Cryptocurrency Vocabulary
By Scott Smith
Bitcoin
On January 3, 2009, the first and most valuable cryptocurrency was launched. While its value has steadily increased since then, it has experienced wild fluctuations.
Block
Data sets within a blockchain. Blocks on cryptocurrency blockchains are made up of transaction records created when users buy or sell coins. Each block can only hold a limited amount of data. When it reaches that limit, it creates a new block to continue the chain.
Gas
A fee is paid to the Ethereum network by developers in order to use the system. Ether, Ethereum’s native cryptocurrency, is used to pay for gas.
What is ATH (All-Time High)?
The highest price reached by an asset.
What is ATL (All Time Low)
The lowest price by and asset, not used often, but I have seen it from time to time to signify a good entry point in a valid project.
What are Alternative Coins (Altcoins)?
Aside from Bitcoin, there are thousands of other digital cryptocurrencies that are based on blockchain technology.
Each coin is distinct and innovative in its own right. The vast majority of altcoins are unrecognized, with a low daily trading volume and market capitalization. However, several examples of alternative coins, such as Ethereum and Ripple, have good liquidity and can be traded against FIAT currencies. Many of the thousands of altcoins have bled out their value and simply vanished over the years.
Who is a Bitcoin Maximalist?
Such a person believes in Bitcoin solely and unequivocally. Other altcoins are usually considered unworthy and unnecessary by the maximalist or “shitcoins.”
What is Block Reward?
The compensation that miners receive for successfully validating new transactions and recording them on the blockchain.
What is Blockchain?
Blockchain can be thought of as a massive information file that contains a record of all transactions that have ever occurred. Blockchain is at the heart of the Crypto network and functions as a sort of ledger.
What is a Centralized Crypto Exchange (CEX)?
A cryptocurrency exchange is an online trading platform that allows users to trade cryptocurrencies and fiat currency. Centralized means that the exchange is run by a single entity that has complete control over it.
The majority of crypto exchanges only allow crypto-to-crypto trading. The larger ones, on the other hand, support crypto-to-FIAT trading. Binance, Coinbase, Kraken, Bitstamp, and BitFinex are the most popular exchanges.
What is a DAO?
A DAO, or Decentralized Autonomous Organization, is a non-centralized organization that is usually run by shareholders and has a transparent set of rules encoded on a computer program.
What are dApps?
Decentralized Applications, or dApps, are applications built on top of blockchain technology that does not have a centralized operational authority.
What is DEX?
A DEX, or decentralized exchange, is an exchange that does not have a centralized authority — it is not run by a company. DEX has some advantages over CEX in terms of security — they are more difficult to breach — as well as regulations.
What is DeFi?
DeFi, or Decentralized Finance, is a new monetary system based on public blockchains that do not require the participation of a centralized institution.
What is a Digital Address?
A string of letters and numbers ranging from 27 to 34. Each address is distinct. An example of a digital address is as follows: 135sti2R9ZooiGrFFRJxYGeDvF5Uvjj7JK.
Cryptocurrency wallets are represented by digital addresses. To send cryptocurrencies or funds, we must use the recipient’s digital address.
What is a Digital Wallet?
A digital wallet is an application that stores digital currencies on a local computer (PC), a mobile app, or a remote server. The majority of digital wallets are designed to store Cryptocurrencies. To store funds, a digital wallet employs both public addresses and private keys.
Cold storage paper wallets or hardware wallets, such as Trezor and Ledger, are the most secure digital wallets. More information on digital wallets can be found here.
Cold Wallet/Cold Storage
A safe way to keep your cryptocurrency completely offline. Many cold wallets (also known as hardware wallets) are physical devices that resemble USB drives. This type of wallet can help protect your cryptocurrency from hacking and theft, but it also has its own risks, such as losing it along with your cryptocurrency.
Hot Wallet
A cryptocurrency wallet that is software-based and connected to the Internet. While these wallets are more convenient for quickly accessing your crypto, they are more vulnerable to hacking and cybersecurity attacks than offline wallets, just as files stored in the cloud may be more easily hacked than those locked in a safe at home.
Public Key
The address of your wallet, which is similar to your bank account number. You can give people or institutions your public wallet key so they can send you money or withdraw money from your account when you authorize it.
What is a Private Key? What is Seed?
Each public or digital address has a distinct private key that must be used to gain access to the funds. A seed phrase is a more compact way of representing a private key. The seed is made up of 12 or 24 words.
What is FIAT?
Any physical currency backed by a state or country. Essentially, it is all of the coins that we are familiar with and use on a daily basis (USD, Euro, CAD, etc.).
What is FOMO?
FOMO is an acronym that stands for “Fear Of Missing Out,” and it refers to the fear of missing out on a profitable trading opportunity.
What is FUD?
FUD is an acronym that stands for fear, uncertainty, and doubt. It disseminates negative information about cryptocurrency that is constantly disseminated by the traditional press in order to cause mass panic. FUD can refer to Cryptocurrencies regulatory issues, rumors about cryptocurrency bans, and other topics.
What is HODL?
HODL is an abbreviation for the English word “hold.” Hodlers believe in HEROS and keep it in their possession at all times, regardless of price, for the long term, or even forever. HODL was coined during the December 2013 crypto bubble burst. It was a typo that stuck.
Paper Hands
‘Paper hands’ are people who have a low-risk tolerance for high volatility stocks they have purchased. They sell quickly when a token price begins to consolidate. Paper hands are the inverse of ‘Diamond hands,’ which refers to someone who has a high risk tolerance for high volatility stocks or assets.
Diamond Hands
“Diamond hands” are people who can hold their positions until the end despite the odds. When you have diamond hands, you have a high risk tolerance and do not exit positions quickly. Someone with diamond hands’ primary goal is to hold a position until they achieve your investment objectives.
