Amber Bitcoin Glossary
New to the world of Bitcoin? When you’re a new-coiner and new to the world of Bitcoin, it’s easy to feel overwhelmed by all the strange words, terms and jargon being thrown around. DCA, cold storage, keys, sats; so many unfamiliar phrases and acronyms. It’s enough to put your head in a spin.
To help you get started, we’ve put together a list of the most frequently used Bitcoin terms you need to know.
Keep this glossary on hand, and these words will soon feel like second nature to you. Soon, you’ll be understanding and using Bitcoin like a seasoned cyberhornet.
The Amber Affiliate Program is a network of bullish Amber Bitcoiners from Australia and the United States plugging into an ever bigger network made up of bullish Bitcoiners from all across the world.
Bitcoin is the latest and most powerful form of technology known as “money”. It’s known by many as the “OG” cryptocurrency and it first emerged after the Global Financial Crisis in 2009 as an electronic peer-to-peer cash system controlled entirely by users.
The simplest way to think of it is like apolitical money free of the constraints of the banking & legacy financial system. Unlike other currencies that are issued by central banks, mandated by governments and managed by commercial banks, Bitcoin is run entirely by a network of users who voluntarily verify transactions and enforce the rules of the network independently, but reach consensus every 10 minutes. It operates 24/7, and does not recognise country, border, nationality, background, age, gender, race or location.
Bitcoin is truly free, open, global, and fair money.
Bitcoin is a universal currency. If you’re based in the United States and you want to transfer money over to Australia, Mongolia, Antarctica or the moon for that matter, you could do so directly, without delay or permission. No need to convert from USD to AUD, pay hefty conversion fees, or wait long periods of time for your money to be transferred between countries on the legacy financial rails.
Bitcoin cash (BCH)
If you’ve been reading up on Bitcoin, you’ve probably come across the terms “Bitcoin” and “Bitcoin Cash”. Despite what you may think, these two aren’t interchangeable — and it pays to know the difference between them.
Bitcoin was first created as the base layer of a new financial system. At its core, this system preferences financial soundness rather than functionality for consumer transactions. Bitcoin Cash is a competing vision of this financial system that prioritises transactional functionality and scalability at the expense of other fundamentals, like security, decentralisation and censorship resistance. While Bitcoin Cash’s original selling point was that it was able to process transactions faster than Bitcoin, new technologies such as Lightning have allowed Bitcoin to far exceed Bitcoin cash (or any other cryptocurrency on the planet) in terms of transaction speed and convenience — all without compromising the security or soundness of the underlying system.
Bitcoin addresses are a string of letters and numbers that look similar to this: 1BvBMSEYstWetqTFn5Au4m4GFg7xJaNVN2 (a legacy Bitcoina address), or bc1qwx6cynmqh8sr6zqkhxnpt4wurru0gz6w2e7040 (a modern “Bech32” address). These are used for transferring Bitcoin from one user to another, much like you do with a bank account number. You need to share your Bitcoin address with another user if they want to send you Bitcoin, and vice versa. Addresses are generated by, and found in your Bitcoin wallet.
Because Bitcoin is a new form of money that neither recognises or requires any of the legacy banking or financial system’s infrastructure, it is not kept on a traditional online bank account nor is it withdrawn as traditional ‘cash’. Instead, your Bitcoin information can be stored in dedicated wallets, which are the way you as a user interact with the Bitcoin Network. The wallet stores your “keys” and can be used to send and receive the currency. Think of a wallet similarly to Apple Mail, Gmail or another Email client. It speaks to the underlying network (IMAP or SMTP) and you just write an email and click send. Bitcoin is the underlying network and the wallets are the clients. Bitcoin wallets can be either hot (online) or cold (offline).
Unlike the legacy banking system, where the ledger of transactions are stored and validated by a single authority (eg; the bank), Bitcoin transactions are stored, processed & validated by every node operator on the network. In order for them to achieve consensus (agreement) on the state of the ledger, they participate in a process called “Proof of Work” which rewards honest validators periodically with an amount of Bitcoin. The periods define the time between “blocks” and the “blocks” are made up of all the transactions waiting to be processed during that period. The difficulty of the validation process (also known as mining) determines the length of the period between blocks and is set so that it’s reached every 10 minutes on average.
A blockchain is merely a form of database in which data is segregated and grouped together in a chain of blocks. It forms a small part of the “recipe” that makes up Bitcoin, and is only useful when an incentive mechanism such as proof of work, and a native currency are integrated.
