An extensive guide with over 50 of the most popular crypto terms explained. Learn what these crypto terms mean, how and in which context they are used and in what way they are connected to each other. This is the complete cryptocurrency ABC. The more you know, the more balanced your decision can be.
- Address: A unique identifier that represents a destination for sending and receiving digital currency.
- Airdrop: An event where a blockchain project distributes free tokens or coins to the community.
- Altcoin: Any cryptocurrency that is an alternative to Bitcoin.
- Arbitrage: The practice of buying and selling an asset across different markets to take advantage of price differences.
- ATH: All-Time High, the highest value reached by an asset at any point in its history.
- Atomic swap: A type of peer-to-peer exchange that allows users to swap different cryptocurrencies without intermediaries or custodians. Atomic swaps use smart contracts and hash time-locked contracts to ensure that both parties receive their funds simultaneously and securely.
- Bag holder: A derogatory term to describe investors who are still holding certain assets that have dropped significantly in value since their purchase price.
- Bear/Bearish: A term used to describe a market or a trend that is declining or expected to decline in price.
- Bear market: A market in which prices fall and negative sentiment is rife; this could lead to a drop-off in demand while buyers wait for lower prices.
- Bitcoin: The first decentralised cryptocurrency released in 2009.
- Bitcoin maximalist: A person who defends bitcoin against all other crypto assets.
- BIP: Bitcoin Improvement Proposal, a document that proposes changes or improvements to the Bitcoin protocol or software. BIPs are submitted by developers or community members and undergo a review process before being implemented or rejected.
- Blockchain: A distributed ledger that records transactions in a secure and transparent way using cryptography and consensus mechanisms.
- Blocks: Units of data that store information about transactions on a blockchain network.
- Bull/Bullish: A term used to describe a market or a trend that is rising or expected to rise in price.
- CBDC: Central Bank Digital Currency, a digital currency issued and regulated by a central bank. CBDCs are different from cryptocurrencies as they are centralised and controlled by the authorities, whereas cryptocurrencies are decentralised and governed by consensus mechanisms.
- Consensus: The process of achieving agreement among network participants on the validity and order of transactions on a blockchain.
- Cryptocurrency: A form of digital asset that uses cryptography as its main security measure to control the creation of additional units and verify transactions on its decentralised network.
- Cryptography: The science of encoding and decoding information using mathematical techniques and algorithms.
- DAO: Decentralised Autonomous Organisation, a type of organisation that is run by smart contracts and does not have a central authority or hierarchy. DAOs can operate autonomously and transparently according to predefined rules and incentives.
- DApp: Decentralised Application, an application that runs on a blockchain network and does not rely on a central server or intermediary.
- DeFi: Decentralised Finance, a movement that aims to create open and permissionless financial services using blockchain technology and smart contracts.
- DEX: Decentralised Exchange, a platform that allows users to trade cryptocurrencies directly with each other without intermediaries or custodians. DEXs use smart contracts and blockchain technology to facilitate trustless and secure transactions.
- ERC-20: A standard for creating and issuing tokens on the Ethereum blockchain. ERC-20 defines a set of rules and functions that tokens must follow to be compatible with the Ethereum network and other ERC-20 tokens.
- Fiat: A term used to refer to government-issued currencies that are not backed by any physical commodity or asset. Fiat currencies are often subject to inflation and devaluation by the authorities.
- Fork: A split in a blockchain network that results in two or more versions of the ledger or protocol. Forks can be hard (incompatible) or soft (compatible), depending on whether they require users to upgrade their software or not. Forks can occur due to technical issues, disagreements among developers or community members, or malicious attacks.
- FOMO: Fear Of Missing Out, a psychological phenomenon that drives people to buy or sell an asset due to the fear of losing an opportunity or being left behind by the market. FOMO can cause irrational behaviour and lead to poor investment decisions.
- FUD: Fear, Uncertainty, and Doubt, a term used to describe negative sentiment or misinformation that is spread to undermine the confidence or reputation of an asset or a project. FUD can cause panic selling and price drops.
- Gas: A unit of measurement that represents the amount of computational power required to execute a transaction or a smart contract on the Ethereum network. Gas fees are paid by users to miners for processing their transactions.
- Halving: An event that occurs every four years in the Bitcoin network, where the reward for mining a new block is reduced by half. This reduces the inflation rate of Bitcoin and affects its supply and demand dynamics.
- Hash: A mathematical function that converts any input data into a fixed-length output that is unique and irreversible. Hashes are used to verify the integrity and authenticity of data on a blockchain network.
- HODL: A misspelling of “hold” that has become a popular term in the crypto community. It means to keep holding an asset regardless of market fluctuations or challenges. It also stands for “Hold On for Dear Life”.
- ICO: Initial Coin Offering, a type of crowdfunding where a project sells its own tokens to raise funds for development and marketing. ICOs are often risky and unregulated, as many projects fail to deliver on their promises or turn out to be scams.
- KYC: Know Your Customer, a legal requirement for financial institutions and service providers to verify the identity and background of their customers to prevent money laundering and fraud.
- Layer 2: A secondary framework or protocol that is built on top of an existing blockchain network to enhance its scalability, speed, or functionality. Layer 2 solutions aim to reduce the congestion and cost of transactions on the main chain by moving them to a separate layer that can process them faster and cheaper.
