November 2, 2021 6:55 pm in Crypto

Crypto Glossary for Beginners

In the world of cryptocurrency, there are a lot of terms that you may not be familiar with. This post will go over some standard crypto glossary terms and definitions to help you better understand the terminology used in this space.

Cryptocurrency Glossary

Address(Wallet Address)

A cryptocurrency address is a string of numbers and letters that you give to someone so they can send you crypto coins in an online wallet or trade with you on exchanges.

Altcoin

An “altcoin” is a cryptocurrency other than Bitcoin. Most altcoins are forks of Bitcoin, with minor changes to the proof-of-work algorithm(s), hashing structure, and the coin supply distribution model.

Airdrop

An airdrop refers to when a blockchain project distributes free tokens or coins to the community. For example, if a blockchain project has an airdrop, you may receive 10 coins just for signing up with their wallet or joining their telegram/slack channel. An “airdrop” is also sometimes called an “ICO drop.”

AML (Anti-Money Laundering)

AML is an acronym for Anti-Money Laundering. AML regulations are rules and procedures designed to stop people from using cryptocurrencies for illegal activities, such as money laundering or terrorist financing.

API (Application Programming Interface)

API stands for Application Programming Interface. APIs are used to give third-party applications access to a blockchain’s data while keeping the user’s private key secure and within their control.

ATH (All-Time-High)

An All-Time-High (ATH) is the highest historical price of a cryptocurrency or token.

Bear

A bear is someone who believes that a specific cryptocurrency or crypto-asset will decrease in value and fall in price. They may also believe that the market for this particular coin or token is not likely to grow much more than it has already.

Bag Holder

A bag holder is someone who holds onto a certain cryptocurrency or crypto-asset despite its price falling. They may hold on to this cryptocurrency because they believe that it will increase in value again in the future.

Bitcoin (BTC)

Bitcoin is the first decentralized cryptocurrency, released in early 2009. It was created by an anonymous programmer(group) known as Satoshi Nakamoto.

Blockchain

A blockchain is a digital record of transactions shared among many computers instead of being stored on a single, centralized computer. To add new transactions to the blockchain, computers must solve complex computational math problems.

Block Height

The height of a block on the blockchain is its position in the “chain.” A block that has been mined and added to the end of the blockchain is called an “immature” or “young” block, while a block that has been in the blockchain for a longer amount of time is considered an older block.

Block Reward

A block reward can be considered “free coins” since it involves new coins appearing in your wallet, which you then own and are free to sell or hold long-term. The amount of newly created coins you receive for each mined block is the block reward.

Bounty/Bug Bounty

A bug bounty is a program where individuals or companies are rewarded for finding bugs, exploits, or other issues within a given company’s product. This can include a blockchain project’s software, white paper, etc.

Coin

A coin is a unit of value on a blockchain. A majority of coins in existence can be broken down into fractions, and one coin is usually equivalent to 1-billionth of the total market cap for that cryptocurrency or token.

Cold Storage

A securely “cold-stored” wallet refers to an offline wallet (not connected to the internet) where funds are kept on a hard drive or USB drive. Cold storage can be thought of as the opposite of a hot wallet connected to the internet.

Confirmation/Block Confirmation

A confirmation means that the blockchain has processed a transaction. Block confirmations also occur when a newly mined block is added to the end of the blockchain, meaning that all transactions included in that block are complete and valid.

Consensus

Consensus is achieved when all nodes on a decentralized network are in agreement with the current blockchain. For example, if you have 1 Bitcoin (BTC) and send this to someone else who is also on the Bitcoin (BTC) blockchain, then most likely everyone involved will agree that you no longer own this BTC token since your wallet address has sent it to someone else’s wallet address.

DAO (Decentralized Autonomous Organization)

An organization that runs autonomously as programmed without any chance of fraud, censorship, or third-party interference. The idea behind a decentralized autonomous organization is that the administrative tasks are contracted out to a network rather than being handled by some central authority.

Decentralization

Decentralization refers to how a system is organized and operated. In decentralized systems, no single entity controls the network, and everyone can participate in its administration.

Decentralized Application (dapp)

A decentralized application (dapp) is an open-source application that operates autonomously and, most importantly, directly on a blockchain. Some examples of apps are EtherDelta(decentralized exchange), Props(decentralized app by YouNow), or your cryptocurrency wallet created for your specific tokens/coins.

Decentralized Finance (Defi)

Decentralized finance is used for the emerging field of blockchain-based financial products based on non-collateralized peer-to-peer loans. It can be seen as an alternative to the current financial system characterized by banks and other centralized institutions such as insurance companies or hedge funds.

Digital Asset

A digital asset is a representation of value that can be digitally traded on the blockchain. There are different types of digital assets, including cryptocurrencies (a subset of digital assets) and tokens.

Digital Signature

A digital signature is a mathematical scheme for presenting the authenticity of documents and messages. Digitally signed messages and documents inherently provide verifiable evidence that the signer indeed created the message or document and was not altered in transit.

Distributed Ledger

A distributed ledger is a type of database spread across multiple sites, countries, or institutions. Records are stored one after the other in a continuous ledger. Distributed ledgers are also decentralized, meaning they do not have any centralized version of the ledger, making it transparent and free of manipulation.