Outside of this, Blockchains have no greater utility, security or immutability than a traditional database. In fact, they’re inferior because they add unnecessary complexity, for no gain. In the case of Bitcoin, the blockchain element is used to give the proof of work element a means via which to create network consensus through the financial incentive of being awarded an amount of Bitcoin for solving a mathematical problem.
Once again, with Bitcoin (and other cryptocurrencies for that matter) the chain becomes the database upon which all of the confirmed Bitcoin transactions that have taken place since the network was first launched are found. As blocks are verified by miners, they are added to the chain of previous blocks. This public ledger is then used by Bitcoin wallets and other Bitcoin software to provide services, whether sending or receiving Bitcoin, locking some Bitcoin in an escrow-like Multi-Signature address, opening a lightning channel and other more complex and interesting functions where the money itself can be directly programmed.
While blockchain technology isn’t limited to Bitcoin, it’s most commonly associated with Bitcoin. This is because blockchain, when properly operational with proof or work, an incentive model, individual node operators, etc,is incredibly expensive to run. In most cases, the expense of running it outweighs the value that it offers. However, in the case of Bitcoin, the cost to secure the world’s money makes not only economic, but social sense.
An essential step in Bitcoin transactions. Once a Bitcoin transaction is created, it’s then ‘signed’ to show that the spender is authorised to spend the funds. After this, the transaction is then broadcast to the network, where it’s processed by validators (miners) and, once confirmed, included in the next block on the Bitcoin blockchain.
Bull market and bear market
Investor terms to describe a rise or fall in the market. A bull market is when the price of an asset, good, stock, currency or in our case, Bitcoin continually rises for a sustained period of time — usually by 20% or more — with the trends expected to continue. On the flip side, a bear market occurs when the price of an asset drops 20% or more from recent highs. Bull markets are typically accompanied by strong growth, whereas a bear market usually comes with lower investing confidence and greater risk.
Fun fact, nobody knows exactly where the terms bull and bear market come from, but they extend back over a century and the “Bull” that’s out front of the New York Stock Exchange is one of the most recognisable symbols of Market slang.
Buy and sell exchange rate
The different rates at which Bitcoin can be bought or sold. The way this works is similar to a foreign currency exchange: the ‘buy’ rate is the rate at which you will be Bitcoin from an exchange in return for traditional “fiat” currency, and the ‘sell’ rate is how much they’re willing to give you if you sell the Bitcoin. Buy rates are typically higher than sell rates in any market because there is always a gap between what buyers want and what sellers want. The midpoint or “market price” is the point where either the seller meets buyer or buyer meets seller. The difference is known as the “spread”.
A central bank is a financial institution that controls the production and distribution of fiat money for a nation. For example, in Australia the central bank is the Reserve Bank of Australia, and in the United States the central bank is the Federal Reserve. In most cases, central banks are also responsible for creating monetary policies and regulating their member banks.
Unlike traditional currencies, Bitcoin doesn’t rely on, or need a central bank. The currency is completely decentralised and relies on set of rules that every peer on the network enforces at an individual level. This is why Bitcoin is known as a peer-to-peer network.
A key attribute of money. Being cognisable means that something can be perceived or known. In finance terms, cognisability refers to being able to recognise money and determine its precise quantity or integrity. If a currency isn’t cognisable, it’s difficult for people to understand what they’re dealing with and how much value they can trade compared to what they’re being given.
Bitcoin perfectly embodies because it’s a mathematical money. Bitcoin clients can ONLY recognise Bitcoin, nothing else
The safest method of storing and accessing your Bitcoin address. Cold storage allows you to hold or store the keys that give you access to your Bitcoin offline without needing to connect to the internet. This makes it more secure because malicious actors can and will take all of your bitcoin if they have access to your keys, and the most insecure place to store any valuable information (such as the keys to your money / wealth / Bitcoin) is on your computer which is connected to the internet. Some of the most common cold storage formats include saving your keys to a USB drive, on an offline computer, written on a piece of paper, and even engraved into steel.
