Reading about cryptocurrency, decentralized digital assets that use cryptography and run on a blockchain can be confusing. From technical terms and acronyms to slang, the vernacular of cryptocurrency can seem like its own language. Over the last decade, cryptocurrency enthusiasts have found new ways to describe, ritualize and give meaning to the movement of decentralized money.
Before we get started, know this is not financial advice. The crypto world is volatile, and you should never risk money you aren’t comfortable losing. Now, let’s take a look at some of the most common lingo:
Every cryptocurrency transaction is processed, verified, and recorded on a virtual ledger known as a blockchain. When someone buys or sells using cryptocurrency, another entry is made on this virtual ledger.
Think of the blockchain as a series of boxcars from a train (the first block). When a cryptocurrency transaction is made, another boxcar gets added to the train. This is then recorded into a distributed ledger.
The blockchain is decentralized. This means it’s not stored on one machine or even across one network. Instead, the blockchain exists on computers all over the world that are accessible because of the internet.
An altcoin is used to describe any cryptocurrency that is not Bitcoin — an alternative digital currency. As Bitcoin was the first cryptocurrency created by Satoshi Nakamoto with his whitepaper, any cryptocurrency or startup that was created after was treated as an “alternative.” For example, Ether (Ethereum), Dogecoin, and others are alternatives to Bitcoin.
Dapps (Decentralized Applications)
DApps are any computer applications whose operation is maintained by a distributed network of computer nodes, as opposed to a single server. The concept of a decentralized application was enabled by blockchain platforms that support smart contracts, the first of which was Ethereum (ETH).
In addition to being a regular cryptocurrency, Ethereum supports something called the Ethereum Virtual Machine (EVM), which can be described as a distributed computer whose state at any given moment is perfectly defined via a consensus algorithm.
DeFi (Decentralized Finance)
DeFi is a blanket term for decentralized alternatives to traditional (centralized) finance. DeFi includes banking, money management, payment processing, insurance, etc. DeFi products and services enable democratized access to a historically exclusive industry.
A type of passive investment strategy where you hold an investment for a long period of time, regardless of any changes in the price or markets. The term first became famous due to a typo made in a Bitcoin forum, and the term is now commonly expanded to stand for “Hold On for Dear Life.”
You’ve heard of them: Non Fungible tokens. Just another way of saying, “This digital item is one of a kind and irreplaceable.” It applies to anything you can imagine, from online artwork to songs, viral videos, articles, text logos, and GIFs.
Whales are individual investors and often sophisticated trading firms with large amounts of Bitcoin and other cryptocurrencies. Whales are feared and respected among crypto day traders for their ability to move prices with single trades. Whales include the prescient individuals who bought Bitcoin in its early years and never sold.
P&D (Pump & Dump)
P&D crypto schemes work when a group of coordinated cryptocurrency traders target a specific coin aimed at artificially driving demand for the coin.
The pump and dumpers not only choose a coin, but they also target a specific exchange. Their aim is usually to drive up the volume of the selected coin. They normally target coins that have low volumes.
If ever you stumble into Crypto Twitter, “moon” is one of the most common terms you’ll encounter among bullish enthusiasts — usually accompanied by rocket emojis. Since the very early days of Bitcoin, the moon has played a substantial role in conveying the sentiment that people have toward cryptocurrencies.
If a digital asset is “going to the moon,” this means that the person saying it believes that we are currently seeing — or are about to see — dramatic increases in price.
When a blockchain’s users make changes to its rules it is known as a Fork. These changes to the protocol of a blockchain may result in two new paths, one that follows the old rules (soft fork), and a new blockchain that splits off from the previous one (example: the hard fork of Bitcoin resulted in Bitcoin Cash).
Blockchain forks are essentially a split in the blockchain network. The network is an open source software, and the code is freely available.
When you make a transaction on the blockchain, you have to pay a fee. That fee is called a gas price. You are basically paying a miner to go out and receive crypto for you. You can choose to pay higher fees for faster transaction speeds, or lower fees for slower transaction fees.
Gas prices are one of the biggest challenges facing cryptocurrency markets. If we find a better way to drive down energy costs for transactions, crypto will become more ubiquitous.
A metaverse is simply an alternate version of reality that exists digitally. Much like the physical reality, people interact in this metaverse to work, play, do business, and socialize with other people and elements.
In the blockchain and crypto industry, many projects working in other emerging technology, like artificial intelligence, and expanded reality, like VR and AR, create versions of their own digital realities.
This is where the term metaverse is often used to describe an ecosystem where users of the platform can find every single element, creation, experience, and interaction in a shared, and most importantly, persistent space.
If you are getting started in the world of crypto, you may hear the term “fiat” thrown around quite often. The definition of fiat money or fiat currency is money a government, central bank or central authority has deemed or certified as legal tender that they support.
The dictionary definition of “fiat” is simply an authoritative or arbitrary order. Fiat currency for example is the U.S. Dollar or Euros. So, the government issues an order dictating that USD, GBP, INR, EUR, or other world currency is lawful and accepted to pay both public and private debts.
Pos (Proof of Stake)
PoS (Proof of Stake) is another consensus mechanism, the method by which blockchain confirms transactions and prevents the problem of double counting. Double counting occurs when the same coin or token is used for more than one transaction.
