – or offline wallet, also cold storage – this is a wallet created and maintained offline making it impossible to hack. In the past, many people printed private/public key pairs on paper from an offline computer and kept them in a safe. Hardware wallets are a derivative of a cold wallet.

Difficulty adjustment – or difficulty retarget – bitcoin is a self-adjusting system. When more hashpower starts mining the difficulty to find a block can adjust to retarget the 10 minute goal for new blocks. Bitcoin’s difficulty is retargeted every 2016 blocks or about 2 weeks.

Double spending – this is the main problem that a block chain solves. Prior to bitcoin it was impossible to solve the double spending problem without a central authority. Specifically, double spending is sending the same coin to multiple recipients. When transactions go through a central clearing house, they’d throw out the second tx, but in a decentralized system it was impossible. Bitcoin solves this through proof of work and ordering transactions into blocks.

Fork – There are two ways this term is used. 1) A split in the codebase of bitcoin. Forking bitcoin is as easy as copying the code and changing a few things. This process results in an altcoin.

2) There’s also another type of fork in regards to the block chain. If two miners find a block at almost the exact same time, and some on the network receives a block from one miner, and the other half of the network receives a block from the other miner, there is a fork in the block chain. These types of forks usually don’t last longer than 10 mins, because they are resolved when the next block is found. In very rare circumstances, forks of this nature can last for 3 blocks, but they eventually converge. It’s very safe to count 3 blocks as irreversible in this sense.

Soft Fork – A backwards compatible change to the codebase. Soft forks make the rules of bitcoin more restrictive, so the resulting valid set is smaller. All actions on the network after the soft fork remain valid to older versions of the software. This is an extremely important concept for a decentralized network. Since bitcoin is decentralized, you have control over your own node, and getting everyone to update to a new version is impossible. There’s still people running 3-4 year old versions on the bitcoin network and they continue to function as they always have.

Hard Fork – A non-compatible change to the codebase. Hard forks change the rule set of bitcoin, so some new rules can be previously invalid and some previous valid rules can be made invalid. The resulting valid rule set is different. Since bitcoin is decentralized, some nodes will not upgrade and will be left behind/kicked off the network. Hard forks have massive centralizing pressure for a network, and creates a central party of developers or large stakeholders that take control, because hard forks introduce new attack vectors not present in soft forks. Political attacks, social engineering attacks or stakeholder attacks from governments can control the central party and force changes onto the network.

Full node – also known as a fully validating node – Created by running the bitcoin software on a computer. Includes a copy of the block chain, mempool and UTXOs. Validates transactions and blocks, can broadcast transactions and act as a wallet. A full node is your vote on the network, your tool to individual sovereignty over your money. No one can tell you what software to run on your node. In the scaling conflict the winning side promoted running your own, and even kept the protocol light to make running a full node easier. Full nodes are the backbone of a decentralized network. If a node receives an invalid block (doesn’t conform to the rules of the network) it rejects it and disconnects from th

Genesis block – The very first block on the bitcoin block chain, mined by Satoshi on Jan 6th, 2009. There was a message contained in the genesis block from a Times headline, “Chancellor on Brink of Second Bailout for Banks.” Another less known fact is that there was a period of time before the second block ending on the 10th. Also the coins in the genesis block are unspendable.

Halving – the reduction in block reward that happens roughly every four years – serious form of halvening.

Hot wallet – a wallet that holds your private keys and with access to the internet, most commonly on a smartphone. In the early days of bitcoin these wallets were very unsafe, but have come a long way over the last couple of years. They now have encrypted keys in isolated environments. It’s very important that you are careful where you download your wallet. Never keep more than spending money on a hot wallet.

MASF – Miner Activated Soft Fork – When miners signal for readiness for a new feature, this signaling activates the use of new features. This was the subject of BIP9 activation that was how Segwit was originally designed to take advantage of. The major problem with MASF is that it changes the incentive structure of bitcoin itself and invites politics into the process. It also, wrongly gives the miners a feeling that they are more important than they are.