An essential step before a Bitcoin transaction is deemed legitimate. A confirmation refers to a Bitcoin transaction being included in a block. Each subsequent confirmation is then a new block being added after the block that includes your transaction and thereby drastically decreases the probability of a transaction being reversed. Multiple confirmations (often above six) are recommended before assuming a transaction is final but this is generally only relevant for sending large sums because the likelihood of a chain re-organisation or chain-split is extraordinarily low on Bitcoin (but very high on all other cryptocurrencies). Therein lies one of Bitcoin’s core value propositions. An extremely high security and transaction finality guarantee. Before being confirmed, a Bitcoin transaction will simply be pending and exists in the “mempool”, not in the blockchain.
This refers to a steep (and often unexpected) drop in the market. Crashes occur in all markets, particularly after spectacular up movements where people want to cash out & ‘take a profit”. The higher something has run in a short period of time, and the greater the mania, the more severe a crash can seem. This is quite normal behaviour in markets which are merely representations of mass human psychology, fear and greed.
A general term that’s used to describe digital currencies, tokens and technologies that are similar to Bitcoin in terms of technical design. Bitcoin is often referred to as a cryptocurrency; however, it’s fundamentally different because it is not issued by a group, foundation, organisation or bank. It’s truly apolitical, open money enforced at the level of the individual. It’s the only non-fiat form of money that exists and is now being recognised by experts as being distinct from the generalised term due to its superior attributes, level of decentralisation, censorship resistance, perfect scarcity, stability, durability, portability, and divisibility.
Another name for “cryptocurrency” in which there is no central control, repository of information, management and no central point of failure. A decentralised currency aims to cut out the middle-man and allow users to trade directly with one-another in a peer-to-peer fashion, but more importantly establish a network that is censorship resistant because the rules are enforced by the individual node operators, and not some single operator. A centralised currency, on the other hand, is issued, managed, controlled and fundamentally owned by a central authority, such as a central bank, cartel of banks or a government.
Many beginners have the misconception that Bitcoin is no longer decentralised as users often need to access it through a centralised exchange, or payment processor. However, this only refers to the onramp and offramp point. Bitcoin itself is the most decentralised and robust network ever created by mankind and is now fundamentally impossible to censor. By operating on a Bitcoin standard, you are free to choose where and how you store your Bitcoin, whom to send it to and you have the opportunity to be liberated from the coerced centralisation of today’s financial system (where users must use a certain currency and abide by its regulations, which you had no say in).
A slight, short-lived drop in price after a sustained upward trend. When users ‘buy the dip’, they’re purchasing assets when the price falls with the expectation that it will recover and continue along its upward trajectory.
Another key attribute of money. The more divisible a money is, the more utility it has, and therefore the better a money it is. Bitcoin is far more divisible than traditional fiat currencies. Just like $1 can be divided up into 100 cents, a Bitcoin can be divided into 100,000,000 smaller units, known as “satoshis” or “Sats”. This means we can unlock a wide range of payments that would be impossible using the legacy financial system. Think “streaming money” and “10,000 people sending $1 to someone in need in Ethiopia”. Bitcoin will unlock financial freedom and optionality like nothing we’ve ever experienced.
Dollar Cost Averaging (DCA)
Dollar Cost Averaging is an investment strategy that involves regularly buying a fixed amount of a particular asset through recurring payments. DCA removes the need to calculate the timing of buying and selling Bitcoin by triggering transactions at set time intervals, regardless of price fluctuations.
You might also hear the phrase auto DCA being used by investors. These refer to people who automate this method.
A key attribute of money. Without durability, money has little utility. Imagine being paid in salt for an entire year’s worth of work, and you accidentally spill water on your salt. All your money is gone. Bitcoin is fundamentally information. It cannot be destroyed and as such is the most durable form of money known to man. It will exist so long as math, letters and numbers exist.
Encryption refers to the process via which information is secured by mathematical obfuscation. Early encryption involved writing secret notes to one another but shifting the letter of the alphabet backwards or forwards by a few letters. In other words: “hello” = “jgnnq”, where the “key” = “use two letters prior”. Encryption comes under the broader study of “cryptography”.
Bitcoin uses modern, uncrackable cryptography to secure public and private key pairs, wallets, messages and hash functions Bitcoin addresses are cryptographic keys, and sending Bitcoin involves encrypting a signed message with a cryptographic function that can then only be decrypted by the intended receiver. This means that only those who are in control of the private key associated with that wallet can access it to send Bitcoin from that address.
A Bitcoin exchange is a place where you can buy and sell Bitcoin, eg; Amber or Swan Bitcoin. These third-party exchanges facilitate Bitcoin trades in exchange for a fee, similar to the way that foreign exchanges facilitate the change of different currencies.
