仮想通貨に関する用語集(CRYPTO GLOSSARY) B行

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Bear Market

A bear market is a lasting downward trend in the market when asset prices are declining and supply is greater than demand.

What is a Crypto Bear Market?

The crypto market is considered more volatile than the traditional markets, which means that price decreases in a bear market can be more significant than you would see in traditional financial markets. 

A crypto bear market occurs when crypto asset prices across the market fall 20% or more from recent highs, and there is general negative market sentiment. In a this market, inexperienced investors tend to panic sell their assets to avoid further losses, which creates a snowball effect on prices. For less stable assets, prolonged price dips can decrease asset values by more than 85%. In a bear market, prices are generally trending downwards. 

A “crypto winter” often follows a bear market. Crypto winter is a market condition where the prices remain low and stagnant for an extended period. For instance, the crypto winter 2022 witnessed a drastic drop and 2USD trillion was wiped out from the total market cap of cryptocurrencies.

Characteristics of a bear market include:

• Continuous price falls over a long period.
• The market sentiment of fear and a general lack of confidence is evident in social media platforms and mainstream media.
• Negative views and lack of trust.
• Demand is less than supply.

How Long Do Crypto Bear Markets Last?

It may last for a couple of weeks, months, or even years. Several factors such as increasing inflation, rising interest rates, and economic conditions may impact the length of bearish trend.

There are typically four phases of a crypto bear market depending on the psychology and contrasting feelings of participants:

• Preliminary phase – In this phase, the market sentiment is still bullish and there is general optimism among traders. Asset prices have reached their peak before the bearish trends begin.
• Early-stage phase – This stage marks the initial onset of the bear market. There are some downsides as well as occasional recoveries. Traders still have high hopes and tend to ignore the indications. Over time, the recoveries can no longer cover the losses.
• Full-fledged phase – The prices start to fall steeply and investors start to panic. Some investors try to sell off their assets to cover the losses. The recoveries are insignificant and there is general negative sentiment in the market.
• Late stage: The prices reach the bottom and start to level off. By this time, the sellers have left the market and new buyers try to enter the market wishing to get the assets at reasonable prices.

 

BEP-20

BEP-20 is a token standard extending Ethereum’s ERC-20 standards. It is the token standard powering the Binance Smart Chain.

What is BEP-20?

BEP acronym stands for “Binance Chain Evolution Proposal”. The preceding number is the unique identifier that differentiates it from other BEP standards, such as BEP2, BEP20, BEP721, and BEP115. BEP-20 is the token standard for creating and deploying all kinds of tokens on the Binance Smart Chain (BSC).

Simply put, it defines a set of rules that all BEP20 tokens launched on the BSC must conform to within the ecosystem. It dictates how the tokens can be spent and who can spend them. The purpose of the BEP20 standard was to provide developers with a programmer-friendly and flexible format for launching tokens on the BNB Smart Chain. It also aimed at optimizing transaction costs and speed.

The standard is basically an extension and modification of ERC-20 token standards. Hence, they share some similarities, such as the transferability requirements,  divisibility standards, and how total supply is defined. 

For instance, the BNB coin, the platform’s native currency, facilitates the transfers between BEP-20 tokens. It is also used to reward the validators. This is similar to Ethereum’s gas fees model. The BEP20 standard is also fully compatible with the  ERC20 standard, enabling cross-chain conversions between BEP2/BEP20 tokens and ERC-20 tokens.

Some popular examples of the BEP20 tokens include Peggy coins, Cake (PancakeSwap token), and BAKE (BakerySwap token).

BEP2 vs BEP20 

BEP-2 is the technical standard defining how tokens on the BNB Beacon Chain are implemented and issued. BEP2 and BEP20 operate in parallel with each other and are completely compatible. In addition, the BNB coin – the native currency on both the BSC and Binance Chain, facilitates their operations.

Since the Binance Smart Chain is simply an extension of the Binance Chain, the two are fully interoperable. This enables the seamless swap between BEP2 tokens from the Binance Chain and BEP20 tokens from the BSC.

Bid Price

The bid price is the highest price that a buyer is willing to pay for a particular asset, such as a cryptocurrency or stock.

What is Bid Price in Crypto?

When it comes to buying and selling, buyers want to nab a deal at rock-bottom prices while sellers dream of making a killing by selling high. To seal the deal, the buyer and seller must come to terms on a price that works for both parties.

Bid price is the highest price that a buyer is willing to pay for a particular asset, such as a stock, bond, or commodity, at a given moment. In the content of crypto, it represents the maximum price that someone is willing to pay to buy a specific cryptocurrency.

It is usually displayed in cryptocurrency exchanges as part of the order book. The order book shows the current bids and asks, is the lowest price at which a seller is willing to sell a particular digital asset at a given moment. A collection of bid prices, which represent the offers made by buyers, and asking prices, which reflect the offers made by sellers, comprise a trading order book.

The bid price is usually lower than the ask price, which is the lowest price at which a seller is willing to sell a cryptocurrency. To sell their assets, traders and investors can either choose one of the existing bid prices available on the order book, or set an asking price and wait for a buyer to place a bid that matches or exceeds that price, which will then fulfill the order.

The gap between the bid and ask prices is known as the bid-ask spread. You can calculate the bid-ask spread by subtracting the highest bid price from the lowest selling price. 

Bid-Ask Spread

Bid-ask spread in crypto is the difference between the highest price a buyer is willing to pay and the lowest price a seller is willing to accept for a specific asset.

What Is Bid-Ask Spread and How It Is Calculated?

Bid-ask spread is the difference between the price that buyers are willing to pay for an asset and the price that is acceptable to the sellers.

The price of a digital asset is primarily determined by the actions of buyers and sellers. The bid price refers to the highest price that a buyer is willing to pay for a given cryptocurrency, whereas the ask price is the lowest price that a seller is willing to accept for the same asset.

The bid-ask spread is calculated by subtracting the ask price from the bid price. Let’s consider the following example:

Suppose you are interested in buying Ether and you find an ask price of USD2,350 and a bid price of USD2,345. In this case, you would have to pay the ask price of USD2,350 to purchase Ether as this is the lowest price at which sellers are willing to sell.

If you were a seller looking to sell Ether, you would sell it at the bid price of USD2,345 as this is the highest price that a buyer is willing to pay you. The bid-ask spread in this scenario would be USD5, which is the difference between the ask and bid prices.

Why Do You Need to Know Bid-Ask Spread?

It is important to note that bid-ask spreads can vary depending on market conditions and trading volume. Higher trading volumes usually lead to narrower spreads, whereas lower trading volumes can result in wider spreads.

Moreover, the bid-ask spread is closely linked to liquidity, which refers to the ease of buying or selling an asset without affecting its price. When an order is placed, the buyer or seller is obliged to buy or sell their assets at the agreed price. A market that has a significant amount of liquidity typically results in a tighter spread. In general, heavily traded assets tend to have smaller bid-ask spreads compared to less traded assets.

 

Bitcoin ATM

A Bitcoin ATM or BTM machine enables you to purchase Bitcoin or other cryptocurrencies by depositing fiat currency or cash.

What Is Bitcoin ATM?

Bitcoin ATM appears and functions similarly to standard bank ATMs (Automated Teller Machines). They provide users convenience and ease to transfer funds, but with a key difference—they are designed for digital assets like Bitcoin rather than cash. 

With standard ATMs, you connect a bank account, then enter your PIN to authorize withdrawal from your account, and it will dispense funds as cash. Bitcoin ATMs, on the other hand, need you to have any debit/credit card and a wallet address to receive Bitcoins.