Non-fungible Tokens (NFTs)
Non-fungible tokens are value units used to represent ownership of one-of-a-kind digital items such as art or collectibles. NFTs are typically stored on the Ethereum blockchain.
What is Halving?
A predetermined procedure that reduces by half the rewards that miners receive for recording and verifying transactions to new blocks added to the blockchain.
Satoshi Nakomoto
Bitcoin’s pseudonymous creator. Nobody knows who Nakomoto is or if he is more than one person.
Smart Contract
An algorithmic program that automatically enacts the terms of a contract based on its code. The ability of the Ethereum network to execute smart contracts is one of its primary value propositions.
Stablecoin or Digital Fiat
A stable coin is a cryptocurrency whose value is tied to another non-digital currency or commodity. On the blockchain, a digital fiat represents a fiat or government-backed currency. (An example is Tether, which is linked to the US dollar.)
Token
A unit of value on a blockchain that usually has a value proposition other than just a value transfer (like a coin).
Vitalik Buterin
A programmer who created Ethereum in 2015.
What is ICO?
An Initial Coin Offering (ICO) is a method of raising funds from the general public for cryptocurrency projects. Unlike traditional fundraising methods, ICO investors are only eligible for tokens and do not have voting rights.
The ICO Bubble lasted from October 2017 to March 2018 and saw hundreds of successful ICO fundraisings in each of those months. The vast majority of those ICOs were of the ERC-20 variety, which is based on the Ethereum blockchain.
Investing in initial coin offerings (ICOs) is considered extremely risky. Many ICOs turned out to be crypto scams, erasing investors’ funds completely. The number of ICOs dropped dramatically in 2018, and Binance was the first exchange to launch an Initial Exchange Offering (IEO) in January 2019. (IEO).
What is IEO?
IEO stands for Initial Exchange Offering, and it is a type of fundraising for the creation of a new token that is carried out by a cryptocurrency exchange.
GIFTO was the first IEO, raising $30 million on Binance Exchange in 2018. IEOs gained popularity in the first half of 2019, shortly after the number of ICOs dropped dramatically.
IEOs, like ICOs, are regarded as high-risk investments.
What is KYC?
KYC, which stands for “Know Your Customer,” is a process in which users are required to provide identity information in order to comply with regulations. This includes, but is not limited to, a passport scan, proof of address, and webcam verification online.
What is Market Cap?
Market capitalization is calculated by multiplying the current price of a single cryptocurrency by the total number of coins in circulation (the circulation supply). Bitcoin has the largest market capitalization of any cryptocurrency.
What is Mining? Who are the Miners?
The process of creating new Crypto coins/Tokens is known as mining. Mining is carried out by miners,’ who solve complex equations. The miner who solves the transaction the fastest receives the reward (fee) and adds it to the block.
Every 10 minutes, a new block is added to the blockchain, which is a massive distributed public ledger of already existing transactions.
In the early days of cryptocurrency, Bitcoin mining could be done on a personal computer (PC). Nowadays, mining efforts are divided among giant corporations such as the Chinese-based Bitmain.
Mining is not limited to just one coin but also to other PoW (Proof-Of-Work) cryptocurrencies.
What is HEROS to the Moon?
The term “Moon” refers to an asset whose price rises significantly, as in “HEROS to the moon!”
What is Proof-of-Stake (PoS)?
This consensus algorithm allows users to choose who validates the next block based on the number of coins they own. Token holders secure the network by locking their tokens and receiving rewards in return.
What is Proof-of-Work (PoW)?
The blockchain network’s original consensus algorithm. The algorithm is used to validate transactions and to add new blocks to the chain. Miners compete with one another to receive rewards when transactions are confirmed.
What is Satoshi?
Satoshi is Bitcoin’s cent unit. One Satoshi is equal to 0.00000001 Bitcoin. It is named after Satoshi Nakamoto, Bitcoin’s anonymous creator.
The reason for the eight decimal spaces is that Satoshi Nakamoto intended Bitcoin to be used as a daily currency even if it reached a price of over one million USD.
What is a Shitcoin?
Shitcoin is a nickname for an altcoin that has no working product and no real value. Shitcoins are commonly used by Bitcoin Maximalists to describe the majority, if not all, altcoins other than Bitcoin.
What is the Total Market Cap?
The total market capitalization, also known as capitalization, is the sum of the market capitalizations of all cryptocurrencies.
Who is a Whale?
A person or entity that owns so much of a single Crypto that they can influence the price of Cryptocurrency solely by mass buying or selling.
What is Whitepaper?
A whitepaper (or WP) is a credible report or guide that informs readers about the specifications of a newly created crypto project. In the traditional financial sphere, it is equivalent to a business plan. The WP is written by the project team and typically contains chapters that discuss the problem that was solved, the token, the team, and the technical aspects of the project.
What is Pump & Dump?
P&D artificially inflates the price of an asset (“pump”) over a short period of time before mass-selling it (“dump”) even faster, while the value falls back to its pre-pump level.
The lower the trading volume and liquidity, the more easily a coin can be pumped and dumped. As a result, lower-cap cryptocurrencies are typically chosen for P&D.
Rug Pull
A rug pull occurs when developers siphon off the money of investors and abandon the project after a large sum has been allocated to the bogus cryptocurrency or DeFi project. These projects are typically created by individuals with malicious intent. A simpler definition is the coin is pumped, and the Developer pulls all the liquidity and disappears, leaving you with a worthless token.
Honeypot
A honeypot is a smart contract that pretends to leak funds to an arbitrary user (victim) in exchange for additional funds. The funds provided by the user, on the other hand, will be trapped, and only the honeypot creator (attacker) will be able to retrieve them. In Other words, you can buy but never sell.
