Cryptocurrency is a complex and evolving field, with terms that can be technical, financial, or community-driven. This guide aims to help you understand the key concepts, whether you're a beginner or looking to deepen your knowledge.
- Cryptocurrencies
- Altcoin: Any cryptocurrency other than Bitcoin.
- Bitcoin (BTC): The original, largest, and best-known cryptocurrency, introduced in 2008.
- Meme coin: Altcoin based on a meme, e.g., Dogecoin (What is Dogecoin).
- On-ledger currency: Cryptocurrency minted by and used on a blockchain ledger, e.g., Bitcoin.
- Satoshi: Smallest unit in Bitcoin, 1 satoshi = 0.00000001 BTC, fraction of a penny.
- Token: Individual cryptocurrency, runs on particular blockchain.
- Virtual currencies: Digital medium of exchange, no physical form, peer-to-peer transactions.
- Blockchain Technology
- Blockchain: Decentralized, public ledger containing transactional information, e.g., Bitcoin's case.
- Block: Collection of transactional data bundled together in a predetermined size in blockchain context.
- Block Confirmation: Number of confirmations a particular block has, each block ahead adds one.
- Block Explorer: Applications or websites displaying transaction status or block data on a public blockchain.
- Block Height: Number indicating the position of a particular block within a blockchain.
- Block Reward: Mechanism built into a blockchain to incentivize validators.
- Consensus: Achieved when all blockchain participants agree on the content of the next block.
- Directed Acyclic Graph (DAG): Data structure built in one direction, branches out, never repeats.
- Distributed Ledger: Ledgers whose data is stored and synced across a network of nodes.
- Distributed Ledger Technology (DLT): Technology enabling distributed ledger.
- Double Spending: Act of spending digital currencies twice, prevented by blockchain.
- Fork: Change to blockchain’s protocols, soft forks are backwards-compatible, hard forks require upgrades.
- Hash: Result of data through hashing algorithm, compresses into unique alphanumeric string.
- Orphan block: Solved block not accepted by network, not added to blockchain, sometimes called “stale blocks.”
- Proof of Work (PoW): Consensus mechanism, miners do computational work to guess 64-character hash, broadcast for verification (Proof of Work).
- Proof of Stake (PoS): Consensus mechanism, verifiers stake crypto to earn chance to add blocks, risk losing stake for fraud (Proof of Stake).
- SHA-256: Hashing algorithm compressing data into secure alphanumeric string, used by Bitcoin, partly by NSA.
- Wallets
- Cold Storage: Offline storage of cryptocurrencies, arguably safer, requiring physical access (e.g., hardware wallet).
- Cold Wallet: Wallets offline, requiring physical access to devices like hardware or paper wallets.
- Digital wallet: Software application for holding, storing, and transferring digital currency, manages addresses and keys.
- Hot wallet: Online storage for cryptocurrencies, provided by exchange or third party.
- Private key: Encrypted password to crypto holdings, long number, authorized transactions.
- Public key: Public-facing address of crypto wallet, shared to receive funds, pairs with private key.
- Seed: Random series of 12 to 24 words generated by crypto wallet for access.
- Wallet: Digital storage for keeping crypto assets secure, can be online (hot) or offline (cold).
- Trading and Exchanges
- Arbitrage: Strategy where investors buy a currency in one market and sell at a higher price in another.
- Bearish: Negative sentiment towards the market or asset, believing downward price movement.
- Bear Market: Market direction going for a downward trend.
- Bitcoin ATM: Machine to buy or sell Bitcoin, typically offering different cryptocurrencies.
- Bloodbath: Term used in trading to describe a market on a downtrend with many assets suffering value depreciation.
- Bots: Software or programmes that automatically trade based on preset behaviours.
- Bullish: Positive sentiment towards the market or asset, believing upward price movement.
- Bull Market: Market direction going in an upward trend.
- Buy the dip: Investing strategy of buying an asset when its price has fallen to benefit from price rises.
- Buy the F***in Dip (BTFD): Encouraging rally by asset/cryptocurrency supporters to buy during a price decline.
- Buy Wall: Anomalously large buy order(s) at a single price point reflecting as a "wall" in the order book.
