No, these are not alien vocabulary words. They’re among the hundreds of words coined around the cryptocurrency language. And while you may know a concept or two about digital currencies, some things are simply nice to know while others must be known. Below is a collection of street jargon and official terms to add to your crypto vocabulary if you’re going to survive the semantic web.
All cryptocurrency coins feature unique addresses used to identify them on the blockchain. If the blockchain was a GPS, you could think of your crypto address as its designated mailing address. Coins exist due to addresses since that is how the blockchain can verify a digital currency’s existence. An address will vary depending on your crypto wallet. A sample address would look like this: 21VZNX1SV5NtKa8UQFxwQbFeFc3iqRYhyz.
An altcoin is virtually any coin other than Bitcoin (BTC). So Ethereum, Ripple, NEXT. Coin, and so on, are altcoins. The exact number of existing altcoins goes beyond 1,000, with new ones popping up almost daily.
An altcoin is also an alternative protocol digital asset; therefore, these coins operate by a different set of rules (protocols) to those of BTC.
Two or more cryptocurrency exchanges can have differences in the pricing of assets. For example, if NEXT. Exchange is selling BTC at €33,457, and another platform sells that same at €33,460; taking advantage of the price difference is referred to as arbitrage. Thus, a trader can buy a digital asset from platform X and sell it to Y at a profit.
All-time-high, abbreviated as ATH, understanding this term alone can help you track market prices. However, digital assets are some of the most volatile asset classes, noting their ATH can be a formidable strategy. For instance, a digital currency can record several highs before settling on an all-time high.
Traders will mostly maintain either a bearish or bullish sentiment towards a market or asset class. If a trader is a bear, they generally believe that the price of an asset will decline. Therefore, such a trader is likely to take a short position towards a purchase. Short positioning happens when a trader sells an asset first only to repurchase it at a lower price.
Bitcoin is the first cryptocurrency established in 2009. It possesses the highest market value, and its value has climbed steadily through the years. Bitcoin has in recent times fluctuated from highs of €50,000 to lows of €25,000.
Formed from the original Bitcoin, Bitcoin Cash is a peer-to-peer electronic cash system. The coin was built to offer more stability where Bitcoin proved too volatile. However, while it’s made to optimise transactions, its use and market value remain far behind Bitcoin.
Blocks are chunks of data within the blockchain network. The blocks, just like ledgers, contain transaction records for users so that any time a trader buys or sells a cryptocurrency, the record is captured and stored in one of the blockchain’s blocks. Every block is built to hold a limited data size, and once it runs out of storage, a new block is formed in the blockchain.
This is one of the buzzwords in this area, and perhaps half of the people who use it don’t entirely know its meaning. For example, a few years ago, an associate of mine confessed they used to link blockchain to some Blackhat operation in Russia.
But that aside, blockchain is a form of a distributed ledger with a record of all cryptocurrency transactions. As earlier mentioned, the transactions in the blockchain are stored in the form of data blocks. A new block is created every time an older one runs out of space, and the process goes on and on. Unlike individual cryptocurrencies, the blockchain is a public network, so no particular person or organization has a monopoly over it. Blockchain is pretty much like Bitcoin, as they are both public forms of tech.
The blockchain does not have a specific location for data storage. Instead, recorded transactions are distributed across thousands of computers in its network called nodes, making it impossible for anyone to alter its data.
Bullish is the opposite of a bearish trader or market. A trader who believes that the price of an asset will rise is a bull. When the overall sentiment points towards a rise in asset prices, the market is said to be bullish.
Like a fiat current note or coin, this is the virtual storage of the value of a cryptocurrency. A coin resides on a crypto network or blockchain, with some coins running on their networks such as Bitcoin, NEXT. Coin, and so on. However, others will run on networks with different names from their coins. Lumen coin, for example, runs on the Stellar blockchain.
You can store cryptocurrencies either online or offline. Offline, they’re stored on a device called cold storage or cold wallet. These devices look like USD drives as they are in physical form. Cold wallets are preferred since they offer offline storage for digital assets, thus limiting access by hackers or crypto burglars. On the downside, they pose the risk of getting lost with your entire assets.