Bitcoin ATMs are operated by third-party service providers, which are registered under government authorities and must follow Anti-Money Laundering laws. A user can only purchase Bitcoin up to a certain amount with cash and may need to provide additional information like a government ID for large amounts. 

To use a Bitcoin ATM, first locate one nearest you. As of 2024, there are over 35,000 Bitcoin ATMs all over the world, with 32,180 installed in the United States. 

When using a Bitcoin ATM, you’ll likely be prompted to accept the terms and conditions and enter details like your name, address, phone number, etc. for identity verification. You may get a text message on your phone to complete the authorization.

Once verified, select the cryptocurrency you want to purchase, enter the amount and your crypto wallet address, or scan the QR code. You can use either cash or a debit/credit card to complete the purchases. 

The operator will send the equivalent Bitcoin to the wallet address, and you will get a receipt. However, a BTC transaction can take anywhere from 10 minutes to hours to confirm, depending upon the network congestion. 

Bitcoin ATMs may have higher charges than other buying methods, which often vary based on the individual ATMs and the operator managing them.

 

Bitcoin Core

Bitcoin Core is the software used to connect to and interact with the Bitcoin peer-to-peer network.

What is Bitcoin Core?

Bitcoin Core is the leading and original implementation software for Bitcoin. It’s an open-source software that allows anyone to view, modify, clone, or propose changes. However, this does not imply that the software can be modified anytime by anyone. Instead, the modifications have to be proposed and reviewed by the Bitcoin community. Bitcoin Core powers the nodes participating in the BTC network, enabling them to reach a consensus and impose rules.

So what is the difference between Bitcoin and Bitcoin Core? Bitcoin Core refers to the software implementation of the Bitcoin protocol. It is the reference implementation that serves as the backbone of the Bitcoin network and allows users to interact with the Bitcoin blockchain. On the other hand, Bitcoin refers to the entire network, protocol, and digital currency system itself.

Developed by Satoshi Nakamoto under the moniker “Bitcoin”, in late 2008, it was later renamed to Bitcoin Core to distinguish it from the BTC network. The software has been operational since 2009, and Satoshi maintained the code until late 2010. Since then, bug fixes and software upgrades have been done by a community of developers, called the Core developers. As of August 2023, Bitcoin Core has 909 contributors.

Since it is community-driven, anyone can propose changes that are reviewed, discussed, and rejected or accepted based on the consensus reached. Core maintainers integrate the changes once the community has approved the proposal.

By executing the code, the users get to participate in the BTC network as nodes and earn rewards for their efforts.  

Can You Mine With Bitcoin Core?

The Core wallet featured an inbuilt Bitcoin mining capacity before it was removed in 2016. It enabled anyone with a PC or laptop to solo mine Bitcoin using their machine’s CPU. 

You can no longer mine Bitcoin using Bitcoin Core. It only serves as the software client for interacting with the Bitcoin blockchain. In addition, most Bitcoin mining in the blockchain itself is done by mining pools rather than solo miners using expensive hardware.

Bitcoin Covenants

A Bitcoin covenant is a mechanism that enforces conditions or restrictions on how a Bitcoin transaction can be spent.

What Are Bitcoin Covenants?

When a traditional bank suspects a merchant’s account to be involved in illegal activities, the bank flags or places restrictions on the account. Well, Bitcoin covenants are somewhat comparable, but what are they exactly?  Covenants are a proposed update to Bitcoin’s consensus rules introducing specific restrictions on Bitcoin transactions. The update would allow a script to restrict a spender from spending their Bitcoins on specific transactions. In other words, it limits where and how you can spend your Bitcoin after you have purchased it.

This upgrade is included in Bitcoin Improvement Proposal – 119 (BIP119), defining how Bitcoin can be improved in smart contracts. These contracts could prevent malicious actors from stealing users’ funds in the event of hacking. The proposal also aims to scale the network, minimize congestion, and facilitate trust-minimized loans, among other applications.

For example, a covenant may only allow Bitcoin transactions to a whitelisted set of scripts. Whitelisted scripts may include sending your Bitcoin to a specific address, returning that Bitcoin to the user’s own balance, or sending the BTC to a staging address (which allows you to send the BTC to any other address but only after some time).

How Do They Work? 

In a standard Bitcoin transaction, locking scripts enforce conditions that mustbe met before the coins can be spent. Such conditions may include timelocks or denial of expenditure. Timelocks only allow you to spend the coins after a certain number of blocks is added to the blockchain, while denial of expenditure requires you to prove you have the private keys to the corresponding public keys by signing.

Bitcoin covenants take the conditions to be met a step further by limiting where and how you can spend the coins. The change features two key proposals – Check Template Verify (CTV) and CheckTXHashVerify 

• Check Template Verify (CTV) – Hashes transaction data and compares it against the pre-calculated hash values in the covenant to verify whether the two match. This enables users to spend only pre-calculated transactions in the future.
• CheckTXHashVerify – Works similarly to CTV. However, rather than committing to a whole set of transaction data, CheckTXHashVerify can only commit to specific transaction data. This enables more flexible control over transactions.

Bitcoin Dominance

Bitcoin dominance is the ratio between Bitcoin’s market cap and the market cap of the entire cryptocurrency market.

What is Bitcoin Dominance?

Bitcoin dominance (also called BTC dominance or BTCD) is a metric for the relative share of Bitcoin compared to the overall cryptocurrency market.

At one point, Bitcoin commanded close to 100% share of the cryptocurrency market. BTC dominance significantly plummeted with the advent of  new altcoins on the  global crypto market. Bitcoin dominance declines when altcoins amass a larger portion of the crypto market, and appreciates when Bitcoin performs better than altcoins. However, fluctuation in this metric does not necessarily correlate with its intrinsic value, nor does it imply a rapid capital inflow. Instead, it is simply a metric based on Bitcoin’s current price and its circulating supply.

Since BTCD is a ratio and not an absolute value, it is often not directly influenced by bullish or bearish trends. If the value of Bitcoin declines or appreciates at a similar rate as altcoins, the ratio will likely remain unchanged, even if Bitcoin’s value fluctuates. However, if the value of Bitcoin decreases while that of altcoins increases or remains the same, Bitcoin’s market share percentage is likely to drop.

How is BTC Dominance Calculated

BTC dominance is made up of two factors: Bitcoin’s market capitalization or market cap, and the global crypto market cap. It simply represents the percentage of Bitcoin’s market capitalization versus the total crypto market cap. It is calculated by dividing Bitcoin’s market cap by the total market cap of all cryptocurrencies. 

Bitcoin Market Cap (%) = Current Market Price x Circulating Supply

Bitcoin Dominance = Bitcoin Market Cap / Total Market Cap x 100

For instance, say Bitcoin’s market cap is USD1 trillion, and the total cryptocurrency market cap is USD3 trillion. Bitcoin’s dominance would be 33.33% because Bitcoin accounts for a third of the entire crypto market’s value.

 

Bitcoin Improvement Proposal (BIP)

Bitcoin Improvement Proposal (BIP) is the standard documentation format for proposing changes to the Bitcoin network.

Bitcoin Improvement Proposal Defined

A Bitcoin Improvement Proposal (BIP) is a formal document that allows  Bitcoin users to suggest changes, ideas, and upgrades to the Bitcoin blockchain. A BIP can include proposals for changes in the blockchain’s consensus rules or guidelines on certain procedures on the network. Some BIPs do not aim to impact the Bitcoin network directly; instead, they propose updates for Bitcoin software, like wallets.  