- Dead Cat Bounce: Short-lived price rally after prolonged decline, only to decline further.
- Derivatives: Financial instrument deriving value from performance of underlying asset or index (e.g., gold).
- Derivatives Market: Market for derivatives like futures or options, value derived from an underlying asset.
- Dump: Term used to describe downward market movement or action of selling an individual's holdings.
- Exchange: Website or app for buying and selling crypto assets.
- Exchange Traded Fund (ETF): Security tracking collection of securities (stocks, bonds, crypto) but tradeable like a stock.
- Market capitalization: Total market value of a cryptocurrency, all cryptos combined market cap slightly less than $1 trillion at writing.
- Volume: Total currency traded in open market, typically 24-hour period in crypto markets.
- Yield: Return on investment, expressed as percentage.
- Security
- 51% Attack: Attack on blockchain by a group of miners controlling more than 50% of network hash rate.
- ASIC Resistant: Cryptocurrency proof-of-work protocols resistant to ASICs, leveling the field against consumer hardware.
- Byzantine Fault: Error where a computer system cannot identify failed components due to lack of information and continues iterating.
- Byzantine Generals’ Problem: Situation requiring consensus from all members within a group who cannot be trusted or verified.
- Cryptography: Discipline using cryptography to convert human-readable information decipherable only by those with knowledge.
- Custody: Protective care or guardianship of an asset.
- Decryption: Process of decrypting previously encrypted data back to readable form.
- Distributed Denial of Service (DDoS) Attack: Cyber-attack tactic diverting large traffic to disrupt normal services.
- Dusting Attack: Malicious activity where hackers send small amounts of money to wallets to undermine privacy.
- Encryption: Process of encoding information via cipher, resulting in ciphertext, only authorized can decipher.
- Know Your Customer (KYC): Identity checks by crypto exchanges, not always required.
- Quantum computing: Computer science field using quantum physics for processing larger data sets faster.
- Regulated: Market where players must follow rules, risk fines/loss of licenses.
- Regulation and Compliance
- BitLicense: Business license issued by New York State Department of Financial Services for crypto companies in New York.
- Central Bank Digital Currency (CBDC): Digital fiat currency issued by central banks, unlike cryptocurrencies issued by non-legislative parties.
- Centralized: Organization structure where a small handful of actors control the entire network.
- Central Ledger: Central data repository of a company or bank.
- Crypto-marketing: Scheme where promoters recruit investors for crypto-tied securities, often via social media, promising returns and commissions.
- Cryptocurrency Act of 2020: Bill aiming to clarify which federal agencies regulate which type of crypto assets.
- Smart Contracts and DApps
- dApp: Decentralized application, distributed on a blockchain, no central authority.
- DAO: Decentralized autonomous organization, group working by self-executing code rules, e.g., Bitcoin project.
- Decentralized: System with no centralized points of failure or organization, no central authority figure.
- Decentralized Applications (dApps): Applications running on decentralized peer-to-peer networks like Solana.
- Decentralized Autonomous Organization (DAO): Open source, decentralized systems not requiring centralized operators or controllers.
- Decentralized Finance (DeFi): Movement building decentralized financial applications with no central authority, censorship-free (DeFi Decentralized Finance).
- Externally Owned Accounts (EOA): Accounts controlled by a private key with no coding associated.
- Smart contract: Program executing on blockchain when conditions met, cannot be changed, no human intervention.
- Mining and Staking
- Address Delegation: Delegation of a wallet's stake to a Super Staker.
- Algorithm: Set of rules to follow to solve a problem or conduct a task.
- Application-Specific Integrated Circuit (ASIC): Specialized computers made for specific tasks like calculating hashes for Bitcoin's PoW.
- Block Mining: Process of miners verifying and adding transaction records into a block.
- Cloud Mining: Mining on blockchains through rented processing power from companies hosting physical equipment.
- Delegated Proof-of-Stake (dPOS): Consensus mechanism where selected members are voted as delegates to validate transactions and produce blocks.
- Difficulty: Relative measure on how difficult it is to correctly guess a new block.
- Emission: Speed/rate at which new coins are minted and released as dictated by protocols.
- Graphics card: High-end cards used in PC gaming, provide processing power for validating blockchain transactions.
