Blockchain

Decoding Virtual Currencies and Bitcoin for Beginners, List of Terms and Definitions

We have written a lot about how Bitcoin economy is shaking up the world. Here is a link to all such articles we have written in the past. But from a Beginners point of view I wanted to make clear, some of the common terms and definitions used with regard to virtual currencies and Bitcoin.

Bitcoin for Beginners:

Bitcoin (BTC): Bitcoin is a form of virtual currency that is not controlled by anyone. Bitcoins aren’t printed, like euros or dollars – they’re produced by users running computers all around the world, utilizing software that solves mathematical problems. It is a cryptocurrency, so-called because it uses cryptography to control the creation and transfer of money. Bitcoin has a cap of 21 Million currency units.

Litecoin(LTC): If Bitcoin is a form of modern Gold then Litecoin is a form of modern Silver. Charles Lee, launched it in early 2011. Litecoin is based on algorithmic system that is similar to Bitcoin but different enough to offer some of the same benefits but with more attributes. It has a cap of 84 million currency units.

Cryptocurrency: A cryptocurrency is a digital medium of exchange. The first cryptocurrency to begin trading was Bitcoin in 2008. Since then, a number of cryptocurrencies have been created.

Cryptography: is the practice and study of techniques for secure communication in the presence of third parties. Basically, it is about analyzing and constructing protocols that overcome the influence of adversaries and which are related to various aspects in information security.

Mining: The process of making computer hardware perform mathematical calculations for the Bitcoin network to confirm transactions and increase security. As a reward for their services, Bitcoin miners can collect transaction fees for the transactions they confirm, along with newly created Bitcoins. Mining is a specialized and competitive market.

Blockchain: A public ledger - a database with a sequential record of all transactions - known as the block chain, records bitcoin ownership at present and at all points in the past. The block chain identifies receivers by Bitcoin addresses, not individuals' names, but the flow of bitcoins can give clues as to who owns them.

Open Source Software: OSS is computer software with its source code made available and licensed with a license in which the copyright holder provides the rights to study, change and distribute the software to anyone and for any purpose. Open-source software is very often developed in a public, collaborative manner.

Digital Wallet: A digital wallet refers to an electronic device that allows an individual to make electronic commerce transactions. This can include purchasing items on-line with a laptop or using a smartphone to purchase something at a store.

Bitcoin Wallet: The wallet contains a private key which Bitcoins allocates from the block chain to be used in purchases. The Bitcoin wallet can show the total balance of Bitcoins it controls and lets you pay a specific amount to a specific person, similar to a physical wallet. Coinbase is an example of a company that can provide you a Bitcoin Wallet.

Coinbase: It is a platform which allows trading of Bitcoins. Any user could create a wallet, link his/her bank details and start using Coinbase to trade Bitcoins. Coinbase was found in June, 2012 by Brian Armstrong (CEO) and Fred Ehrsam with Mark Peter Davis as an investor. Since its inception the company has raised $6.71 Mn in funding.

BTC China: BTC China was launched in June 2011. It is China’s first and most established Bitcoin trading platform. The company has received a funding of $5 Mn through investors Lightspeed China Partners and Lighspeed Venture Partners.

Private Key: A private key is data that proves a right to spend Bitcoins from a specific wallet through a cryptographic signature. The private key is stored on a computer, smartphone, table, or storage device it a software wallet is used. The key can also be stored on remote servers if a web wallet is used.

Digital Currency: Digital currency is a form of currency or medium of exchange that is electronically created and stored. Some digital currencies are cryptocurrencies – like Bitcoin, Litecoin and Peercoin - others are not – such as the Ven. Similar to traditional money, these currencies can often be used to avail physical goods and services.

Peer-to-peer: A peer-to-peer (P2P) network is a type of decentralized and distributed network architecture in which individual nodes in the network (called "peers") act as both suppliers and consumers of resources, in contrast to the centralized client–server model where client nodes request access to resources provided by central servers. In the case of Bitcoin, each entity broadcasting the transactions of other entities and there is not centralized authority.

Fiat Money: Money that derives its value from government regulation or law is known as Fiat Money. The term fiat currency is used when a fiat money is used as the main currency of the country. Fiat money was first used in China about a thousand years ago. Fiat money has been used intermittently by various countries since, alongside with currencies that were backed by metals, mainly silver or gold.

Store of Value: A store of value is the function of an asset that can be saved, retrieved and exchanged at a later time, and be predictably useful when retrieved. The most common store of value in modern times has been money, currency, or a commodity like gold, or financial capital. The point of any store of value is intrinsic risk management due to an inherent stable demand for the underlying asset.

Central Bank: A central bank, reserve bank, or monetary authority is an institution that manages a state's currency, money supply, and interest rates. Central banks also usually oversee the commercial banking system of their respective countries. In contrast to a commercial bank, a central bank possesses a monopoly on increasing the amount of money in the nation.  Federal Reserve of the USA is an example.

Satoshi Nakomoto: Satoshi Nakamoto is a person (or group of people) that created the Bitcoin protocol and reference software, Bitcoin-Qt. In 2008, Nakamoto published a paper on The Cryptography Mailing list at metzdowd.com describing the Bitcoin digital currency. In 2009, he released the first Bitcoin software that launched the network and the first units of the Bitcoin currency, called bitcoins. Nakamoto is said to have continued to contribute to his Bitcoin software release with other developers until contact with his team and the community gradually began to fade by the middle of 2010.