Satoshi Nakamoto built Bitcoin to operate in a completely decentralized manner as an open-source, cryptocurrency blockchain. There is no hierarchical leadership structure in place, so BIPs are the only way for developers to introduce updates to the blockchain through consensus.   

Programmer Amir Taaki proposed the first BIP (BIP 0001) in 2011, two years after Bitcoin’s launch. This inaugural BIP set the format for how subsequent BIPs should be created. This BIP and all other subsequent BIPs are publicly available on GitHub.

Types of BIPs

There are three categories of Bitcoin Improvement Proposals: Standard BIPs, Informational BIP, and Process BIP.

Standard BIPs are proposals that affect most of Bitcoin’s functionality, such as validating transactions. Informational BIPs are mostly guidelines and educational proposals, and they do not have to be adhered to by community members. Process BIPs propose changes outside the Bitcoin protocol. 

To create a BIP, users send their proposals to the Bitcoin email list or any communication medium like Slack, forum chats, or even Crypto Twitter. When other developers on the network reach an agreement on the wording of the proposal, it will be assigned a BIP number and the BIP becomes official. This stage may take several years, and still requires approval from nodes (also called miners) on Bitcoin before it can be implemented. Over 95% of the miners on the blockchain have to approve a BIP before it can be implemented. 

The Segregated Witnesses (SegWit) upgrade on Bitcoin in 2017 began as BIP 141. BIP 141 proposed major upgrades to the Bitcoin network that increased the scalability of the network.

 

Bitcoin Inscriptions

Bitcoin inscription is the process of embedding arbitrary data or content onto a Satoshi, the smallest denomination of Bitcoin.

What Are Bitcoin Ordinal Inscriptions?

Generally, the term “inscription” refers to something written, curved, or engraved onto something else. But what is an inscription in crypto? In this context, it is the process of attaching metadata to a cryptocurrency. For instance, inscriptions in Ethereum and Bitcoin are known as Ethscriptions and Bitcoin Inscriptions, respectively.

Also known as Ordinal Inscriptions, Bitcoin Inscriptions are a new way of writing additional data or digital artifacts on the Bitcoin blockchain. The information engraved includes images, videos, texts, audio, and more. This extra data is attached to individual satoshis (sats), the smallest unit of Bitcoin representing 0.00000001 BTC.

How Do Ordinal Inscriptions Work?

Since Bitcoin was designed to handle basic functionalities like writing simple smart contracts and transferring value, how are inscriptions possible on the network?

Initially, Bitcoin was limited by the amount of data that users could attach to it. The taproot upgrade paved the path for Ordinal inscriptions by removing the transaction data storage limit, allowing blocks to contain more data. This opened possibilities such as Bitcoin Ordinals – the pieces of Bitcoin in which extra information is inscribed.

Ordinal inscriptions are based on Ordinals theory, where individual satoshis are identified or numbered based on the order in which they are mined. Instead of imprinting data on separate tokens or relying on sidechains, Ordinal inscription adds a data layer to specific units of Bitcoin on-chain. The inscription protocol uses a mechanism called an “envelope”, a Bitcoin script designed not to execute, to store the data. The arbitrary data is then attached to Bitcoin transactions’ witness through the SegWit and Taproot upgrades. Typically, this approach allows up to 4MB of data to be included in each transaction.

By inscribing and storing metadata directly on the Bitcoin blockchain, they inherit the network’s benefits, such as immutability, security, scarcity, and tamper-proofness. In addition, it allows users to create Bitcoin-native non-fungible tokens (NFTs) and BRC-20 tokens – the standard for fungible tokens on the Bitcoin network.

 

Bitcoin Maxi

A Bitcoin maximalist is a hardcore Bitcoin advocate who believes that Bitcoin is sound money and trusts in BTC more than fiat or any other asset class.

What Is Bitcoin Maximalist?

Bitcoin maximalism is an idea that Bitcoin is the only valuable cryptocurrency in existence. According to Bitcoin maximalists (Bitcoin Maxis), crypto slang for individuals who hold this belief, Bitcoin is the only cryptocurrency – or more accurately, currency– that will be needed in the future. The term “Bitcoin maxi” may also define individuals contributing to the advancement of the Bitcoin network.

What’s more, maximalist Bitcoiners hold that other cryptocurrencies are simply altcoins if not shitcoins. This is because other cryptos do not adhere to the ideas of Satoshi Nakamoto, the pseudonymous Bitcoin creator(s). Therefore, they regard Bitcoin as superior to all other digital assets.

For Bitcoin Maxis, there is Bitcoin and then there is crypto, where the term “crypto” is insufficient enough to define Bitcoin’s significance or weight. 

The principles behind Bitcoin Maxi

With its maximum supply capped at 21 million coins, Bitcoin diehards consider it the only cryptocurrency that really matters. And as such, Maxis believe that it will stand the test of time to replace fiat currencies as the mainstream, permissionless payment method and store of value. In short, the philosophy behind the Bitcoin maximalism movement is that Bitcoin is the future of money.

In addition, Bitcoin’s first-mover advantage, market dominance, and robust security performance contribute to its maximalism debate. They also argue that Bitcoin creates a non-state monetary system and free market economy, an escape from centralization. And other cryptocurrencies that emerged after Bitcoin only compete with it by existence without offering long-term benefits without trade-offs.

To explain this, Bitcoin maximalists hold the notion that Bitcoin can achieve everything that other cryptocurrencies or centralized financial alternatives can do.

 

Bitcoin OG

Bitcoin OG, short for “Original Gangsta” or “Original Gangster,” is slang for the earliest adopters of the cryptocurrency.

What Is an OG in Bitcoin?

OG, short for “Original Gangsta” or “Original Gangster,” is a colloquial term derived from the pop culture lingo. It describes or acknowledges an individual regarded as a founding figure, veteran, or pioneer in something unique. Generally speaking, it acknowledges their authenticity, expertise, and influence within that space or industry.

In the blockchain context, the term OG can denote the original or “original gangsta” blockchain (OG blockchain), in which case, Bitcoin is the OG of all blockchains. It can also refer to the crypto “original gangster” (crypto OG), where Bitcoin is the OG crypto as it was the first successful decentralized digital currency to come into existence.

Therefore, a crypto OG would be slang for a founder of any of the earliest blockchain networks. It also describes any original participant(s) or adopter(s) of the earliest cryptocurrencies, such as Bitcoin and Ethereum. These individuals contributed to the development, growth, and evolution of some of the earliest blockchains before they gained mainstream adoption. 

Following this logic, anybody who interacted with Bitcoin between its inception in 2009 and 2017 earned the title of Bitcoin OG. They embody unwavering conviction, perseverance, and resilience in the persisting face of adversity and skepticism towards the original blockchain and cryptocurrency.

Bitcoin Runes

Bitcoin Runes are an alternative fungible token standard to the experimental BRC20 standard.

What Are Bitcoin Runes?

Bitcoin has evolved from basic functionalities to facilitate the development of Ordinals and Inscriptions, Stamps, and BRC-20 tokens. Most of these come from the innovation of developer Casey Rodarmor, who came up with inscriptions – a way of embedding arbitrary data onto satoshis, the smallest units of Bitcoin. This led to the development of Bitcoin’s version of NFTs called Ordinals, which inspired the creation of BRC-20 fungible tokens on Bitcoin. With BRC-20 still experimental, it introduced complexities and inefficiencies when creating fungible tokens on the Bitcoin network. Enter Bitcoin Runes.

Proposed to address the setbacks of the BRC-20 token standards, Bitcoin Runes are unique, fungible tokens directly issued on the Bitcoin network. They operate within Bitcoin’s unspent transaction output (UTXO) model to replace the ordinals’ technology. UTXOs are typically the leftovers of a transaction that are still available for spending in a new transaction. 