- Lightning Network: A layer 2 solution that aims to improve the scalability and speed of Bitcoin transactions by creating off-chain payment channels between users. Users can send and receive multiple transactions through these channels without broadcasting them to the main chain, thus reducing fees and confirmation times. The channels are secured by smart contracts and can be closed and settled on the main chain at any time.
- Liquidity: The availability of an asset in the market or the ease with which it can be bought or sold without affecting its price. Liquidity is important for traders and investors as it affects the efficiency and profitability of their transactions.
- Market cap: The total value of all the coins or tokens in circulation of a cryptocurrency. Market cap is calculated by multiplying the current price of a coin or token by its total supply. Market cap is often used as an indicator of the size, popularity, or potential of a cryptocurrency.
- Mining: The process of validating transactions and creating new blocks on a blockchain network by solving complex mathematical problems. Miners are rewarded with newly minted coins and transaction fees for their work. Mining also secures the network and prevents double-spending attacks.
- NFT: Non-Fungible Token, a type of token that represents a unique digital asset that cannot be replicated or exchanged for another token of the same kind. NFTs are often used to create digital art, collectibles, gaming items, and more.
- Node: A computer or device that connects to a blockchain network and maintains a copy of the ledger. Nodes can also validate transactions and participate in consensus mechanisms.
- Oracle: A service or a device that provides external data or information to a blockchain network or a smart contract. Oracles can bridge the gap between the real world and the blockchain world by providing inputs such as prices, weather, events, outcomes, etc.
- PoS: Proof-of-Stake, a consensus mechanism that selects validators based on their stake or amount of coins they have locked up in the network. Validators are rewarded with transaction fees or newly minted coins for securing the network and processing transactions. PoS is considered more energy-efficient and scalable than Proof-of-Work (PoW).
- PoW: Proof-of-Work, a consensus mechanism that requires miners to solve complex mathematical problems in order to create new blocks and validate transactions on a blockchain network. Miners are rewarded with newly minted coins and transaction fees for their work. PoW is considered more secure and decentralised than Proof-of-Stake (PoS).
- Private key: A secret alphanumeric code that is used to access and control one’s cryptocurrency wallet and funds. Private keys should be kept safe and never shared with anyone else.
- Public key: A public alphanumeric code that is derived from one’s private key and acts as an address for sending and receiving cryptocurrency. Public keys can be shared with anyone without compromising one’s security or privacy.
- Quorum: A permissioned blockchain platform that is based on Ethereum and designed for enterprise use cases. Quorum supports private transactions, smart contracts, and high performance. Quorum is developed by JPMorgan Chase and is used by various financial institutions and organisations.
- Ripple: A payment network that uses the XRP cryptocurrency as its native asset. Ripple aims to provide fast, cheap, and secure cross-border transactions for banks and other financial entities. Ripple also develops various products and services that use its network and token, such as RippleNet, xRapid, xCurrent, and xVia.
- Satoshi: The smallest unit of Bitcoin, equivalent to 0.00000001 BTC. Also the name of the pseudonymous creator of Bitcoin, Satoshi Nakamoto.
- Smart contract: A self-executing contract that is encoded on a blockchain network and performs certain actions based on predefined rules and conditions. Smart contracts can facilitate trustless transactions and agreements without intermediaries or third parties.
- Stablecoin: A type of cryptocurrency that is pegged to another asset or currency, such as the US dollar or gold, to maintain a stable value and reduce volatility. Stablecoins can be backed by fiat reserves, crypto collateral, or algorithms.
- Staking: The process of locking up one’s cryptocurrency in a wallet or a smart contract to support the security and operations of a blockchain network. Stakers are rewarded with interest or dividends for their contribution.
- Token: A digital representation of value or utility that is issued on a blockchain network. Tokens can have various functions and purposes, such as serving as a medium of exchange, a store of value, a unit of account, a reward, a governance right, or an access right.
- Uniswap: A decentralised exchange (DEX) that runs on the Ethereum blockchain and allows users to swap any ERC-20 token without intermediaries or custodians. Uniswap uses an automated market maker (AMM) model that relies on liquidity pools to provide liquidity and determine prices. Uniswap also has its own governance token, UNI, that gives holders voting rights and a share of the fees generated by the platform.
- Vitalik Buterin: The co-founder of Ethereum and one of the most influential figures in the crypto space. Vitalik is a programmer, writer, and visionary who conceived the idea of Ethereum as a platform for smart contracts and decentralised applications. Vitalik is also involved in various research and development projects related to blockchain technology and cryptography.
- Wallet: A software or hardware device that stores one’s private and public keys and allows one to send and receive cryptocurrency. Wallets can be hot (connected to the internet) or cold (offline).
- Whale: A term used to describe an individual or an entity that holds a large amount of cryptocurrency and has the potential to influence the market with their actions.
- White paper: A document that outlines the technical details, features, goals, and vision of a blockchain project or a cryptocurrency. White papers are often used to attract investors and users to a new project.
- XRP: The native cryptocurrency of the Ripple network. XRP is used as a bridge currency to facilitate cross-border payments and transfers between different fiat currencies and cryptocurrencies. XRP is also used to pay for transaction fees on the Ripple network.
- Yield farming: A type of DeFi activity where users lend or borrow cryptocurrency on various platforms and protocols to earn interest or rewards. Yield farmers often move their funds across different platforms and protocols to maximise their returns.
- Zero-knowledge proof: A cryptographic technique that allows one party to prove to another party that they know a certain piece of information without revealing it. Zero-knowledge proofs can enhance the privacy and security of transactions and data on a blockchain network.