Mt. Gox: is an acronym for Magic: The Gathering Online Exchange, and was a Bitcoin exchange based in Tokyo, Japan. It was launched in July 2010, and by 2013 was handling 70% of all Bitcoin transactions. In February 2014, the Mt. Gox company suspended trading, closed its website and exchange service, and filed for a form of bankruptcy protection from creditors called minji saisei, or civil rehabilitation, to allow courts to seek a buyer.

FinCEN: Financial Crimes Enforcement Network is a bureau of the United States Department of the Treasury that collects and analyzes information about financial transactions in order to combat money laundering, terrorist financiers, and other financial crimes.

KYC compliance: Know your customer (KYC) refers to relevant information from their clients for the purpose of doing business with them. The term is also used to refer to the bank regulation which governs these activities.

AML compliance: Anti-money laundering (AML) is a term mainly used in the financial and legal industries to describe the legal controls that require financial institutions and other regulated entities to prevent, detect, and report money laundering activities.

Silk Road: Silk Road is an online market. that’s operated as a Tor hidden service – wherein online users are able to browse it anonymously and securely without potential traffic monitoring. The website launched in February 2011 is held to be part of the Deep Web.Although Silk Road is an underground website, dubbed as the "Amazon for drugs," the site also sells apparel, art, biotic materials, books, collectibles, computer equipment, digital goods, along with dozens of other categories of merchandise.  On October 2, 2013, the FBI shut down Silk Road. On 6 November 2013 it was reported that Silk Road 2.0 was online and being run by former administrators of Silk Road and that a different user was now using the name, Dread Pirate Roberts.

Charlie Shrem: Charles "Charlie" Shrem IV is an American entrepreneur , as well as an advocate and pioneer of Bitcoin. He is co-founder and CEO of the startup company BitInstant. He is a founding member of the Bitcoin Foundation, and formerly served as vice chairman.

Kraken: Kraken, a virtual currency exchange, is the brainchild of Jesse Powell, the CEO of San Francisco-based company Payward. Kraken has been designed to bring digital currency traders some of the same features enjoyed by forex traders such as stop orders and margin trading.  It let’s individual traders and institutions in the US and abroad trade fiat currencies like the US Dollar and the Euro against digital currencies like Bitcoin, Litecoin and Ripple.

Some of the Early Adopters and High Profile Merchants that Accept Bitcoin: 

Subway: Back in August 2013, a Subway outlet began offering 10% discount for customers paying in Bitcoin. This was followed by Subway outlets in Bratislava, Slovakia and Allentown.

Lamborghini Newport Beach: Car dealership Lamborghini Newport Beach recently announced that the payment for a Tesla Model S had been made with Bitcoins. The car would have cost around 55 Bitcoins as the price was around $1,150 at the time of sale.

Reddit: In February 2013, Reddit announced that they will be accepting Bitcoins as fee to their Reddit Gold Membership service. Reddit is a user generated news and entertainment site.

Overstock.com: It is one of the largest online discount retailers. Overstock announced plans to integrate Bitcoin payments in their platform by June 2014.

TigerDirect.Com: TigerDirect.com – announced that it would accept Bitcoin payments via BitPay on over 200,000 products available on its website. TigerDirect is the first major electronics retailer to join the ‘BitWagon’.

Zynga: Online games giant Zynga recently began accepting payments for in-game items, bonuses, etc., via Bitcoin. This could be huge and significant in many ways for the virtual currency. Players are able to pay via the BitPay payments service for players of FarmVille 2, ChefVille, CoasterVille, CastleVille and other games.

Shopify: On 27th November 2013, Shopify announced that more than 75,000 merchants that are registered with their platform can start accepting Bitcoin payments. The integration is available through BitPay. It can be used along with other payment services such as PayPal & Shopify payments.

WordPress.com: WordPress has been accepting bitcoins since November 2012. WordPress is a provider of a free and paid blog based website templates, plugins, etc.

Special Mentions:

Sean’s Outpost: This charity began accepting Bitcoin as early as mid-march in 2013. It has been successful in raising the number of meals served to homeless people from 50 per week in March to 900 per week in November. They also have a project called Satoshi Forest underway, which is a 9 acre property for its clients to live in a completely self sustained environment.

Virgin Galactic: Richard Branson announced in November 2013 that his company, would be accepting Bitcoins as payment for space Travel. “Virgin Galactic is a bold entrepreneurial technology driving revolution – bitcoin is doing just the same,” he said.

Snoop Dogg: HipHop Royalty, Snoop Dogg tweeted “My next release will be available in Bitcoin and delivered in Drone.

Chiraag Patel

Chiraag Patel is a Senior Reporting Analyst and the Editor of Bitcoin and Virtual Currency channels at Lets Talk Payments. He is an engineer with deep interest in MMORPG, Virtual Banking, Game Currency and Virtual Cash. Chiraag enjoys Reading& Blogging with focus on New Innovation, Technology & Startups in the Payments Space.

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