MAHF – Miner Activated Hard Hork –

Mempool – the group of transactions in a node’s memory waiting to be confirmed. In Bitcoin transactions are broadcast so the entire network can hear them, until they show up in a block they sit in the mempool. Miners take txs from the mempool and order them into blocks.

Each node may have a slightly different mempool, because they hear a slightly different set of txs than other nodes. Nodes can set an individual mempool max size for their node, ie 50MB, so anything more than that, the node will drop older txs. A reason for restricting the size of the mempool could be performance. Another option for limiting your mempool is by transaction fee. You can set it to not retain txs with fees lower than a set limit, ie 5 sats/byte.

The mempool is “cleared” by miners ordering transactions into blocks. With a maximum block weight now of 4MB and 6 blocks/hour, the mempool can theoretically be cleared at a rate of 24MB/hour. However, if people refuse to use segwit type txs, the block size is more limited.

Mining – 1) Bitcoin mining was first described in the white paper, but was adapted from earlier efforts by Wei Dai and Hal Finney. It serves several functions, it is the process by which new bitcoins are released into circulation, distributed randomly, transactions are confirmed, and the keeps the system immutable.

2) Mining is the use of software, hardware and electricity to find a random number which solves a math problem. The difficulty of finding the random number is programatically adjusted to keep the average time to find it to 10 minutes. Miners are incentivized to do this work by allowing them to claim a reward of bitcoin in special transaction in each block called a coinbase transaction. They are also rewarded to order transactions through fees, and doing so increases the value of the block reward, too.  When a miner finds a valid solution they hash it together with ordered valid transactions into a block and broadcast it to the network. For their reward to be claimed, their solution must be added to the block chain by the network. If two miners simultaneously broadcast a block, and because of network latency both are accepted by different parts of the network the tie is broken by the next block. Each block is built on the previous block, so whatever the next block builds on becomes the winner.

3) Behavior of miners is the result of an extremely dynamic process within the Bitcoin incentive structure. It’s not fully understood and the subject of lively debate within the community.

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 public keys and Bitcoin addresses generated for the wallet

Proof of work – (proof-of-work, PoW) a piece of data which is difficult (costly, time-consuming) to produce but easy for others to verify and which satisfies certain requirements. Producing a proof of work can be a random process with low probability so that a lot of trial and error is required on average before a valid proof of work is generated. Bitcoin uses the Hashcash proof of work system.

Proof of stake –

Public key – a 2D point coordinate on an Elliptic Curve derived from private key. The private key is used to sign messages (in case of Bitcoin – the transactions), and the public key is used to check whether the signature is correct. The public key can either be used raw in a transaction, or turned into a Bitcoin address by means of hashing and other operations.

Seed –

Soft fork –

UASF – User Activated Soft Fork – a mechanism to activate a compatible upgrade the Bitcoin network where users coordinate and agree to adopt the change as a large organic distributed consensus. The opposite of a centrally planned change. As a soft fork, the upgrade is backwards compatible, so doesn’t mandate any action on the part of other nodes (the segwit UASF was slightly different than this due to the hardcoded requirements included in the upgrade).

UAHF – User Activated Hard Fork – a mechanism to activate an incompatible upgrade the Bitcoin network where users coordinate and agree to adopt the change as a large organic distributed consensus. The extremely important distinction is incompatible, because it is very hard or impossible to force all nodes to upgrade. Leaving nodes behind out of consensus shrinks the network. If any of those nodes constitute significant economic value, the hard fork will definitely decrease the price of the hard forked coin, influencing others not to upgrade. In Bitcoin, HFs are impossible if there is an option to not upgrade, they are only viable in existential cases. All other HFs in Bitcoin result in an altcoin.

Whitepaper – The original outline of ideas written by Satoshi Nakamoto and released on 31 Oct 2008. The white paper introduced the ideas behind Bitcoin, but wasn’t the first application of the ideas. That came two months later.


Bitcoin Economics Terms