A cryptocurrency’s network will reach a consensus regarding a transaction when all the nodes are in agreement. Nodes are computers that regulate a coin’s network. Consensus is vital in ensuring data consistency throughout a network. Distributed ledger systems are run by consensus, making it virtually impossible to alter or interfere with data.
A currency that is built on cryptography technology is called a cryptocurrency. Cryptography offers a complex way of coding information, so it’s only accessible by the intended users. Cryptocurrencies leverage cryptography to protect their data as well as stored value.
The word cryptography has two meanings – crypto means “hidden,” and graphy denotes “writing.” It is a coding technique used to develop cryptocurrencies.
Distribution Denial of Service (DDoS) occurs when multiple computers overwhelm a system with malicious data or dozens of requests. Usually, the attackers intend to prevent a system from executing its normal functions, such as serving a web page.
Nefarious parties can attack cryptocurrency exchanges to prevent them from performing their routine tasks while stealing digital assets from the platforms. And even when no theft occurs, sometimes all they intend to do is make the exchange users disgruntled enough to quit using it.
Decentralization is the process of shifting power or authority away from a central point. The blockchain operates on a decentralized system to eliminate any form of central control over cryptocurrency transactions or data. This way, if any change occurs in the network, all the nodes will have to agree.
Decentralized apps (dApps) are open-source tools built on the blockchain for everyday use. The mother of dApps is considered Ethereum, created to help developers build apps based on its blockchain.
It’s hard to pin a specific definition to dApps, but they are primarily based on a few standard features:
· They are open-source, meaning the software is free and available for modification and distribution.
· They are decentralized
· They have protocols (run based on a set of predetermined rules)
· The app validators are incentivised (they receive tokens for their contribution)
Decentralized Finance (DeFi)
DeFi is an alternative to the convention centralized finance system. Unlike the centralized banking system, for example, DeFi is a decentralized structure of money management, payment processing, and banking offering democratised financial transactions.
In short, with DeFi, parties can transact without the need for an intermediary such as a bank, government, or financial institution - pretty much the way cryptocurrencies are operated.
Contrary to what most people believe, digital currencies are not pegged to cryptocurrencies only. Fiat currencies can also be in digital form. For instance, China and the US currencies are digitally linked. In the fiat world, digital currencies are based on trust since a lot of institutions participate in the involved transactions.
With crypto, however, transactions are trust-less, and you can seamlessly verify details in real-time without involving a third-party individual or institution. Digitised fiat currencies have to build trust to transact – consider the example of PayPal. You transact using the platform because you trust it.
A distributed ledger is a data-recording system that spreads or distributes information across several devices called nodes. All cryptocurrency transactions are recorded in a distributed ledger on the blockchain. Whenever you see the phrase “distributed ledger,” think of blockchain.
An escrow is a third-party platform holding a cryptocurrency or fiat on behalf of transacting parties. For example, two parties unknown to each other will hold assets in an escrow until the buyer receives the purchase in exchange for their money.
After Bitcoin, this is the second-largest crypto, currently valued at €1973 with a market cap of €237 billion. Apart from being a cryptocurrency network, it is also a software tool for developing new applications. Ethereum is associated with a digital currency called Ether.
An exchange is essentially a marketplace for cryptocurrency buyers and sellers. For example, if you wish to own BTC, buying one through an exchange offers the most straightforward and fast way of achieving that. Different exchanges trade different currencies. For example, NEXT. Exchange deals in hundreds of cryptocurrencies, including Ethereum, Bitcoin, NEXT. Coin, Ripple, etc.
Fiat is government-backed money such as the Euro and USD. The value of a country’s currency is dependent on the collective faith placed in the institution of that state. For example, should the Netherlands government crumble today, its currently would drastically lose value.
FOMO is an abbreviation of “fear of missing out.” When investors start oversubscribing to an asset with the belief that its price will soon rise, the market could endure FOMO. As a result, investors will rush to buy assets to not miss out on some speculated gains.
This is a common occurrence, especially with assets that tend to undergo sharp gains followed by dips.