How Does the Runes Tokens Standard Work?

Utilizing UTXOs as the foundation for creating fungible tokens reduces the generation of junk (unnecessary UTXOs) that clogs the network.

Here’s how this novel token standard works:

1. Token issuance and transfer

The entire process begins by defining the token supply, specific human-readable symbols, and decimal configurations. The token supply defines how many Runes a specific UTXO can contain. Initiating a transfer divides the UTXO into multiple UTXOs, each holding different quantities of Runes.

2. Data storage

While ordinal inscriptions hold data in the witness segment of a transaction, Runes tokens store the arbitrary data in Bitcoin’s special data storage function called OP_RETURN. Every OP_RETURN output in a Bitcoin transaction encodes all new or transferred Runes. And since these outputs are provably unspendable, they reduce the on-chain footprint by curtailing the creation of unnecessary UTXOs.

BRC20 vs Runes: What’s the Difference?

Both BRC20 and Runes token standards serve a similar purpose: to create and issue fungible tokens on the Bitcoin network. Despite having a common purpose, they are quite different from one another. For instance, BRC20 tokens are based on the Ordinals theory, which requires technical knowledge of how ordinals operate. On the other hand, the UTXO-based structure allows Runes to easily integrate with Bitcoin’s native UTXO model without requiring complex actions or off-chain data.

Unlike BRC20 tokens, the UTXO-based token standard is lightning-compatible, which means that it integrates with Bitcoin layer-2s such as the Lightning Network. Consequently, BRC20 is riddled with a high on-chain footprint due to the generation of junk UTXOs that congest the Bitcoin network. Conversely, Runes minimizes unnecessary outputs, reducing the data storage requirement. And while it minimizes junk in the ecosystem, it also signifies a redundancy in effort that may fragment the Bitcoin ecosystem.

Bitcoin Stamps

Bitcoin stamps define the technique of embedding metadata within Bitcoin transaction outputs.

What Are Bitcoin Stamps?

Initially designed as a straightforward store of value, Bitcoin has since transcended its basic functionalities to allow a range of use cases. One such function is the embedding of additional data in Bitcoin transactions. And the STAMPS protocol –  is a new way of doing just that, though it isn’t the first. 

Launched in January 2023, the Ordinals protocol allowed for the creation of Bitcoin Ordinals. To put it simply, these are small pieces of Bitcoin that have data inscribed on them. So if Ordinals already offer a way to embed data on the Bitcoin blockchain, why the need for another approach? 

Well, Ordinals heavily rely on the discretion of individual nodes. This implies that the nodes can prune or modify data to optimize their efficiency or performance – potentially leading to a loss of information over time. 

Enter the Bitcoin STAMPS Protocol, which stands for “secure, tradeable art maintained securely”. In contrast to Ordinals, Bitcoin Stamps directly etch and store data in Bitcoin’s transaction outputs – specifically unspent transaction outputs (UTXOs) — making the data immutable. In other words, the data becomes impossible to remove or alter. 

The STAMPS protocol involves converting image data (jpg, png, gif, or webP) into a base64 string format, which depicts the image as a sequence of characters. These image strings are then incorporated into a Bitcoin transaction’s description key and sorted by timestamps.

Stamps vs Ordinals

Stamps record data directly on Bitcoin’s UTXO, ensuring data permanence and immutability. Since this consumes minimal space, its effect on network performance is negligible. On the contrary, Ordinals write data in the Witness Field of a Bitcoin block (the part of the Block that confirms the validity of a transaction). This approach risks full node pruning (i.e. removal) while potentially resulting in increased block size and low transaction throughput.

Due to their immutability, stamps are well-suited for applications and use cases that rely on long-term data authenticity and integrity, such as certificates, historical records, and legal documents. Ordinals lack the same level of reliability due to their impermanence.

Bitcoin Stamps Protocols

The common Stamps protocols are:

• SRC-20 tokens: The token standard influenced by the BRC-20 standard and built on the Counterparty protocol. The standard is characterized by housing the arbitrary data within the spendable data transactions rather than in the witness data segment. 
• SRC-721: Refers to the specification aimed at enabling efficient and cost-effective creation of high-resolution, composable NFTs. It uses the STAMPS protocol for layered storage, reduced file sizes, and compact JSON files, and Counterparty asset IDs for stability.

Bits

A bit is a smaller unit or subdivision of a single Bitcoin, typically representing one millionth of a Bitcoin.

What Are Bitcoin Bits?

A bit is a unit used to designate a subdivision of a Bitcoin. One bit represents one millionth of a single Bitcoin, meaning that 1 million bits are equivalent to 1 BTC. Since a million microbitcoins (uBTC) also equate to 1 BTC, bits can also be referred to as microbitcoins.

For context, a single Bitcoin is often made up of smaller, more manageable sub-units. When broken down into 100 million units, the denominations are called satoshis (sats), typically the smallest possible unit of a Bitcoin. However, when denominated into a million smaller units, the units are called bits. 

In short, since one Bitcoin is equal to 1 million bits or 100 million sats, 1 bit would be equal to 100 sats. These denominations make Bitcoin more flexible and more practical for pricing tips and purchasing goods and services, among other everyday uses.

Why Use Bits as a Standard of Measure

The concept of using bits as Bitcoin’s main denominator originated from a proposal published on the Bitcoin subreddit. This standard argued that owning one whole Bitcoin is too expensive while sats are too small to buy due Bitcoin dust limit – the minimum limit of a valid Bitcoin transaction – unless on the Lightning Network.

Moreover, a majority of standard financial software is limited to parsing only two decimal places, posing a significant challenge to Bitcoin interoperability. Since bits can be expressed to two decimal places, such as 99.99 bits, the standard enhances Bitcoin’s usability and compatibility in common financial applications, including bookkeeping and accounting.

It is also easier to calculate Bitcoin balances in bits as compared to fractions of a Bitcoin. For example, instead of crypto wallets and exchanges displaying a user’s balance or transactions as 0.000005473 BTC, it is more straightforward and intuitive to specify the amount as 5473 bits.

In addition, subdividing Bitcoin is essential in integrating Bitcoin into daily financial transactions, such as paying for a service, buying a coffee, or tipping an attendant. By facilitating microtransactions, this standard helps expand Bitcoin’s use cases beyond pure speculation and large asset transfers.

Bittensor

Bittensor TAO is a decentralized, peer-to-peer network that enables users to create, deploy, share, and train machine learning models.

What Is Bittensor (TAO)?

Bittensor is an open-source decentralized protocol that creates a peer-to-peer marketplace that converts machine learning (ML) into a tradable product. The protocol leverages incentivized collaboration and distributed networks to create a concerted and connected global supply of computing power capable of creating and deploy ML models and AI technologies.

OpenTensor Foundation, founded by Jacob Robert Steeves and Ala Shabaana, launched Bittensor in 2021. Its blockchain network, called Subtensor, is a layer-1 network designed using Polkadot’s Substrate Software Development Kit (SDK). 

While the project was initially developed as a Polkadot parachain, called Finney, it launched its own chain, Nakamoto, in March 2023 to minimize its dependence on the Polkadot ecosystem.

How Does the Protocol Work?

Bittensor constitutes three key components– a subnet, Subtensor, and the Bittensor API.