While Proof-of-Work is used for Bitcoin transactions, PoS was created to work as a powerful alternative that uses less computing power. Many researchers believe PoS is significantly more energy efficient compared to PoW and more secure, although some critics question the integrity of these claims.
Pow (Proof of Work)
PoW (Proof of Work) paves the way for many cryptocurrencies including Bitcoin and Ethereum to work without the involvement of a government or company. This consensus mechanism is crucial to avoiding double spending — ensuring that a coin or token isn’t used more than once to facilitate a transaction.
It is the key process behind adding new blocks to Bitcoin’s blockchain and verifying transactions. The network approves a block each time a cryptocurrency miner successfully completes PoW behind the block. Miners are rewarded with BTC if they successfully solve the PoW.
IPO (Initial Public Offering)
Initial public offering (IPO) refers to the moment a private company starts offering its shares to the public for the first time. The term “going public” may also be used to refer to IPOs in some casual instances.
ICO (Initial coin offering)
An ICO, or Initial Coin Offering, is how blockchain projects raise money and launch their virtual currency networks. ICOs exploded in popularity in 2017 and 2018 amid the broader market frenzy. Many ICOS were classic pump-and-dump schemes, many more were accused of money laundering too. The Securities and Exchange Commission has sued many of them.
A public key refers to a series of alphanumeric characters used to encrypt plain text messages into ciphertext. A public key is used in conducting peer-to-peer transactions without the need to reveal the composition of one’s private keys, supporting a cryptographic function that allows for a safe and secure exchange of assets and information without the need for a third party.
A private key generally refers to an alphanumeric string that is generated at the creation of a crypto wallet address and serves as its password or the access code. Whoever has access to a private key has absolute control over its corresponding wallet, access to the funds contained within, and can transfer or trade assets and use the account for other purposes.
Stablecoins are a class of cryptocurrencies that attempt to offer fewer price fluctuations, more stability and are backed by a reserve asset. Stablecoins have gained traction as they attempt to offer the best of both worlds—the instant processing and security or privacy of payments of cryptocurrencies, and the volatility-free stable valuations of fiat currencies.
Fomo (fear of missing out)
FOMO stands for fear of missing out and is used to explain in situations where someone is experiencing fear, uncertainty and doubt.
A halvening (or halving) is a deflationary blockchain event where block subsidies or rewards received for validating transactions decrease by half. It is significant in the sense that it reduces the rate of supply coming into circulation at every instant, and thus increases the scarcity by bringing fewer and fewer units of coins/tokens into existence.
Dao (Decentralized Autonomous Organization)
Dao is an organization whose rules are automated or developed by consensus among the members. It is designed to work unlike a typical corporate structure, where power lies in the hands of an executive or board.
Ether is a term that is associated with the second biggest cryptocurrency (in terms of market cap) Ethereum. It is a developer-run blockchain technology co-founded by Vitalik Buterin, a Canadian-Russian computer science student. Its aim is to make the Ethereum blockchain the most useful and revolutionary for crypto transactions.
The Ethereum network provides an ecosystem that can hold assets, enable programmers to code functions, has high liquidity for buying and selling into smart contracts and is typically also the building block for most DApps for finance.
A cryptocurrency exchange is a venue for buying and selling crypto assets such as Bitcoin and Ether. They often also offer loans and custody of assets, and other services that traditional exchanges or other financial institutions cannot.
Exchanges sometimes offer the user a cryptocurrency wallet so they may store their new transactions and keep track of market capitalization and the number of coins they have invested. Examples of crypto exchanges include Binance and Coinbase.
Crypto wallets keep your private keys – the passwords that give you access to your cryptocurrencies – safe from hackers and accessible, allowing you to send and receive cryptocurrencies Crypto wallets range from simple-to-use apps to more complex security solutions. The main types of wallets you can choose from include:
Hardware wallets: Keys are stored in a thumb-drive device that is kept in a safe place and only connected to a computer when you want to use your crypto. Putting crypto into these wallets is called cold storage (not to be confused with hot wallets).
Online wallets: Keys are stored in an app or other software – look for one that is protected by two-step encryption. This makes sending, receiving, and using your crypto as easy as using an online bank account, payment system, or brokerage.
One of the most significant Ethereum tokens is known as ERC-20. ERC-20 has emerged as the technical standard; it is used for all smart contracts on the Ethereum blockchain for token implementation and provides a list of rules that all Ethereum-based tokens must follow. ERC-20 is similar, in some respects, to Bitcoin, Litecoin and the meme-coin Dogecoin.
A genesis block refers to the first block of any blockchain network. It is almost always hardcoded into the protocol software. It is the only block of a blockchain network that does not reference a previous block.
Now Over to You
Investors who are thinking about getting involved with cryptocurrency should keep in mind that industry terminology can be hugely beneficial. By performing the necessary research and learning this information, would-be traders can increase their chances of meeting their investment objectives.
We hope you enjoyed this edition of the knowledge crunch blog just as much as we enjoy writing them! Stay tuned for more and be sure to check out our other helpful blogs with advice and tips to reach your investment goals with ZuluTrade.
Disclaimer: The views expressed do not constitute investment or any other advice/recommendation/suggestion and are subject to change. Reliance upon information in this material is at the sole discretion of the reader. Opinions expressed in this article do not represent the opinion of ZuluTrade Social Trading Platform and do not constitute an offer or invitation to anyone to invest or trade. Every metric and the statistical number is a result of a past performance which does not constitute a promise or a certainty for a future one.