When the blockchain network users change its protocol, it could either result in a new network that follows the old rules (protocols) or a new one with its own set of rules. An example of a fork is Bitcoin Cash, as it was built off Bitcoin.
FUD is an abbreviation of “Fear, Uncertainty, and Doubt.” This concept is premised that market participants might spread false or inaccurate information to trigger a decline in an asset’s price. For example, a mischievous trader might want to trigger a price drop so they can buy an asset cheaply or short it to generate gains.
Transactions carried out on the blockchain attract a form of a fee called gas price. Technically speaking, you’re compensating a miner for going out to get crypto for you. However, gas prices will vary depending on your preferred transaction speed; generally, lower fees result in slower transaction speeds while higher costs afford you faster transactions.
Gas pricing is currently a concern in the crypto community, with many constantly looking for ways to drive it down. For example, lowered energy costs could help reduce the mining costs and thus transaction fees.
This is the first-ever block of crypto to be mined.
A hard fork occurs when the rules or protocols of a cryptocurrency are permanently altered. When this type of fork happens, a new blockchain is created, which gets rid of the network with the older rules. This means that new blocks of crypto mined using the old protocols will not be accepted in the new blockchain.
However, both the new and old blockchains can operate, just with different protocols.
Although the word came to exist due to an error by a developer during a Bitcoin forum in 2013, it was modified to mean “hold on for dear life.” It denotes a passive trading strategy where traders buy and hold on to their cryptos instead of selling or spending, hoping the prices will rise.
Each Bitcoin code has a built-in feature that regulates the number of blocks mined after every four years. The code ensures that the number of new Bitcoins entering the market is slashed by half after every four years of mining. The halving is meant to regulate the demand and price of Bitcoin.
A hash is a unique set of numbers and letters connected to buyers and sellers and identifies each block of transactions.
A hot wallet is a crypto wallet connected to the internet. Unlike hardware wallets, hot wallets are software-based. Therefore, unless a hot wallet is well-secured, digital assets stored can easily get stolen by hackers. On a positive note, online wallets feature faster and convenient modes of access.
Initial Coin Offering (ICO)
If you’re familiar with the traditional Initial Public Offering (IPO) concept used by companies to secure funding, then you’ll undoubtedly relate it with ICO. An ICO is a modern way for individuals and companies to raise funds. With ICO, it’s all about identifying the right set of investors as opposed to netting finances.
A trader goes long or takes a long position when they place a bet on an asset, hoping that its price will upswing. For instance, if you purchased a Ripple coin, you’re creating a wager that its price will rise.
It refers to the current value of all the mined cryptocurrencies. Just like the market cap of a stock is evaluated by multiplying the number of shares by their market value, a coin’s market cap is calculated based on the mined coins and their current market value.
New blocks of a cryptocurrency can be created through a process called mining. Consider the example of Bitcoin, which is released to the market every time a new block is mined. Here, mining entails confirming every transaction and arranging them in data blocks.
The mining process requires a great deal of energy and time, with miners earning BTC tokens for their time and resources.
Mining incentive is a form of compensation to cryptocurrency miners for the electricity they use as well as their time and skills. Miners require specialized hardware to mine and arrange transactions in blocks, thus the incentive.
Initially, miners would receive incentives of 50 BTC for their roles. However, the compensation has since been reduced to 12.5 BTC.
If the price of a cryptocurrency sharply rises in value, it is said to have mooned. For instance, we like to talk about how NEXT. Coin is soon going to “moon.”
This is a computer connected to a blockchain network.
Non-Fungible Tokens (NFTs)
NFTs are data stored in a digital ledger such as blockchain, and the data represents the value of a specific object such as a trading card, art, or music.
Experts in the investment space like to describe newbies as “noobs.” Noobs are customarily advised to sit back and watch how things happen in the markets before jumping in headfirst.
An engagement among users without the need for a third-party intermediary.
A public key represents your bank account in the crypto field. People sending you money will do so using your public key, and you can share it with them even when authorizing a withdrawal from your cryptocurrency wallet.
