I’ve gone through the cycle of learning about crypto, studying blockchain technology, becoming an investor and owning a business in this industry without recourse to a cryptocurrency terms glossary. They weren’t widely available and, when I could find any, they were incomplete at best. So it occurred to me quite recently that this is something I could offer others who are entering this incredible space.
You won’t find here every single term that a crypto fanatic might use. Ethereum alone has devised a jargon that would require dozens of entries.But I thought of the most common and most important terms anyone should know, and the list expanded as I went along. I hope you find this field as fascinating as I did – and still do.
Altcoin. Any crypto-currency other than Bitcoin. Some would say main coins also include Litecoin or Ethereum, but altcoins are generally defined by opposition to Bitcoin.
AML – Anti Money Laundering. The United States, the European Union and other places around the world have more recently imposed requirements on institutions, including crypto exchanges, to report suspicious activities and support identification of suspicious accounts.
Arbitrage. The practice of trading to take advantage of a difference in price for the same asset across two or more different exchanges. You can buy Monero low on Bitstamp and sell it high on Kraken, etc.
ASIC. Application Specific Integrated Circuit. A silicon chip designed for one application only. The more computational power is needed to mine cryptocurrencies, for instance, the more you will need such powerful integrated circuits that improve computational speed.
Bear market. A market that expects prices to decrease. It is characterized by pessimism. Its name is said to derive from the downward motion with which the bear attacks its prey.
Block halving. Every 210,000 blocks, i.e. about every four years, Bitcoin’s block reward halves to preserve scarcity as designed by Satoshi Nakamoto. The reward started at 50, and is now 12.5 bitcoin. The next halving will occur in May 2020.
Block reward. On most public blockchains, new coins are created by block rewards, i.e. coins issued to the miner who has mined the most recent block on the chain. As the supply of coins dwindles, rewards will increasingly be made up of transaction fees rather than new coins.
Blockchain. Decentralized, distributed ledgers characterized by immutability and transaction transparency. Data is recorded and stored simultaneously across all nodes of the network; there is no central point of supervision and authority.
Bug Bounty. New blockchain companies build their code and release it on open-source repositories for others to examine it. Many companies pay digital fees to contributors who scan the code for bugs and vulnerabilities.
Bull market. A market that expects prices to increase. It is characterized by optimism. Its name is said to derive from the upward motion of the bull charging its prey.
Cold storage. Keeping cryptocurrency off the internet to minimize hacking opportunities. Cold storage includes paper wallets, hardware wallets etc.
Consensus protocol. The algorithmic process by which nodes on a blockchain reach an agreement about a set of data.
Consortium blockchain. A blockchain on which consensus is dictated by pre-set nodes or by a pre-set number of nodes. They are usually not public, not decentralized and usually involve large institutions working together rather than individuals.
Cryptographic hash function. A mathematical algorithm that transforms any type of digital input into one fixed-length output. SHA-256, for instance, is the hash function that yields Bitcoin’s hashes. It is secure because you cannot read back the input – or you could, but it would take eons of brute force attempts. It is also virtually impossible to generate the same hash out of two different inputs; even a one-character change yields a massively different output.
Cryptojacking. Using a computer terminal to mine cryptocurrency without the terminal’s owner knowing about it or agreeing to it.
DAO – Decentralized Autonomous Organization. A startup built on the Ethereum blockchain promoting certain kinds of smart contracts. It was launched in April 2016 to great success, was hacked in June 2016, lost a third of the funding to the hacker and prompted Ethereum’s hard fork.
DLT – Distributed ledger technology. The umbrella term that encompasses blockchain technology among other types of ledgers, DLT refers to a secured, shared database that is stored in a “live” version on several the nodes in a network.
Equity tokens. A token that represents an ownership interest in a company. Equity tokens are very much like stocks: they confer the owner an interest, as well as ownership rights, in the issuing company.
