Just like every industry, the world of cryptocurrencies and blockchain certainly uses its own lingo, which can be confusing for everyone else who is not familiar with the industry or “in the know”.
How often has it happened that you read a cryptocurrency news website or went through Reddit and were left more confused than when you started? For most people, this is a common problem, especially for those who are new to cryptocurrencies or the blockchain.
Most Popular Cryptocurrency Glossary Terms
So, if you are just getting started in crypto, or merely intend to extend your vocabulary for new words in this industry, we have curated a short guide to help you effortlessly navigate the miasma of cryptocurrency terms and definitions
What Is Blockchain & Bitcoin Cryptocurrency?
For starters, let’s begin by defining what the blockchain actually is and how it works.
Blockchain & Nodes
The blockchain is the technology technology behind Bitcoin and Ethereum. A blockchain is a distributed ledger secured by cryptographic keys. Blockchains are also public databases and great repositories of information that anyone can get access to and read through the data. However, only the owners of the blockchain can modify the data, and sometimes, the data is immutable.
Compared to traditional databases that rest on a centralized server, data on the blockchain is spread across a distributed network of computers across the globe. Each computer has a copy of the blockchain and works to maintain, and each computer in this network is known as a node.
Bitcoin is the first and is perhaps the ‘gold standard’ of cryptocurrencies. This means that all other coins and tokens are compared to and measured against the value of Bitcoin. Another way of looking at it is when Bitcoin drops in value, all other coins drop in value, too; the reverse also applies.
To keep our cryptocurrencies and tokens safe from criminals and hackers, we use what’s called a wallet. There are different kinds of wallets made for different applications and security requirements. The most popular and basic kind of wallet is a software wallet. Software wallets exist as a computer file, and can be generated for free using a variety of online services.
To improve security of one’s coins, there are also hardware wallets. Hardware wallets are thought to be some of the safest ways to hold cryptocurrencies. Two popular options of hardware wallets are the Nano S and Trezor. Taking the idea of physical security a step further is known as cold storage, whereby one disconnects their cryptocurrency portfolio from the Internet entirely.
Popular Cryptocurrency Tokens
There are more than 1500 different cryptocurrencies available for purchase. Due to how long it would take to list each and every one, we won’t be going through them all.
However, the most popular cryptocurrencies with the largest market caps are the following:
- Ethereum (ETH)
- Bitcoin (BTC)
- Bitcoin Cash (BCH)
- Litecoin (LTC)
- Monero (XMR)
- Ripple (XRP)
- NEO (NEO)
- VeChain (VET)
- Dash (DASH)
- Zcash (ZEC)
- Ethereum Cash (ETC)
- Stellar Lumens (XLM)
- Eos (EOS)
- EomiseGo (OMG)
The good news is that when it comes to the terms and lingo of trading cryptocurrencies, each trade occurs on what’s called a marketplace for trading cryptocurrencies. Exchanges support fiat (e.g USD) to buy cryptocurrencies.
When trading cryptocurrencies, there are two ways that you can do this: limit or market orders.
A limit order (limit buy, limit sell) is placed by traders who want to buy or sell a cryptocurrency when the price is at a certain value.
While a market order (market buy, market sell) are straightforward purchases or sales on an exchange at the market price. To illustrate how a market buy works, the market could decide to purchase Ethereum at the cheapest price possible on the exchange’s order book and, while market sells transact the most expensive buy orders.
ROI simply means return on investment.
Arbitrate refers to the act of capitalizing on the price difference of the same currency between 2 different exchanges. This is often cited when one compares the value of cryptocurrencies on Korean exchanges versus US exchanges.
The market cap is the total value of a cryptocurrency. The market gets calculated through multiplying the total number of coins with the present value of a unit. The most popular method for calculating the value of a cryptocurrency is using a tool named CoinMarketCap.
TA is shorthand for Technical Analysis, which is known as the process for comparing price charts and trends to anticipate trends in the market.
Through the use of a depth chart, people can see the amount of limit of buy and sell points, which are sometimes referred to as sell walls and buy walls. Typically, the word Whale will often be used in conjunction with those terms, which refers to someone who owns a large amount of cryptocurrency.
Bullish charts means that the price of a cryptocurrency is likely to increase, while bearish gets used when prices are expected to lower in value.