• Subnet – Bittensor is basically a “protocol for decentralized subnets”, where a subnet is an incentive-based competition marketplace that users can participate in as validators or miners. Users can also develop custom subnets by paying TAO– the network’s native token– if they have sufficient computing resources.
• Subtensor – The protocol’s blockchain network is called a Subtensor, which facilitates the network’s permissionlessness, decentralization, and collusion-resistance. The Subtensor is also responsible for supporting the subnets.
• Bittensor API – The API links the Subtensor with the subnets. This ensures the distribution of rewards to validators and miners in the subnets.

Technically, Bittensor uses a Proof of Intelligence consensus mechanism to reward nodes that provide valuable ML models and output to the protocol. This algorithm is a variation of proof of stake (PoS) and proof of work (PoW) consensus mechanisms. However, rather than solving complex mathematical puzzles, the nodes prove their intelligence by performing specific ML tasks.

The miners (or “servers”) in the network are responsible for hosting and deploying ML models to provide ML services to network participants seeking predictions. Meanwhile, the validators query the validity, accuracy, and reliability of the predictions and responses from the miners. What’s more the network selects nodes to add the next block to the blockchain based on the value and accuracy of their ML model output.

For providing accurate predictions, valuable data, and computational resources, the network rewards the miners and validators using TAO tokens.

Block

A block in a blockchain is a container of data that records all transactions in a secure and transparent way.

What is a Block in Blockchain?

A block in a blockchain is like a box of Legos, where each Lego represents a transaction, and once the box is full, it’s sealed and added to a stack of other boxes. This forms a chain of all the transactions that have ever been made on the network.

They are arranged in a linear sequence with new blocks added to the end of the chain hence the term blockchain. Think of a train and the different coaches that are attached to the train, a block is like a coach and all the coaches together make up the train (blockchain). 

What Information Does It Contain? 

Each block typically contains a header and a body. The header contains metadata about the block, such as a timestamp, a unique identifier, and a reference to the previous block in the chain. Its body contains a list of transactions, which can include various types of data depending on the specific blockchain.

Its size can vary depending on the blockchain. For example, Bitcoin blocks now have a size of 4MB, while some other blockchains have larger blocks sizes to accommodate more transactions.

Blocks significantly increase the security of a blockchain, because any attempt to compromise the data would involve altering the data on all blocks in the blockchain.

How are New Blocks Added to the Blockchain?

In a blockchain, each block contains a batch of verified transactions. Once it is created, a hash function is used to generate a unique hash code that represents the entire contents of the block.

A hash function is a mathematical algorithm that takes in input data of any size and produces a fixed-size output called a hash. The hash is a unique representation of the input data, and even a small change to the input data will produce a completely different hash. This property makes hash functions useful for ensuring data integrity and security.

This hash code is then used to link the current block to the previous one in the chain. The hash of the previous block is included in the header of the current block, forming a chain of blocks that are linked together in a tamper-evident and secure way. Any alteration in the data will result in a different hash code, which will break the link to the previous block and make the alteration obvious.

Blocks in a blockchain are added to the chain through a consensus mechanism, which is a way for nodes in the network to agree on the contents of each block. There are several different consensus mechanisms, such as proof-of-work and proof-of-stake, but the basic idea is that nodes in the network compete to add new blocks to the existing chain by solving complex mathematical puzzles. Once a node solves the puzzle and creates a valid block, it is broadcast to the network for verification and added to the chain.

Block Reward

A block reward is the sum of crypto awarded to a miner or validator by a blockchain protocol for successfully mining and validating a block.

What is a Block Reward?

A blockchain constitutes of a sequence of individual blocks that contain transaction records. Every block is associated with a problem that must first be solved before a new block can be generated and added to the protocol. Blockchain users who solve these problems are rewarded with a portion of newly minted crypto. 

This unit of cryptocurrency assigned to the validators is known as a block reward or mining reward. The users responsible for validating the blocks are called validators or miners, depending on the blockchain’s consensus mechanism. 

They are used as a primary financial incentive for the miners participating in a blockchain. The system also serves as a way to release newly minted crypto into the market. This is done by assigning a portion of the newly minted coin to the validator who mines or proposes new blocks.

Blockchains use block rewards as an incentive to attract more miners to the network, thereby decreasing centralization. The more miners a network has, the more secure it is from miners conspiring to perform a 51% attack.

A block reward is composed of two components: transaction fees and the block subsidy, which goes to the miner. 

For instance, Bitcoin’s block reward was initially 50 BTC. Bitcoin’s maximum supply is capped at 21 million coins. This means that no more block rewards and new coins will enter the market after the maximum supply is achieved. Bitcoin uses a halving mechanism to decelerate the mining reward amount and maintain the supply-demand force. This means that Bitcoin’s block subsidy is reduced by half for every 210,000 blocks (which amounts to about every four years). Since its inception, Bitcoin’s block subsidy has halved three times.

Blockchain

Blockchain is a digital ledger, capable of tracking the movement of value or information around its network. With control of this network distributed across many points, it cannot be censored.

What is a Blockchain?

Blockchain is a distributed ledger system that stores transactional data. It is ‘decentralized’ because it is not controlled by any central authority. It is a ‘distributed’ system as all data is shared, recorded, and validated by a network of computers around the world, called ‘nodes.’ Each node contains a copy of the digital ledger with no way to tamper or duplicate that data. Nodes must reach consensus on new blocks of transactions before they are added to the chain. This system ensures only genuine data is added to the blockchain, and secures it from manipulation.  

All transactions are recorded and verified in a file called a ‘block.’ All transactions in the network are chronologically grouped together to form a linear chain of data blocks, with each new block taking account of all the data from the blocks that came before it – sort of like a Russian doll. This is why the system is called a blockchain.

How Does it Work?

Each and every block in a network stores the information and hash of its previous block. A hash can be explained as a mathematical code unique  to a specific block. 

Each block must refer to the preceding block’s hash. When fresh data needs to be added to the network, a new block will be created, and once the block is filled with the information or data, it will be linked to the existing chain of blocks in chronological order. Changing the data once it is stored on the digital ledger is almost impossible. 

Types of Blockchains

There are three  broad types of blockchains:

• Public Blockchain – A permissionless blockchain that can be accessed by anyone by connecting to the network. Bitcoin is the best example of a public blockchain as anyone can become a node of Bitcoin.
• Private Blockchain – Private blockchains are closed networks open exclusively to authorized users. Companies often use private blockchains for managing internal information and sensitive data, which can only be accessed by a handful of people in the network. Access is determined by the organization itself.
• Consortium Blockchain – Instead of a single entity controlling the network, a Consortium network is controlled by a group of entities or organizations. It is more decentralized than a private blockchain and can be used by organizations with common goals to ensure transparency between the participants. 

 The technology has real-world applications in the healthcare industry, cross-border payments, online identity verification, copyright, royalties, and more.

Difference between Blockchain and Crypto

While blockchain is a distributed database, cryptocurrency is the unit of value of the decentralized network. Cryptocurrencies are used for transactions within and between blockchains. 

So blockchain is the infrastructure, like the Ethereum network, while ETH is the medium of exchange on the Ethereum network. 

Blockchain Bridge

A blockchain bridge connects two separate blockchain networks and enables the transfer of data and tokens between the different networks. Blockchain bridges facilitate interaction and the ability to operate between networks (commonly referred to as “interoperability”).

What is a Blockchain Bridge?

Each blockchain network has its own set of rules, protocols, smart contracts, and tokens. The blockchain network is fully functional, but it works as a single entity confined within the boundary of its own domain. This is a big problem for users, especially if the network forms the base of a larger ecosystem. One such example is Bitcoin; its functionality is limited to its own network and its protocol does not allow users to interact with other networks.