Money that’s issued by the state or government. Fiat money lacks any real value because it’s not chosen by the market because of it’s inherently useful attributes, but the governing body “says so”. For example, a $100 note is only valued at $100 because a central bank has defined its value at this amount. Without this definition, which is maintained by force or coercion, it’s doubtful anybody would trade their goods or services for a piece of paper.
Think of this as a fork in the road. All societies, groups, projects, friends and family fork off from each other when they’re no longer in agreement. In Bitcoin, forking refers to an event where one group of network participants disagree with another, and in particular on a rule that would impact the future compatibility of the network.
There are two types of forks: hard and soft forks.
Hard forks, like Bitcoin Cash, are a radical change to the protocol of Bitcoin’s blockchain that makes previous blocks and transactions invalid or vice versa. After a hard fork, users either need to stick with the old protocol or move onto the new one
A soft fork still involves a change to the software protocol, but any changes are “backwards compatible”, meaning that the network does not split and as such a new currency is not spun off.
Used to describe a unit or an asset that is interchangeable. Owned cars and houses are non-fungible as each item has its own unique properties that add or subtract value. On the other hand, Money must be fungible in order for it to have utility. If everyone’s money was different, you cannot accurately measure the inter-subjective value of all the different goods and services. This is a reason why there is so much friction cross border with national currencies. They’re not fungible and as a result, money changers perpetually extract wealth from the system without adding anything value.
Bitcoin is perfectly fungible for the same reason that it’s cognisable. Bitcoin is Bitcoin. It’s pure math and the Bitcoin network can ONLY recognize Bitcoin. As such, there is zero risk of being sent something other than Bitcoin to your Bitcoin wallet, and on a more macro scale, it removes the need for all the wealth being extorted from the global financial system by bankers and money changes who sit between borders and run the rails.
Fear. Uncertainty. Doubt.
FUD is the refuge of the salty and the unimaginative, where talk of boiling the oceans, selfishly sucking up the energy of a small country, government bans and shut downs, volatility, criminality, bubbles, scaling, hacks, an assumed lack of intrinsic value, costly unit bias, and more, flys around the internet like a lie, while Nic Carter and co. continue to struggle putting on their pants and tell the truth.
Amber’s FUD Fighting FAQ coming soon…
An event that halves the issuance rate of Bitcoin every 210,000 blocks (which is approximately every four years). This halving schedule is precisely defined by an algorithm in Bitcoin’s code, which allows a certain amount of new Bitcoin to be mined in each block.
Bitcoin miners are rewarded a certain amount of Bitcoin every time a new block is produced. During the first four years (or 210,000 blocks), the Bitcoin Block Reward was 50 Bitcoin. It then halved to 25, then 12.5 four years after, and in May 2020, we entered the 4th Epoch where the Block reward every 10 minutes dropped to 6.25btc. This process will keep occurring until the reward block becomes zero, which happens in the year 2140.
Fun fact, the last Bitcoin will take more than 30 years to “mine”.
Hashrate is a representation of the adoption, the security, and the investment into Bitcoin.
Specifically, hashrate refers to the collective computing power that goes into securing the Bitcoin network. These are specialist computing machines – often ASICs – that contribute to the network hashrate by attempting to solve Bitcoin’s complex mathematical equations (a hash) in order to verify a Bitcoin transaction and win the block reward.
HODL is one of the greatest and most recognisable Bitcoin memes of all time:
“I type d that tyitle twice because I knew it was wrong the first time. Still wrong. w/e,” wrote Bitcointalk forum user, GameKyuubi regarding the now-famous misspelling of “holding.”
“WHY AM I HOLDING? I’LL TELL YOU WHY,” he continued. “It’s because I’m a bad trader and I KNOW I’M A BAD TRADER. Yeah you good traders can spot the highs and the lows pit pat piffy wing wong wang just like that and make a millino bucks sure no problem bro.”
Don’t trade Bitcoin. Save it. Hold On for Dear Life (HODL).
A method of storing Bitcoin. A hot wallet simply means that the keys are stored somewhere that is connected to the internet. It’s a misunderstood concept because you can have a “hardware wallet”, but if you keep a copy of the keys on a text file or word document saved on your personal computer, with which you surf the internet, your computer could be compromised (malware, hack, etc) and your keys can be stolen.