ETF – Exchange Traded Fund. An investment fund that operates much like individual stocks: it places together various assets and trades them together on an exchange.
Fiat. Government-issued currency, usually holding no value in itself. Fiat money is worth something because the government has enabled it as legal tender. Gold coins are worth more or less whatever their gold is worth; fiat money is not backed by any physical asset’s worth.
FOMO – Fear Of Missing Out. A well-known symptom on the cryptocurrency market, it refers to the impulse to jump onboard when it looks like the market is booming and profits are easy.
Fork. A blockchain split into two entities, each operating its own chain. Forks occur because of coding problems, hacks, ideological dissension, technological innovation etc. They can be hard forks and soft forks.
FUD – Fear, Uncertainty, and Doubt. Another common acronym on the cryptocurrency market, this one refers to the negative feelings being disseminated by entities with malicious interests, usually attempting to cause a price drop on a currency.
Futures. Standardized contracts to buy or sell commodities or assets in the future, at a pre-set time, against a pre-set price, on a futures exchange.
Hard fork. A change to the blockchain protocol that creates two separate, non-compatible versions of the blockchain.
Hardware wallet. Probably the most secure storage type for cryptocurrency, hardware wallets are literally hardware devices where the private keys are stored on a microcontroller. They are virtually impossible to hack.
HODL. Either a misspelling or an acronym for “holding on for dear life”, it has come to represent an investment position where the user buys coins and “forgets about them”, i.e. hangs on to the coin for a long period of time despite market fluctuations.
Hot storage. As opposed to cold storage, which means not connected to the internet, hot storage is done online, on online wallets or exchanges.
ICO – Initial Coin Offering. A form of crowdsale by which blockchain startups issue their own token and sell it to fund their upcoming product/service.
KYC – Know Your Customer. A regulation that requires financial institutions to verify and keep records of their customers’ identity, in order to prevent financial crimes.
Long position. Going long is a type of margin trade by which an investor buys a stock, commodity or currency “with the expectation that the asset will rise in value”.
Margin trading. A risky trading practice of borrowing funds from a broker to buy a certain asset. The asset then becomes your collateral for the broker.
Market capitalization. A form of measuring size and market interest or popularity that is calculated by multiplying the number of coins and the price per coin. There are 17,324,000 bitcoins in circulation; multiply that by a price of, say, $6,500 per bitcoin – the number you get, $112,606,000,000, is bitcoin’s current market cap.
Mining pool. A group of users, be they individual or institutional that pool together their computational resources to mine cryptocurrency and split the rewards..
Mining rig. A set of CPUs, GPUs or ASICs set to work specifically to mine proof-of-work blockchains.
Mining. The process by which a computer node attempts to solve the next block on the blockchain by using the computer’s processing power.
Mooning. Not what you think. It originates in “to the moon” or “over the moon”, referring to crypto prices reaching very high levels.
MultiSig – Multi Signature. A system of securing wallets and addresses by requiring multiple users to sign transactions so they can be validated.
Node. A computer that holds a live copy of the blockchain and participates in the blockchain’s operations.
Paper wallet. One of the more secure ways of storing cryptocurrency, paper wallets require printed keys or QR code to authenticate users. They are, therefore, cold storage.
PoS. Proof-of-stake is a consensus algorithm that requires nodes to stake coins to be allowed to validate transactions and forge new coins. NavCoin, for instance, uses PoS; Ethereum plans to switch to it.
PoW. Proof-of-work is the most common consensus algorithm, requiring nodes to perform work on the blockchain to confirm transactions and mine blocks. It generally means using a terminal’s computing power to participate in the blockchain’s oeprations.
Private blockchains. More like distributed ledgers than actual blockchains, these are transparent and distributed databases, but they are not permissionless or decentralized, as the owner of the blockchain retains authority.
Private key. A digital “password” consisting of a string of randomized letters and numbers, used for securely operating crypto transactions. It is one of the most secret possessions a crypto holder could ever own.