A blockchain bridge overcomes this obstacle to allow blockchain networks to transfer data and tokens with other outside networks.  Blockchain bridges do this by using wrapped tokens to mimic the characteristics of the target token in a different network. Let’s say you want to convert Bitcoin (BTC) to the Ethereum network. A blockchain bridge will wrap that Bitcoin and lock it in a smart contract. At the same time, the blockchain bridge generates the same amount of wrapped BTC in the Ethereum network. From that point, you can convert the wrapped BTC, and an equivalent number of BTC will be transferred to my wallet on the new network.

Blockchain Bridges and Interoperability

Interoperability, and therefore blockchain bridges, are crucial for the decentralization of blockchain ecosystems. It helps facilitate the exchange of information and assets among the respective blockchain networks, without the need for a third-party interface. Blockchain bridges streamline decentralized applications (dApps) and allow hundreds of application-specific networks to communicate and cultivate innovation. They reduce network congestion, enhance transaction processing speeds, and aid in the cheap and fast transfer of tokens.

Types of Blockchain Bridges

Blockchain bridges can be classified into two broad categories – centralized (trusted) bridges and decentralized ( untrusted) bridges. 

Centralized or Trusted Blockchain Bridge

Trusted bridges rely on members of a federation to confirm transactions or transfer of funds. They also depend on a central body or governing authority to control their operations. All members must oblige and hand over the control of their assets to this governing authority. Recently this has led to cyber-attacks that raise the reliability and security of centralized bridges, such as the Ronin bridge hack that resulted in a loss of USD540 million. 

Decentralized or Trustless Blockchain Bridge

Trustless or decentralized bridges operate on code-based algorithms. Contrary to their name, trustless bridges generally are considered a safer option. They are based on smart contracts rather than a centralized protocol, and users have full control of their funds. Decentralized bridges incentivize broad participation and achieve transparency by eliminating interference from any centralized authority. But despite layers of protection, these bridges are not infallible, and decentralized bridges have also become victims of cyberattacks. 

These isolated incidents aside, blockchain bridges remain an incredible innovation to achieve decentralization and interoperability among different networks.

 

Blockchain Confirmation

Blockchain confirmation refers to the process of verifying a transaction and adding it to a blockchain.

What Is a Blockchain Confirmation?

When someone makes a money transfer through a bank, they get a transaction confirmation or receipt. The confirmation is proof that the transaction was legitimate and complete. Similarly, when a trader makes a transaction on a blockchain network, the network must verify the transaction and conclude that it is legitimate before adding it to the blockchain. 

Blockchain confirmation or block confirmation is the process of validating and adding a user’s transaction to a block in a blockchain network. It safeguards a network against threats like double-spending. 

How Do Blockchain Confirmations Work? 

Say you place an order online to purchase a new laptop. The order goes through a confirmation process before it is shipped to you. During the processing, you might receive updates such as “order received”, “order being prepared”, and “order shipped”. When the package is finally delivered, you might receive a “delivery confirmation” message.

In block confirmations, transactions sit in a network’s queue of unconfirmed transactions, in a waiting area known as a mempool, until they are verified and confirmed by miners or validators. Miners and validators are responsible for confirming the validity of transactions and securing the network.

How Long Do Blockchain Confirmations Take?

Block confirmation periods vary from one blockchain to another based on how long it takes to add a block to the blockchain. It also depends on the complexity of the transaction.

On the Bitcoin network, a blockchain confirmation takes place every 10 minutes, so it can process six confirmations an hour. In the Ethereum network, a set of twelve blocks are confirmed every three minutes. 

The transaction speed is influenced by factors such as network congestion, mining difficulty, and transaction fees. When a blockchain experiences high trading volumes, validators/miners may take a long time to add your transaction to the next block. Sometimes, the transaction may be declined and the funds returned to your account. In such cases, paying higher transaction fees may reduce the waiting period as miners prioritize transactions that incentivize them well. 

In proof-of-work blockchains, mining difficulty may slow down the block confirmation process. Since they rely on miners to solve complex mathematical puzzles before they can confirm blocks, the miners may take longer to add transactions to the block if solving the puzzle becomes a challenge.

Blockchain Explorer

A blockchain explorer is a tool that enables users to navigate and review information about any public blockchain network.

What is a Blockchain Explorer?

A blockchain explorer (or block explorer) is a software application that allows users to extract, visualize, and review blockchain network metrics, including vital information about crypto transactions, such as transaction history, wallet balances, transaction fees, etc. Block explorers are often accessed online via web browsers.

Every blockchain has its own distinct block explorer, meaning that information about Bitcoin transactions can only be accessed via a Bitcoin block explorer. The Ethereum block explorers include EtherScan and Ethplorer, while the Bitcoin block explorers include Blockchain.com, Tokenview, and Blockchair, among others. The block explorer can be private or public, depending on the blockchain in question. 

Block explorers can be considered “browsers” and “search engines” for blockchains and cryptocurrencies. They can serve as an information hub, providing detailed analytics about individual blocks and addresses. They may also be useful in acquiring real-time charts and data about transaction status, hard forks, hash rates, etc.

Why Use a Block Explorer?

Individuals can utilize block explorers to monitor the status of their transactions and see if a transaction is completed or pending/unconfirmed based on network confirmations. Users can do this by typing the transaction ID in the block explorer’s search bar.

With a blockchain explorer, you can also track the current state of a crypto network, such as the total crypto in circulation and crypto burn transactions. In addition, users can monitor all of their transaction history and sender and recipient addresses.

Some of the information you can view on blockchain explorers include:

• Mempool size/status
• Block difficulty 
• Average block size
• Average transaction fees
• Latest blocks
• Network hash rate
• Double-spend incidents
• The most significant transaction of the day
• The genesis block of the blockchain network

Market analysts use block explorers to monitor and evaluate wallet addresses, especially of crypto whales, to better understand buys and sells, and the potential for a market sentiment shift.

Blockchain Indexing

Blockchain indexing refers to the process of organizing the high volumes of information on a blockchain to make data easy to find and use. 

What is blockchain indexing?

Blockchain indexing takes all the transactions, blocks, and addresses from the blockchain and sorts them into a searchable database. Blockchain indexing works by pulling data from the blockchain, such as transaction IDs, timestamps, and wallet addresses, and organizing it into a structured database.

Imagine trying to find a specific book in a library without a catalog—you’d spend forever searching for it. Blockchain indexing solves that problem by organizing the data so applications can access it quickly and efficiently. Indexing makes it easy for developers to access the information through tools like APIs. For example, if you’re building a DeFi app, you need real-time data to manage liquidity pools and execute smart contracts. Blockchain indexing ensures your app can quickly retrieve this data, keeping everything running smoothly.

However, indexing blockchain data isn’t easy. Blockchains hold huge amounts of data that are constantly growing, meaning indexers have to handle large amounts of data with each passing day and keep it up to date. Tools like Bitquery and services from Bware Labs can provide efficient indexing solutions, making it easier for developers to build powerful blockchain applications without the hassle.

Blockchain indexing use cases

Blockchain indexing makes blockchain data accessible and usable, which is crucial for various applications. For example, traders rely on indexed data to analyze market trends and make informed decisions. 

NFT marketplaces use indexing to track ownership and transaction histories of digital assets, ensuring that each NFT’s journey is transparent and verifiable. Additionally, businesses can use blockchain indexing to maintain structured data for regulatory reporting to meet legal requirements and ensure compliance. 

By organizing and simplifying blockchain data, indexing supports essential functions across different sectors, making blockchain technology more effective and reliable for everyone.