Your private key, as the name suggests, is not to be shared with anyone. It’s a string of numbers and letters used to verify transactions on your wallet. When someone gains access to your private keys, they can authorise purchases, funds transfer, or lock you out of your wallet.
Proof of Authority (PoA)
A few selected nodes can approve mining activities for miners in a setup where a blockchain network operates with the proof of authority, including creating new blocks, transacting, etc. This is a more centralized approach but much faster in task execution.
Proof of Work (POW)
POW is the conventional approach to incentivising miners. Unlike the PoA model, POW requires the miners to demonstrate their commitment by attaching a variable to the transaction hashing process. Thus, the hashing process shows the efforts of a miner and their compensation thereof. However, this concept is known to require a lot of energy (electricity) to accomplish.
Proof of Stake (PoS)
PoS is all about a miner’s stake in the game. It’s purported that a miner will be allowed to validate or mine cryptocurrencies based on the coins they own. The concept assumes that a miner is unlikely to abuse the network if they have a stake in it.
Blockchains have their public ledgers. The ledgers contain every transaction ever made on that network and can be accessed by anyone as long as it’s a public blockchain. However, some coins are run on private blockchain networks, so that their ledgers will have restricted access.
Pump and Dump
In a “pump and dump” scenario, a single or several market participants team up to inflate the price of an asset and sell it expensively to make a profit. Technically, they artificially inflate an asset’s price to a temporary high. With the widespread usage of group apps such as Telegram, traders will typically team up and arrange for a pump and dump scheme to skyrocket certain asset prices.
“Rekt” is a twisted version of “wrecked” popularly used in the crypto community. When a trader is said to be “rekt,” it means they lost a great deal of money.
Return on Investment, abbreviated as ROI, is a common investment phrase used to describe gains from an asset such as BTC or stocks. For example, people invest in crypto, hoping to get some profits in return for their time and money.
This is the creator of the first cryptocurrency, Bitcoin. Unfortunately, to date, not a single person knows the true identity of Satoshi, or whether it’s a robot or a group of people.
Your cryptocurrency wallet is founded on the seed. It is a combination of twelve to sixteen words used to retrieve your wallet if you lose it or forget your private keys. A seed combination is an equivalent of answering twelve to sixteen questions due to a forgotten password. That is why your ‘seed’ must never be compromised.
Segregated Witness (SEGWIT)
The SEGWIT allows miners to fit more transactions in one block, thus raising the transaction speed. In simpler terms, it’s a blockchain add-on for increasing the rate of transactions.
Shorting a digital asset means that you’re betting that its price will drop soon. This can be achieved using multiple techniques, including margin trading, futures, and options. However, while it’s known to work, it attracts many risks, especially with the volatile nature of cryptocurrencies.
Smart contracts are codes that automatically enact the terms of an agreement. Ethereum is the network behind the introduction of smart contracts, and it’s one of its most prominent value propositions.
Unlike cryptocurrencies, the value of a stable coin is tied to another commodity or non-digital currency. An example is the Tether coin, whose value is pegged to the USD.
A token is a unit of a cryptocurrency. Some utility tokens are meant for particular ecosystems, and they’re referred to as utility tokens. The other category is security tokens, digitised versions of traditional instruments such as bonds and stocks. Security tokens essentially represent a person’s stake in a company.
The inventor of Ethereum back in 2015.
A wallet is a holding place for your cryptocurrencies. Wallets come in two types: cold and hot; the former is an offline storage device while the latter is online-based.
The most valuable addresses for Bitcoin are called Whales. Currently, there are about 2,000 BTC whale addresses, with only three owning about 100,000 coins. So think of Bitcoin whales are crypto tycoons.
Cryptocurrency developers usually create white papers for each asset. A white paper is a coin’s blueprint, offering every last detail about a digital asset, including the tech behind it, the number of created coins, and much more.
Wrapping It Up
There you go - all the crypto terms and jargon you need to know to navigate web 3.0 safely. Do bookmark this guide, as we’ll be building on the list in the next couple of months.
In closing, understanding the related terms is a step closer to getting it right with cryptos. By grasping these terminologies, would-be investors will immensely boost their chances of attaining their end goals.