The upshot of a hot wallet is that by the keys being easily accessible, you can more easily send Bitcoin, ie; sign and broadcast a transaction. They’re generally fine for small amounts of Bitcoin but definitely NOT for any meaningful amounts of Bitcoin.
Initial coin offering (ICO)
Used for new digital currencies. In an ICO, someone offers coins for a new cryptocurrency for sale to assist in raising capital for the coin. Unfortunately, as ICOs are completely fraudulent methods of capital raising because they give the investor no assurances, guarantees, ownership of the company or foundation launching the coin and as such have often been used to scam investors: the famous Bitconnect ICO scam turned out to be a huge Ponzi scheme that cost investors over $3.45 billion.
A public key, as the name suggests, is public. It is how you receive Bitcoin, similar to your BSB and account number. Your public key is designed to be shared with others.
A Bitcoin private key is a (very long) string of numbers and letters that is used to sign and broadcast Bitcoin transactions. This is how you “spend” Bitcoin, and owning the key means you effectively own the Bitcoin. Bitcoin wallets technically don’t “hold your Bitcoin” but hold your keys. Because these keys enable you to spend your Bitcoin (ie; give you control of the Bitcoin), they must be kept safe and secure at all times (see “Cold Storage” above).
Keys (Public-Private Pair)
Public and Private keys come in pairs. A public key is a receiving address and the private key gives you control of the Bitcoin on the receiving address.
KYC stands for Know Your Customer. It’s a process employed by the legacy financial system used to identify users anc clients. It’s become the standard verification procedure employed by all financial institutions and products, including most Bitcoin exchanges to verify customers, understand their risk tolerance and evaluate their financial profiles. When you complete a KYC verification, you’ll usually need to provide an exchange with your phone number and provide documents to verify your identification
A list of data related to a financial account, such as IDs, transactions, timestamps and balances. The Bitcoin blockchain is a unique shared ledger where all of this information is distributed, decentralised, and public.
The subtle art of trying to explain the complexities Bitcoin to interested family and friends without applying too much pressure.
Better to nudge than to shove someone over towards the rabbit hole with a light shill.
Multi Signature or M of N
Most Bitcoin wallets offer a multisignature, or ‘multisig’, feature with an M-of-N setup. These transactions require authorising signatures from multiple parties before they can be broadcast and confirmed. “N” represents the total number ofkeys given joint custody of Bitcoin and “M” stands for the number of signatures required to spend the funds. In order to spend the Bitcoin, “M” signatures must be provided from the total “N” amount.
Here’s an example. Imagine you have a multi-key system for your house that has six parts, and your door requires you to use at least four parts to open it. In this case, “N” is six — the total number of parts — and “M” is four — the minimum number of parts needed to open it.
Medium of Exchange
A medium of exchange is one of the primary functions of money. A good money is one that you can exchange with someone else easily, but it must also have other attributes that give it utility as a money otherwise the receiver doesn’t want to take it. As a result, a good money must also be a store of value in order to be a great medium of exchange. Bitcoin embodies all of the properties of money and furthermore, because it does not require the permission of a third party, ie; it’s a peer to peer money, Bitcoin is a perfect medium of exchange.
Bitcoin is gradually becoming more widely accepted as payment for products or services, which means people around the world are beginning to realise its superiority as a medium of exchange.
The mempool, or “memory pool”, is a series of unconfirmed transactions that are pending or queued for inclusion into the next Bitcoin Block. Every transaction on the mempool is pending, and should not be considered “final” until it’s been included in a block and had multiple confirmations.
A miner is just a validator. It’s a user on the Bitcoin network that participates in proof of work, stores a copy of all Bitcoin transactions, processes new transactions from the mempool and if they input enough energy regularly, can win the block reward. They are thus incentivised to be the validators, guards and processing power of the Bitcoin network. Miners also collect the transaction fees attached to the transactions within blocks as a further reward for their work. Anybody anywhere with an internet connecting and some power can be a miner on the Bitcoin network. It’s completely permissionless and open.
Also known as validating. Proof of work is the cornerstone of Bitcoin’s economic and incentive model. Miners add new blocks to the Bitcoin blockchain by expending energy in the process of solving a specific math problem. This energy expenditure is an unforgeable cost and is the means via which Bitcoin miners are kept honest, and how the network achieves autonomous consensus.
Wallets that require an M of N set up in order for transactions to be signed and broadcast to the Bitcoin network. This is in contrast to a simple Bitcoin transaction which only requires a single key. Multisig wallets allow multiple users to have joint custody over funds and can add an extra layer of security for large bitcoin holders.