- Mining: Verifying transactions via proof of work, involves solving hashes, more computing power increases chances of earning crypto.
- Terahash: Rate of guessing one trillion hashes per second when mining.
- Validator: Someone paying to validate transactions, earn crypto on proof of stake blockchain.
- Tokens and Standards
- Burned Tokens: Tokens sent to addresses whose private key are not known, becoming unusable.
- Buy/Sell Tax: On-chain buy or sell tax rate where a percentage of tokens bought/sold is transferred to a set address.
- cc0 NFT: Digital content where IP rights have been relinquished.
- Collateralized Debt Obligation (CDO): Form of derivative where value is generated from another underlying asset, sold to institutional investors.
- Composability: Ability to combine different components of a software stack.
- Crowdsale: Auction with a fixed price per token sold on a first-come-first-serve basis.
- Initial Coin Offering (ICO): Entity issues virtual coins, often called tokens, to raise capital, typically in bitcoin, also called “token sale” (Understanding ICOs).
- NFT: Non-fungible token, digital collectible using cryptocurrency technology (NFT Non-Fungible Token).
- Stablecoin: Cryptocurrency maintaining fixed value, pegged to currency/commodity, e.g., Tether, USD Coin.
- Tether (USDC): Stablecoin pegged 1-to-1 with U.S. dollar (What is Tether USDT).
- USD Coin (USDC): Stablecoin pegged 1-to-1 with U.S. dollar (USD Coin).
- Miscellaneous
- Airdrop: Way to promote cryptocurrencies by sending some free tokens to traders.
- Algorithmic Stablecoin: Tokens pegged to a fiat currency, usually the US dollar, purely through software and conditions.
- All-Time-High (ATH): Highest point (in price, market capitalization) that a cryptocurrency has been in history.
- All-Time-Low (ATL): Lowest point (in price, market capitalization) that a cryptocurrency has been in history.
- Ask Me Anything (AMA): Sessions where individuals or companies (e.g., CEO of Tesla) answer user questions.
- Atomic SWAP: Exchange of cryptocurrencies on different blockchains without intermediaries.
- Automatic Replay Protection: Upgrade by Bitcoin Cash to stop fund loss from exchanges through replay attacks.
- Bagholder: Person holding large quantity of cryptocurrency declining in value or becoming worthless.
- Bakkt: Company by Intercontinental Exchange (ICE), specializing in Futures/Options contracts for crypto.
- Batch Auction: Distributes tokens to users proportional to their contribution to the pool.
- Bitcoin Evangelist: Individuals passionate about Bitcoin, dedicated to spreading knowledge.
- Bitcoin Improvement Proposal (BIP): Improvement proposals for Bitcoin, used to introduce features or updates.
- Bounty: Public tasks available for anyone for a reward.
- BUIDL: Advice for investors to contribute new projects on blockchain rather than holding for price increase.
- Crypto Bubble: Speculation in cryptocurrencies where prices go extremely high before bursting.
- Crypto-marketing: Scheme where promoters recruit investors for crypto-tied securities, often via social media, promising returns and commissions.
- Daily Active Addresses (DAA): Number of addresses fulfilling defined activity parameter on a given blockchain.
- Degen: Cryptotrading without Due Diligence and research - basically gambling.
- Do Your Own Research (DYOR): Advice for investors to do their own research on coins they want to invest in.
- Dutch Auction: Auction starting with high asking price decaying over time until a pre-determined floor price.
- Explain Like I'm Five (ELI5): To explain in simple terms even a five-year-old would understand.
- Faucet: Site dispensing small amounts of cryptocurrency for free, often for testing or promotion.
- FOMO: Fear of missing out, community term for rushing into investments due to hype.
- Jager: Smallest denomination of Binance Coin (BNB).
- On-chain: Transaction occurring on a blockchain, reflected on public ledger.
- Satoshi Nakamoto: Pseudonym for author of original Bitcoin whitepaper (Bitcoin Whitepaper).
- Volatility: Market condition with frequent, unpredictable price rises and falls (What is Volatility).
- Whitepaper: Technical document explaining new crypto project system, including objectives and team details.
- Zero confirmation: Transaction not yet confirmed on blockchain, not part of it yet.