Bank Run: A situation where a large number of customers withdraw their deposits simultaneously due to fears of the bank’s insolvency.
Bearer Instrument: An asset whose ownership is proven solely by possession (e.g., physical cash or a private key).
Cantillon Effect: The uneven distribution of new money into an economy, where those closest to the source of money issuance benefit at the expense of those furthest away.
Crusoe Economics: A simplified economic model using a single individual (Robinson Crusoe) to illustrate fundamental principles of saving, capital accumulation, and time preference.
Debasement: The practice of lowering the value of a currency by reducing the amount of precious metal in coins.
Fiat Money: Currency established as money by government regulation or law, not backed by a physical commodity.
Fractional Reserve Banking: A banking system in which only a fraction of bank deposits are backed by actual cash on hand and available for withdrawal.
Fungibility: The property of a good or a commodity whose individual units are essentially interchangeable.
Hardness (Hard Money): A measure of how difficult it is to produce more of a specific form of money. High Stock-to-Flow equals high hardness.
Inelasticity: An economic situation where the supply of a good does not change regardless of how much its price increases.
Marginal Utility: The additional satisfaction or benefit (utility) a consumer derives from buying an additional unit of a commodity or service.
Nixon Shock (1971): The series of economic measures taken by US President Richard Nixon, most notably ending the direct convertibility of the US dollar to gold.
Positive-Sum Game: A situation where the total of gains and losses is greater than zero, meaning both parties can benefit (e.g., voluntary trade).
Praxeology: The study of human action based on the premise that humans act purposefully to achieve goals.
Salability (Liquidity): How easily a good can be exchanged for other goods or services with minimal loss of value.
Seigniorage: The difference between the value of money and the cost to produce it; effectively the profit of the money issuer.
Stock-to-Flow Ratio: The ratio of the total existing supply of an asset to its annual production.
Time Preference: The ratio of valuation between present goods and future goods. Low time preference means valuing the future more.
ASIC (Application-Specific Integrated Circuit): Specialized hardware designed for the sole purpose of mining Bitcoin (calculating SHA-256 hashes).
Asymmetric Cryptography: Also known as Public-Key Cryptography. A system that uses a pair of related keys: a Public Key (to encrypt/verify) and a Private Key (to decrypt/sign).
Blind Signature: A cryptographic technique that allows an authority to sign a message without seeing its content, ensuring the privacy of the requester.
Centralized Mint: A central authority that verifies and prevents double-spending in a digital cash system (e.g., DigiCash).
Crypto-Anarchy: The use of cryptography to protect individual privacy and freedom from government surveillance and coercion.
Digital Signature: A mathematical scheme for demonstrating the authenticity of digital messages or documents.
Double-Spending: The risk that a digital currency can be spent more than once.
Hash Function: A mathematical algorithm that maps data of arbitrary size to a bit string of a fixed size (a hash). It is a “one-way” function.
Hashcash: A proof-of-work system used to limit email spam and denial-of-service attacks, and more recently used in Bitcoin.
Merkle Tree: A data structure in which every leaf node is a hash of a data block, and every non-leaf node is a hash of its child nodes.
Merkle Root: The single hash at the top of a Merkle Tree that represents all the underlying data (transactions) in that tree.
Nim (Pseudonym): A digital identity used to interact online without revealing one’s physical identity (e.g., Satoshi Nakamoto).
Pre-image Resistance: The property of a hash function where it is computationally infeasible to find any input that produces a specific output.
Private Key: A secret piece of data that allows a user to spend Bitcoin or sign messages. “Not your keys, not your coins.”
Proof of Work (PoW): A mechanism that requires a participant to perform computational work (burn energy) to prove their honesty and secure the network.
Public Key: A cryptographic key that can be shared with anyone. It is used by others to send you Bitcoin or verify your digital signatures.
SPV (Simple Payment Verification): A method that allows a user to verify their transactions without downloading the entire blockchain, by checking only block headers and Merkle paths.
Symmetric Cryptography: An encryption system that uses the same key for both encryption and decryption.
UTXO (Unspent Transaction Output): The fundamental unit of Bitcoin. Bitcoin is not stored in accounts but as individual “outputs” that haven’t been spent yet.