 

Blue Chip NFTs

Blue chip NFTs are considered to be the NFT market’s most valuable and coveted digital assets.

What are Blue Chip NFTs?

Blue chip NFTs are distinguished by several key characteristics that set them apart in the digital asset landscape. These top-tier tokens are characterized by their high value, strong market performance, utility, and perceived potential for long-term appreciation. 

While newer blue chip web3 projects often originated from established creators, popular brands, and celebrities, the older blue chip projects were largely driven by their online communities and sustained market activity.  

One of the primary attributes of such NFTs is their scarcity. These tokens are often part of highly sought-after collections and feature unique traits that make them rare within their respective ecosystems. This scarcity factor contributes significantly to their perceived value and desirability among collectors and investors.

As mentioned earlier, blue-chip NFTs may also represent historical significance or cultural impact. Many of these tokens represent pivotal moments in the development of blockchain technology or the NFT space itself. This historical relevance often translates into sustained interest and value over time. 

Lastly, blue-chip NFTs can offer utility beyond mere ownership. This could include access to exclusive events, additional digital assets, or participation in decentralized autonomous organizations (DAOs).

It’s important to note that the NFT market is dynamic, and what the market views as a blue-chip NFT can evolve, though blue-chip status is most widely tied to a collection’s floor price. Thorough research and understanding of market trends are essential for identifying potential blue-chip NFTs.

Bounty

A bounty is a reward offered to individuals for identifying vulnerabilities or bugs in software.

What is a Crypto Bounty?

A cryptocurrency bounty refers to an incentive program that rewards users for performing specific tasks assigned by a blockchain project. 

Crypto bounties help create engagement and increase awareness about a blockchain project to improve its chances of success. It also aimed at improving the blockchain’s security against malicious actors by identifying bugs and vulnerabilities within the project’s software before they can be exploited.

How Do Cryptocurrency Bounties Work?

Developers prioritize releasing efficient and secure applications or software to the end users. However, even the crème de la crème of developers might miss a bug or two, which might pose some security risks in future. And for systems like blockchain that are designed to securely store and transmit sensitive data, even the slightest bug or error can have significant negative impacts on the project’s success. Therefore, cryptocurrency projects – such as exchanges, wallet providers, and protocols – offer developers bug bounties as a supplementary security measure to protect users from malicious actors.

The projects offer this reward with the hope that one of the users will identify potential vulnerabilities or bugs that may affect the overall functionality of the project. Bounty schemes are open to the public, allowing anyone to compete. The scheme can be thought of as a group of “bounty hackers” competing to find a bug for a reward. The individual who finds the bug first reports it to the cryptocurrency project offering the bounty. This allows the technical team to fix the identified vulnerability before a malicious actor can exploit it.

While individual bounties may be very low, the incentive amount often relies on the vulnerability’s severity. For instance, a low-severity bug may attract a USD120 reward. On the contrary, a high-severity bug may attract over USD10,000.

What is a Crypto Bounty Hunter?

The popularity of these programs has given rise to a new breed of participants in the crypto arena – the “crypto bounty hunter”. A crypto bounty hunter is an individual interested in pursuing various reward programs or profits while promoting a crypto project. They can participate in several reward programs and earn rewards simultaneously, such as identifying bugs and promoting a project.

For example, a bounty hunter could hunt bugs within a crypto project and report to the development team in exchange for a reward. In most cases, the “hunters” are rewarded using the project’s native currency.

BRC-720

BRC-720 is an AI-driven protocol for creating 3D NFTs.

What Is BRC-720?

You’ve probably come across BRC (Bitcoin Request for Comment)–20, the experimental standard for creating fungible tokens on the Bitcoin blockchain. But what is BRC-720?

BRC-720 is a novel AI-empowered asset standard in the Bitcoin ecosystem that can generate three-dimensional (3D) non-fungible tokens (NFTs). BitWorld created BRC720 to bring artificial intelligence (AI) features to the blockchain, allowing users to create characters and inscribe on-chain game components on the Bitcoin blockchain.

BRC-720 Features

Some of the key features of the AI-empowered protocol includes:

• Text-to-Image generation – The protocol allows users to convert textual descriptions into images using advanced neural network architectures. 
• Image-to-3D generation – It facilitates image-to-3D generation, enabling users to transform two-dimensional (2D) images into immersive, 3D representations. The protocol typically extracts spatial information from the 2D images and uses the information to rebuild them into 3D models.
• Text-to-3D transformation – The BRC-720 AI protocol can also directly convert textinputs into 3D models. It uses advanced tools and techniques in natural language processing (NLP) and 3D modeling to interpret textual descriptions, extract spatial information, and transform it into a 3D representation.

Why is the BRC-720 AI protocol important?

Bringing AI features, such as text-to-image, text-to-3D, and image-to-3D generation, to blockchain offers developers, artists, and Bitcoin users an environment to explore the potential of on-chain games. 

For instance, combining AI and NFT assets on-chain facilitates user-led asset issuance. This allows users to decide how their NFTs are generated, such as 3D models in blockchain games. Therefore, the protocol binds the original NFT’s collection information with new 3D assets.

The protocol also brings a wide array of use cases, such as the integration of 3D assets with Web3 games, social agents, avatars, AI agents, and metaverse. This use case innovation facilitates autonomous social interactions and digital asset trading.

Moreover, BRC-720 embodies technical innovation, enabling the transformation of text and 2D images into 3D models while minimizing 3D storage.

Breakout

A breakout is when an asset’s price moves below a support level or above a resistance level. Breakouts are used to identify potential trends and trading opportunities.

What is a Breakout in Cryptocurrency?

In cryptocurrency, a breakout is when the price of a specific cryptocurrency goes above a predefined resistance level or below a support level. Breakouts are used in technical analysis. They are often sudden and accompanied by high trading volumes and increased volatility.

Breakouts can either be bullish or bearish.

A bullish or upward breakout occurs when a crypto’s price moves above the resistance level. The resistance level is the price point where the upward movement of a cryptocurrency’s price stops due to significant selling pressure.

A bearish breakout (also called a downward breakout or breakdown) occurs when the price of a cryptocurrency falls below the support level. The support level is a specific price point where the downward movement of a cryptocurrency’s price stops due to significant buying pressure. 

However, if a breakout doesn’t sustain the trend of its direction, it becomes a fakeout, also called a false or failed breakout. This occurs when the price moves beyond the resistance or support area but quickly reverses.

A bullish breakout is a technical sign that the buying pressure is stronger than ever, while a bearish one indicates an intensified selling pressure. As such, bullish breakouts may signal a new upward price trend. Bearish breakouts may signal the start of a new downward trend with the potential to reach new lows.

How Do You Identify Crypto Breakouts?

Breakouts are used in technical analysis to identify potential price movements beyond key support or resistance levels. Traders recognize breakouts by studying historical price movements or analyzing chart patterns and line charts.

Investors can also gain insight into price trends by identifying the existing resistance and support areas. This can be achieved by observing crypto trading columns, or using technical indicators such as Moving Averages, Bollinger Bands, or Relative Strength Index (RSI).

 

BUIDL

The term “BUIDL” is a call for crypto users and enthusiasts to build and contribute to the progress of the blockchain and crypto space, as opposed to passively holding digital assets.

What is BUIDL?

The term “BUIDL” is used to urge crypto factions to proactively contribute to the development, evolution, and adoption of cryptocurrencies and blockchain technology. This could be as simple as utilizing decentralized applications (dApps), beta testing crypto projects and products, using smart contracts, playing blockchain games, using cryptocurrency wallets, or utilizing crypto as a payment method.