Difficulty

This term is used in Proof-of-Work blockchains to define the required threshold of computational power necessary to solve a mathematical problem.

Double Spending

A potential flaw when using digital money or tokens allows an individual to spend the same unit twice. This can occur when two transactions are sent to two different cryptocurrency networks, but only one transaction is accepted. In this case, the other transaction will be rejected as it corresponds to a previously spent unit of currency.

DYOR (Do Your Own Research)

DYOR is a phrase that summarizes the meaning of “research on your own before making any decisions.” It is often a reminder for investors to perform their due diligence before trusting an investment or project.

Encryption

A cryptographic technique protects sensitive information and privacy by converting readable information (plaintext) into an undecipherable format (ciphertext). It involves a mathematical algorithm that uses a key to encrypt and decrypt information.

Ether (ETH)

Ether is the native currency of the Ethereum blockchain. Its code is ETH, and it can be used as a store of value to pay fees or act as the “fuel” for smart contract functionality on the network.

Ethereum

Ethereum is an open-source, public, blockchain-based distributed computing platform featuring smart contract functionality. It provides a decentralized Turing-complete virtual machine that can execute scripts using an international network of public nodes.

Exchange

An exchange platform allows users to buy, sell and trade cryptocurrencies for other digital currencies or fiat money.

Fiat Currency

Fiat currency is a currency that a government has declared legal tender, but it does not have physical commodity backing.

FOMO (Fear of Missing Out)

A state of mind in which an individual feels the need to participate in an exciting or profitable venture and exhibits irrational behavior as a result.

Fork

A term used in blockchain technology describes the creation of a new cryptocurrency through divergence from an existing codebase. Instead of adding new features to an existing protocol, creating a separate branch with its own rules is necessary.

FUD (Fear, Uncertainty, Doubt)

An acronym used to describe unsubstantiated rumours and leveraged as an influence strategy to manipulate price action.

Gas

Gas is the internal pricing for running a transaction or contract in Ethereum. The gas price is determined by the number of computational resources required to run the code and the time limit before execution runs out.

Genesis Block

The first block of a blockchain, upon creation.

Hash

A cryptographic function that maps data of any size to a fixed size. Blockchain technology is used as a digital fingerprint for the digital file where the data exists.

Hash Rate

The speed at which a computer is completing an operation in the mining process. Measured in hashes per second (H/s). The hash rate determines the number of attempts at solving a block and defines the probability of an individual discovering the solution that will lead to a reward.

ICO (Initial Coin Offering)

An unregulated means by which funds are raised for a new cryptocurrency venture. In an ICO campaign, a percentage of the cryptocurrency is sold to early backers of the project in exchange for legal tender or other cryptocurrencies, but usually for Bitcoin.

Halving

The act of cutting the consumption or production of something in half. In cryptocurrency, this often refers to when mining rewards are cut in half.

Hardware Wallet

A physical, electronic device built for the sole purpose of generating and storing private keys. Hardware wallets are considered safer because they remain offline, theoretically protecting them against online attacks like viruses and hackers.

HODL (Hold On for Dear Life)

A slang term in the cryptocurrency community for holding on to your coins no matter what happens, coined from HOLD.

Hybrid Consensus Model

A consensus model that uses a combination of proof-of-stake and proof-of-work to achieve consensus.

KYC (Know Your Customer)

In the regulatory world, KYC is an acronym for “know your customer.” It is a process financial institutions use to verify the identity of their clients and create a basic profile of information about them.

Mining

The act of validating blockchain transactions. The individual who accomplishes this task is rewarded with cryptocurrency and the fees involved in the transactions they helped transact.

Market Cap (Market Capitalization)

The total dollar market value of all the outstanding shares of a publicly-traded company at a given time.

MultiSig (Multiple Signature) Wallet

A wallet that requires multiple people to approve of a transaction before it is executed.

Node

A computer linked to the cryptocurrency’s network and participating in its activities.

P2P (Peer-to-peer)

An online system, such as those involved with cryptocurrencies, comprises individual users who interact directly with each other (peer-to-peer) instead of through a middleman.

PoS (Proof-of-Stake)

A consensus model replaces the energy-consuming proof-of-work model with an alternative that doesn’t require mining equipment or machines, to validate transactions on the blockchain network. It is also known as Delegated Proof-of-Stake because it requires network members to stake a portion of their coins to vote for the block producers.

Private Key

A secret piece of data that proves your right to spend bitcoins in a specific wallet. It is mathematically related to the public key but is kept hidden from anyone but you. It’s important to know that whoever knows your private key has control over your bitcoins.

Proof of Work (PoW)

A consensus model that adds computational effort to solve mathematical problems to validate transactions on the blockchain network.

Public Blockchain

A type of blockchain that is open to the public where transactions are open for validation by anyone on or off the network.

Satoshi Nakamoto

The alias for the creator of Bitcoin. It is widely believed to be a man named Satoshi Nakamoto, although this has never been verified.

Scamcoin

A cryptocurrency created to defraud others out of their money, either before or after the launch. See also Ponzi scheme.

Scalability

A measure of the capability of a cryptocurrency to increase its transaction handling ability.

Sharding

An idea for how blockchains can scale, which partitions the network into sub-groups called “shards” that process transactions concurrently.

Smart Contracts

Self-executing contracts with the terms of the agreement between buyer and seller directly written into lines of code.