A term used to describe people who are new to Bitcoin (such as, perhaps you!).
A connection point in the Bitcoin network. Any computer that connects to the Bitcoin network is known as a node, and nodes that fully verify all of the Bitcoin rules are known as full nodes.
Full nodes store and validate transactions and blocks in the blockchain ledger, and more importantly enforce the rules of the network. This is how much of the integrity of the Bitcoin network manifests, and is another way in which miners are kept honest. If rules are arbitrarily changed by a group of miners, but the majority of the nodes do not recognise the change, the blocks are invalid and miners are spending money (performing work) for now reward.
Bitcoin is designed such that anyone, anywhere can run a node, keep a copy of the entire Bitcoin blockchain and participate in the decentralisation of Bitcoin. So long as there are two nodes running anywhere in the world, the Bitcoin blockchain lives on.
When you get more comfortable with Bitcoin, you should definitely consider running a node!
A cold storage method of storing Bitcoin information. With a paper wallet, your private key(s), or the seed phrase that derives your private keys,are written or printed onto a piece of paper, then stored offline, somewhere wafe.
Paper wallets are obviously more “secure” than keeping your keys on a computer, but must be treated with care as losing or destroying the paper means you lose your keys.
A network where users communicate directly with each other, rather than using a centralised server. The Bitcoin blockchain is a peer-to-peer network where all “peers” are equal and serve as validators of the state of the ledger.
Another key attribute of money. In order for money to be useful, it must be portable. If you can’t carry it with you, it’s not great money (imagine using a cow or a big tree as money). Bitcoin is information. There’s nothing more portable than information. If you’re able to memorise your seed phrase or private keys, you can technically carry billions of dollars worth of Bitcoin in your mind. Once again, this is part of what makes Bitcoin a perfect money.
Decentralized systems, by definition, do not have a single source of truth. Satoshi’s breakthrough was to build a system that allows all participants to zero in on the same truth independently. Proof of work is what allows this to happen. (*)
Proof-of-Work (PoW) is a decentralised consensus mechanism that requires members of a network to expend effort (energy) to solve an arbitrary mathematical puzzle and to prevent any one entity from gaming the system. Money is a representation of the work (time/energy) expended that is required to generate and produce goods.
The Bitcoin network requires energy to be expended in order to verify and preserve the authenticity of the ledger, secure the network and enforce the immutability of the money supply.
Not to be confused with the Cantillion 2.0 Proof-of-Stake consensus mechanism, whereby a select few shitcoiners from the ruling class make easily broken promises, and set out rules for thee but not for me (eerily similar to the current financial system), Proof-of-Steak occurs whenever any self-respecting Bitcoiner, who is dedicated to their own long term health and well-being, posts a photo of their meal featuring a delicious, perfectly cooked slice of grass fed prime beef.
Proof-of-Stake is for exploiters and slaves. Proof-of-Steak is for self-owned sovereign individuals.
A square barcode that stores data and can be read by pointing a smartphone camera at it. Bitcoin QR codes are useful as you can quickly turn your address into a scannable barcode that other users can simply scan to initiate a transaction. QR codes are also used for Bitcoin and lightning invoices so that people can quickly scan and make payments without having to type strings of letters and numbers. It’s a great way to remove user error.
Return on Investment (ROI)
The amount you make back on your initial investment. ROI is calculated by subtracting the current value of your investment with the cost of your investment, then dividing it by the cost of your investment and multiplying it by 100.
Let’s say you spent US $20,000 for a single Bitcoin, and you decide to sell that Bitcoin at US $34,346. In this case, your ROI would be ($34,346 – $20,000) / $20,000 x 100 = 71.73%.
Short for Satoshis, the smallest denominationof Bitcoin named after its creator, Satoshi Nakamoto. One Satoshi is equal to one hundred millionth, or 0.00000001, of a Bitcoin. There are 100,000,000 satoshis in a Bitcoin.
The goal is to acquire as many Satoshis as you can. As Bitcoin rises in purchasing power, people will be using Sats as a medium of exchange. Owning an entire Bitcoin will be a luxury few will ever have, or be able to earn.
One of the most fundamental attributes of money. Scarcity refers to the supply or availability of something. In the case of money, without scarcity, anyone anywhere could just conjure money up out of whatever object of medium they’re using. This is the problem for example with seashells, or salt, or fiat money, as money.