ATH, which means All Time High, is something we’ve experienced a lot of over the last few months, with popular cryptocurrencies like Bitcoin, Litecoin, and Ethereum soaring to record heights.
Margin Trading is the process of increasing the intensity of your trades through putting the rest of your coins at risk.
Going long is a type of margin trade that profits if the price goes up in value, whilst going short is a type of margin trade that wins if the price lowers in value.
FOMO is known as Fear of Missing Out. FOMO can be described as the visceral sensation you feel when the price of something starts to sharply increase or decrease in value.
FUD means Fear, Uncertainty, and Doubt. FUD is often spread by well-meaning friends who advise you to not invest in cryptocurrency markets despite knowing nothing about them. Other times, the traditional media spreads FUD when it speaks out against cryptocurrency trading.
P&D otherwise known as Pump and Dump happens when an altcoin gains a huge amount of attention, which leads to a quick price increase, and then followed by a big crash, this process is repeated until the originators of the scam make their money or the altcoins is rendered worthless.
A smart contract is a computer applications used to verify, enforce, and facilitate the negotiation or performance of a specific contract. Smart contracts let you transfer money from A to B, on terms that condition C specifies. Solidity is the most common programming language that smart contracts are coded in.
The process of “solving” blocks is named cryptocurrency mining. Mining requires a huge amount of computer processing power to operate effectively, but miners who are the first to solve the mining “hash” are rewarded. A computer built made solely for processing proof-of-work blockchains like Ethereum is called a mining rig. Mining rigs are built with graphic processing units (GPUs) to churn through large amounts of data.
Proof-of-work (PoW) is the most common consensus algorithm. PoW is used by cryptocurrencies like Ethereum, but this is likely to change to Proof-of-Stake (PoS). This means that instead of mining, people who own Ethereum can tie up their Ether for a short while in exchange for the participation in the network consensus. ETH holders will be rewarded with Ethereum for doing so.
Sharding is one proposed scaling solution for the blockchain. Sharding lets nodes keep partial replications of the total blockchain to increase network performance and speed of consensus.
An ICO, or Initial Coin Offering works in the same way an IPO on the stockmarket. An ICO can be said to be the same as crowdfunding, except this crowdfunding process takes places on the Ethereum platform.
An Airdrop is the distribution of a token to the cryptocurrency community for free, or in return for a small favor. Airdrops are used to foster a community ad as a marketing strategy as part of an ICO phase.
Gas is the measurement of how much hashing (processing) power is needed by the Ethereum network to validate a transaction. Some simple transactions, like sending Ethereum to a different address, generally don’t need as much gas, whilst more complicated transactions, such as in the case of deploying smart contracts, necessitate higher amounts.
The gas price is the value of Ether needed for every gas unit for a transaction, while transactions with a higher gas price are generally prioritized by the network.
Wei is the smallest amount of Ether possible, while Gwei is the most popular amount.
A Fork happens when a blockchain is split into several different chains. Forks occur in the crypto world when additional governance rules get built into the blockchain’s code.
Other Important Terms
You may have seen the popular meme of a lambo on the moon. This inside joke refers to the anticipation of a particular cryptocurrency skyrocketing in value.
There are also some terms used exclusively by the crypto community, such as HODL, which means to hold a cryptocurrency over the long term. Shilling, means to pump or advertise a cryptocurrency in a deceptive way.
A Decentralized Autonomous Organization (DAO) is a type of venture capital fund coded on the Ethereum network and was hacked in June 2016. The hack resulted in around 1/3 of the DAO’s funds of the funds hard forked over the proceeding months.
To date, the DAO is often referred to as one of Ethereum’s biggest mistakes.
At one point Mt Gox was responsible processing more than 70% of Bitcoin’s transactions over a period between 2013 and 2014. This was before it was hacked and customers lost all of their funds. Mt. Gox was a hard lesson for people to learn, and educated people to keep their eyes on an exchange, and to also keep funds in a secure wallet; preferably in cold storage.
Lightning Network extends on the work done by Bitcoin and Litecoin to facilitate settlements that occur off the chain.
The Genesis block is the first block ever mined.
Satoshi Nakamoto is the founder of Bitcoin, whose real name is still a mystery.
Vitalik Buterin is there founder of Ethereum.
Charlie Lee is the founder of Litecoin.