BUIDL is formed by purposely misspelling the word “build” (obviously), in the same vein as HODL. HODL is far more popular in the crypto space, originating from a typo by a crypto enthusiast in a Bitcoin forum in 2013 when referring to HOLDING Bitcoin. It is used to reference holding one’s digital assets for the long term. 

The logic behind BUIDL is that a crypto enthusiast who believes in a project’s prospects needs to play their part and help advance the project, rather than holding an asset and waiting for its price to increase. The BUIDL movement argues that some projects genuinely rely on user participation to take off. It also compels users to learn, comprehend, and create, rather than spectate and speculate.

Though the origin of the term is still unclear, notable figures in the blockchain and crypto industry regularly use it to advocate for the BUIDLing of the entire ecosystem. Vitalik Buterin, Ethereum’s founder, used “BUIDL” in a 2018 tweet to cite Ethereum’s development. Binance founder Changpeng Zhao also uses the term to motivate the crypto community to contribute to the ecosystem, instead of just HODLing.

 

Bull Market

A bull market is a period of sustained upward trend when asset prices are steadily increasing.

What is a Bull Market in Crypto?

A crypto bull market (bullish market) defines a market with a strong positive trend in cryptocurrency asset prices. It occurs when cryptocurrency asset values surge by 20% or more from recent lows. Individuals with positive sentiments about the cryptocurrency market are known as “bulls” and are said to be “bullish”.

Typically, there is a positive market sentiment as investors are optimistic about crypto assets. They are driven by greed and fear of missing out (FOMO) on profitable opportunities when the prices increase further. As such, the buying pressure is relatively high in bullish markets, upsetting the forces of supply and demand. This makes the cryptocurrency prices to rise. The most recent bullish market was in 2021. 

Bull markets exhibit characteristics such as:

• A steady increase in crypto prices
• Demand is greater than the supply
• Positive investor sentiments
• General optimism and confidence even on social media platforms.
• Increased trading volume or market activity.

What Causes Bullish Markets?

They are generally caused by investor confidence and optimism that an asset’s price will continue rising and they will benefit from purchasing now. In traditional markets, it could be a strong economy characterized by low unemployment rates and high gross domestic product (GDP), which boosts investor confidence.

In cryptocurrency markets, the emergence of bull markets is sometimes influenced by a simple “To the moon” tweet from an influential figure in the crypto space. A display of confidence in cryptocurrency by giant traditional financial institutions can also jump-start an uptrend. 

However, bull markets do not last forever and there is no way to tell how long a cryptocurrency bull run will last. Hence, the crypto market will experience price correction at some point. And when asset prices start declining, investors are likely to panic-sell, causing a downward trend in prices. If the asset prices decline by 20% or more from recent highs, it is considered a “bear market”, the opposite of a bull market.

Buy The Dip (BTD)

Buying the dip refers to the practice of buying an asset when the price drops.

What Does ‘Buy The Dip’ Mean in Crypto? 

Buy the dip (BTD) is a phrase that cryptocurrency enthusiasts use to encourage purchases when asset values drop. They typically have a favorable long-term outlook of the market, and see these declines in prices as an opportunity to buy and add more of their favorite assets to their portfolio. For optimistic investors, the drop in value is seen as a short-term phenomenon that will reverse with time.

Some users who use this strategy during price declines also see it as a dollar cost averaging (DCA) strategy. These users already own units of that asset and are looking to buy more at a cheaper price. This allows them to lower the net average purchase price of a cryptocurrency already in their portfolio. The strategy helps minimize some effects from the crypto market’s high volatility.That said, there is no way to predict where the price decline will stop, and so users who buy the dip could see even further price declines. 

Some users buy the dip during pull-backs in a bull market. Once the uptrend continues, they earn their profit. Long-term traders, prefer it during a bear market, when prices are generally much lower across the market. 

The decision to buy the dip is primarily driven by a strong belief in a project’s long-term potential. It is vital to always do your own research (DYOR) before deciding on whether or not to engage in this strategy for any cryptocurrency. 

Buy Wall

A buy wall is the result of a large buy limit order(s) placed on a cryptocurrency when it hits a certain price. Automated trading algorithms are responsible for most buy walls.

What Is a Buy Wall?

A buy wall in crypto refers to a massive single buy order or multiple buy orders placed on the order book when a cryptocurrency hits a specific price. It occurs when the buy limit orders significantly exceed the volume of sell orders.

Buy walls can be caused by a single trader if the trader is a whale, or an organization with enough liquidity to have an impact on the value of a cryptocurrency by either selling or buying in bulk. They can also be created by hedge funds, trading institutions, automated trading bots, or a group of traders or investors working together.

The main purpose for buy walls is to prevent the value of a certain cryptocurrency from going below a certain threshold. However, it could just be an investor trying to increase their crypto holdings when they are bullish on it.

Buy walls are also a response to attempted price manipulation, where a whale has the power to move the market up and down with big buys. In such cases, the buy walls may appear quickly and disappear once the whale has achieved their goal of price manipulation.

For example:

Say the price of BTC has been trailing below USD16,000 for more than 2 months and the market no longer seems appealing to investors. An institutional investor or whale, understanding that fear will soon creep in and investors will start liquidating, makes a purchase of 5,000 BTC at USD15,000 each. This is likely to illustrate a spike in demand, hence, driving the price up.

Generally, buy walls are meant to change the market impression so that it appears that the demand for a particular asset is high to drive the price up. Buy walls have the potential to influence crypto market prices.

Byzantine Generals’ Problem

The Byzantine Generals’ Problem is a game theory problem that illustrates how difficult it is for decentralized parties to arrive at a consensus or agree on a single truth without relying on a trusted third party.

What is the Byzantine Generals’ Problem?

The Byzantine Generals’ Problem is a classic game theory problem that has become particularly appropriate for decentralized networks and blockchain.

The problem derives its name from the ancient city Byzantium, which had complex communication and defense systems. The problem is set during an attack on an enemy city, when the generals have to coordinate a joint attack. In the problem, the generals can only communicate with each other through messengers for a course of action. However, some of the messengers or generals may be traitors who might deliver false information, which would lead to a failed attack. The goal is to find a way for the loyal generals to arrive at a consensus despite the possibility of conflicting messages from traitors.

The problem arises because the generals cannot trust their messengers to deliver accurate information. In the context of decentralized systems, the Byzantine Generals’ Problem demonstrates the difficulty in coordinating network users in a trustless environment to come to a common consensus. This is because nodes, which are anonymous and could theoretically be malicious, have to trust each other to arrive at a consensus on a shared ledger.

How does Blockchain Solve the Byzantine Generals’ Problem?

Blockchain technology solves the Byzantine Generals’ Problem through protocols that use fault-tolerant mechanisms like proof-of-work (PoW), proof-of-stake (PoS), and delegated proof-of-stake (DPoS) mechanisms. Blockchains create a layer of trust through a consensus mechanism, where the participating nodes have a copy of the ledger. Every transaction has to be verified by a majority of the nodes for it to be added to the ledger, creating a tamper-proof record of all the information on the network. In addition, blockchains utilize cryptographic methods for encryption to ensure the security of transactions or information within the network.

For example,  Bitcoin addresses the problem by using a blockchain network to hold all transaction history in a public and trustless manner, where all participating nodes have to agree on the transactions that occurred and in the order in which they occurred. Several cryptocurrencies, including Bitcoin, use the proof-of-work mechanism that requires nodes (who represent the generals) to solve a mathematical puzzle in order to add new blocks to the blockchain. The amount of computational work required makes it difficult for a single node to manipulate the blockchain’s history.

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