Leverage

Leverage refers to trading using borrowed money. When using leveraged financial instruments, a trader borrows a multiple of their existing capital to buy an asset with.

Leverage on profitable trades can amplify returns considerably. For example, let’s presume that the current BTC price is $10,000. A 10x leveraged position with $1,000 starting capital would allow the trader to buy 1 BTC. If BTC price rose 10% to $11,000, the position would be in $1,000 of profit. Meanwhile, a non-leveraged $1,000 position would return just $100 of profit.

Leverage also increases potential losses. In the above example, if BTC price decreased by 10%, the non-leveraged position would lose $100, while the leveraged one would lose all $1,000 of the initial capital. It’s vital to understand these risks before using leveraged financial instruments.

Node

A node refers to an individual computer system that forms part of a network. In cryptocurrency networks, distributed nodes validate and relay transaction data in place of a central authority. This decentralization removes any single point of failure, increasing the network’s overall resilience.   

Nodes each run a similar open-source software implementation and store either a complete or partial copy of the network’s total transaction history. They compare newly submitted transactions with their own record to confirm their validity. Nodes also enforce network rules by rejecting blocks of transactions from miners following a different ruleset.

Peer-to-peer

If a network is described as peer-to-peer, or P2P, it means that all connected systems — i.e., nodes — share the same privileges. Cryptocurrency networks are peer-to-peer because all nodes are of equal authority, and transaction data is shared among nodes without reliance on coordination from a centralized server with additional privileges.

Anyone can join a peer-to-peer network. All they need is a device, a way to connect with other nodes (usually the internet) and a piece of software. As well as its use in cryptocurrencies, peer-to-peer networking was used in early file-sharing applications like Napster and LimeWire.

Satoshi Nakamoto

The pseudonym of the anonymous individual or group that created Bitcoin. Satoshi Nakamoto published the Bitcoin white paper in October 2008. They launched the network the following January.

The mysterious programmer continued to be involved in Bitcoin development until their departure in April 2011. In their final message to Bitcoin Core developer Mike Hearn, Nakamoto claimed that they had “moved on to other things.”

Like Nakamoto’s true identity, no one knows the reason behind the sudden disappearance. However, some speculate that the programmer was becoming uncomfortable with the attention Bitcoin was receiving — notably from the CIA.  

Since their disappearance, there have been plenty of rumors about who Nakamoto is or was. A few individuals have also claimed themselves to be Bitcoin’s creator. However, no one has ever proved it by signing a message using the cryptographic keys from Bitcoin’s Genesis Block or transacting any of the roughly 1 million BTC believed to have been mined by Nakamoto in the network’s infancy.

Trustless

In centralized, closed-source programs and applications, only those granted access by the central authority can inspect the code to see exactly how it works. When using closed-source applications, the user is forced to trust that the code is free of vulnerabilities, backdoors and other potentially harmful functions.

By contrast, cryptocurrency networks are described as trustless because all code is freely available and open-source. Anyone can inspect the software’s code and know for certain all its functions. Developers can also build their own software implementations based on open standards and already-published code for additional peace of mind.

Verification

As part of a commitment to fight terrorist financing, money laundering and other illicit activity, financial services companies must check that a customer is who they claim to be. These checks — also known as Know Your Customer verifications — involve a customer proving their identity using a government-issued document.

The regulations that impose KYC verification checks are often referred to as AML (i.e., anti-money laundering) and CTF (i.e., combating terrorist financing) measures. The Financial Action Task Force sets global standards. National and supranational agencies, such as Europe’s EBA, the U.S.’s OCC, Russia’s FSFM and Singapore’s MAS, develop and enforce regulatory frameworks at a more local level.