If money is supposed to measure time, energy & scarce resources, it should map as closely as possible to these. In other words, the more scarce, and ideally “perfectly scarce” (another way of saying ”fixed in supply”) that it is, the closer to perfect the money is.
Furthermore, scarcity ensure value is maintained across time. A very important function of money.
Bitcoin is the only verifiably fixed supply money known to man, and it is unchangeable.
This is another attribute of Bitcoin that makes it perfect money.
Fiat currencies on the other hand are arbitrarily inflated. This not only erodes money’s key function of preserving value over time, but it distorst pricing signals, creates rampant inflation, steals from one group whilst enriching those who print & issue it, and fundamentally makes things more expensive over time, instead of cheaper and more efficient which is what innovation naturally does.
Bitcoin is the exact opposite. There will only ever be 21 million Bitcoin, made up of 2,100,000,000,000,000 satoshis, making it the only resource in the world that is truly scarce and that we can instantly verify and validate its total.
A seed phrase is a collection of 12 or 24 words that is used to generate public and private key pairs in a wallet. These 12 or 24 words come from a dictionary which contains 2048 specific words. The order of these words is critical as it defines how the wallet will regenerate the private and public key pairs associated with the Bitcoin you own.
Think of your Bitcoin wallet as a password manager, and your seed phrase as your master password. Your wallet software will generally ask you to generate a seed phrase and write it down somewhere safe. Nobody, not even the wallet manager, can ever access your seed phrase.
Your seed phrase is effectively your private key. This is what you must hold and store securely, at all costs.
Segregated Witness, or SegWit, is the name used for an implemented soft fork change in the transaction format of Bitcoin.
The formal title “Segregated Witness (Consensus layer)” had Bitcoin Improvement Proposal number BIP141. The declared purpose was to prevent nonintentional bitcoin transaction malleability, allow optional data transmission, and to bypass certain protocol restrictions (such as the block size limit) with a soft fork.
When SegWit was created, it accidentally improved the network’s scalability as well. Witness data used to take up 65% of every Bitcoin block. By removing witness data, SegWit Bitcoin blocks now have room for much more transaction information.
A colloquial term for accumulating small and/or regular amounts of Bitcoin. This is commonly used in the Bitcoin community to refer to the method of building up your holdings by purchasing fractions of a Bitcoin (Satoshis) “stacking” these over time.
Store of Value
A primary function of money. Something cannot be used as money if it does not store value. Many assets can be used as a “Store of Value”, eg; property, paintings, shares, gold and even vintage cars, but few combine the medium of exchange function which makes a Store of Value a useful money. Scarcity is an important attribute that makes an asset able to preserve value across time without depreciating. Gold or silver are good examples because they are relatively scarce, and have other great attributes.
Bitcoin is the perfect Store of Value because it is perfectly scarce, and most importantly, a holder of Bitcoin knows his or her EXACT proportion of holdings in relation to the whole, and knows they cannot be diluted. No other money has had this level of verifiable scarcity and as such, Bitcoin will become the medium in which the most global value will be stored over time.
A token is just a unit of value on a network. With cryptocurrencies, this means the actual currencies themselves. With Bitcoin, the network is called Bitcoin, and the currency (or token) is called bitcoin.
A token can be used for anything the creator of the token wants to use it for. The issue arises when token issuers launch them on markets and the tokens begin to be traded as monetary assets or currencies. This confuses people and they begin to assume there is some similarity between the token that is “bitcoin” and the tokens arbitrarily issued & created by randoms on the internet who are effectively printing their own “digital fiat money”.
Automated tools that conduct trades and execute transactions on behalf of investors. Bots allow traders to take advantage of markets around the clock, identify the best trades, and react quickly in an ever-changing market.
Unit of Account
The third and final function of money. Once a money is used broadly enough, it becomes the means via which we measure all other goods and services. In a fiat system, it’s enforced legally and backed by the promise of a central bank, or government bureaucracy. With an organic money such as Bitcoin or gold, it’s selected by the users and the people who are actually trading their goods and services for “money”. This is what will make Bitcoin such a powerful Unit of Account in the longer term. It is being “naturally selected” by the market, not by force or coercion.
The more divisible, scarce, portable and curable a money, the better a Unit of Account it will prove to be in the long run. Once again, Bitcoin not only stands out, but is multiple orders of magnitude superior to legacy “fiat” money.
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