Public blockchain. A blockchain that anyone in the world with an internet connection can read and participate in. Public blockchains are the original version of the blockchain, meaning they are fully decentralized, trustless and permissionless.
Public key. A string of randomized letters and numbers used just like an email address or bank account number, to receive crypto payments. Unlike the public key, which you should never reveal, the public key does not give others any power over your wallet.
Pump and dump. A method of stimulating the price of a coin to go up quickly, usually through below-the-line hype or trading moves, so that coin holders could then dump a large amount of that coin at a high price and exit the market when it crashes.
Ring signature. A cryptographic technology that places a user’s digital signature in a “ring” of people, after which it becomes impossible to isolate the exact member of the group who produced the signature. Used by Monero, it is an added privacy feature.
ROI. Return on Investment, a basic investment term, refers to the gains made compared to the initial investment. To calculate an RoI, divide the benefit by the cost of the investment and express the measure in percent.
Satoshi Nakamoto. Bitcoin was created in late 2008 through the publication of a white paper on a cryptography forum. The author signed his name “Satoshi Nakamoto”, and later claimed to be a man born in 1975 and living in Japan. To this day, no one has succeeded in untangling Nakamoto’s identity. We don’t know if he is dead or alive, where he might be, or even whether he is a “he”, a “she” or a “they”.
Satoshi. The smallest unit of measure of bitoin. Each Satoshi is ฿0.00000001.
SEC. The United States Securities and Exchange Commission, an independent governmental agency that proposes, monitors and enforces securities, stock and options exchanges etc.
Sharding. A database partitioning technique than is currently being tested for Ethereum as part of its attempt to scale the Ethereum blockchain. Sharding allows for nodes to store partial information of the blockchain in order to enable faster operations on the network.
Shilling. Pro-actively endorsing a product, claiming to be sincere in your assessment of the product, while being secretly paid or otherwise stimulated to promote the product.
Short position. Going short is a type of margin trade in which an investor sells before it buys. It is usually motivated by the expectations that prices will decrease, so that the investor “borrows” stock, for instance, and sells it while it’s high, then pays the lender when the price is already low.
Smart contract. Better termed “conditional transactions”, they are code that enables specific operations to be conducted on the Ethereum blockchain if certain conditions are met.
Soft fork. A change to blockchain protocol that disables only the previous blocks, but is backwards compatible with the previous protocol.
Software wallet. Cryptocurrency storage provided in the form of a software program that allows you to send and receive cryptocoins.
Stablecoin. A cryptocurrency that is pegged to a stable asset like gold or a main fiat currency. Stablecoins are supposed to enjoy low volatility.
Technical analysis. A type of analysis conducted by regular traders. It involves examining charts to understand the market and predict the best trading routes, based on complex chart information.
Tokens. Generally refers to coins/currencies created on various types of blockchain (mostly Ethereum, but not exclusively), that raise money through ICO’s (Initial Coin Offerings).
Turing complete. A system or language that is universal, in the sense that it can process any language / code that can be created. Ethereum claims to be Turing complete.
Utility token. A token that is acquired through an ICO and which does not give owners equity in the ICO company, but rather acts like a voucher to access specific products or services offered by the company. Still they can be sold on an exchange to speculate price increases.
Whale. Whales can be individuals who own massive amounts of cryptocurrency, or investment funds, hedge funds etc. that pool equally massive amounts of their clients’ crypto.
Whitepaper. A formal paper that explains, in academic terms but as widely intelligible as possible, what a certain project or idea refers to, how it is supposed to work, what the benefits are etc. A whitepaper (or white paper) contains both technical details about the product or service, and details about its usefulness and market fit.
Zero-knowledge proof. A cryptographic method of allowing one entity to provide evidence of a certain piece of knowledge without revealing any other piece of knowledge. It works, for instance, to provide authentication without providing passwords.