The Words of Crypto
Get up to date with the most important blockchain, cryptocurrency, and DeFi terms and jargon here.
- A
Wallet Address
A wallet address is a group of letters and numbers used for sending and receiving cryptocurrencies and other digital assets. It can be shared to facilitate digital transactions.
Airdrop
An airdrop is a type of marketing strategy that involves sending crypto wallet addresses a few tokens or coins in exchange for small tasks, such as sharing a social media post. This is usually done to increase public awareness of a new cryptocurrency.
Algorithm
An algorithm is a finite sequence of instructions used to perform a calculation or to process data. These instructions must be completed in a specific order to produce the desired result.
All-Time High (ATH)
All-time high, or ATH, is a term that refers to the highest historical price a cryptocurrency has reached since its initial launch.
All-Time Low (ATL)
All-time low, or ATL, is an abnormally low price point. A crypto asset reaches its all-time low when the price of its coin is lower than it has ever been before.
Angel Investor
An angel investor is an individual, usually of high net worth, who provides funding for entrepreneurs or startups in exchange for a percentage of ownership in the venture.
Anti-Money Laundering (AML)
Anti-money laundering, or AML, is any type of method that prevents criminals from moving illicit funds with crypto.
Arbitrage
Arbitrage is the buying and selling of the same asset concurrently in different crypto markets to earn a profit from the temporary price differences that are due to market inefficiencies.
ASIC-Resistant
ASIC stands for application-specific integrated circuit, which has superior mining capability compared to traditional graphics cards. Cryptocurrencies with ASIC-resistant qualities cannot be mined with ASIC mining rigs.
Ask Price
Ask price is the lowest price at which a trader is willing to sell an asset, security or cryptocurrency.
Atomic Swap
An atomic swap is an automatic exchange of cryptocurrencies from different blockchains, facilitated by a hashed timelock contract (HTLC), without the need for centralized third-party trading platforms.
Automated Market Maker (AMM)
An automated market maker (AMM) is a system that facilitates automated trading on a decentralized exchange through crypto liquidity pools funded by liquidity providers.
- B
Beacon Chain
Beacon Chain is a blockchain that lays the foundation for Ethereum 2.0, managing the registration of validators and the staking process to facilitate the proof of stake (PoS) protocol.
Bear Market
A bear market occurs when a market undergoes an extended price decline, which can last for anywhere from a few weeks to many years.
Bear Trap
A bear trap is a coordinated effort that involves selling an asset to produce a short-lived dip in the asset’s price.
BEP 2
BEP 2 stands for Binance Chain Evolution Proposal 2. It’s a tokenization standard used on the Binance chain system that ensures cryptocurrencies will enjoy a smoother and more seamless integration with each other on the system.
Bid-Ask Spread
Bid-ask spread represents the difference between the bid — the price buyers are willing to pay — and the ask, which is the price sellers are willing to accept to trade a financial instrument.
Bid Price
Bid price is the highest price that a potential buyer is willing to pay for an asset or commodity.
Bitcoin Dead Cat Bounce
A Bitcoin dead cat bounce refers to the brief recovery of Bitcoin prices from an extended decrease in prices. A dead cat bounce is usually followed by a noticeable downward trend.
Blockchain Address
A blockchain address is a form of identification, usually comprising a sequence of alphanumeric characters unique to a specific user. It serves as the primary way to receive and send cryptocurrencies on a blockchain network.
Block Producer
A block producer is a decentralized entity that exists on delegated proof-of-stake (DPoS) blockchains to create, process and verify a block of transactions on the network.
Blockchain 3.0
Blockchain 3.0 is the next blockchain development stage after Blockchain 2.0. It aims to resolve existing issues in the blockchain industry to facilitate mainstream adoption.
Bridges
The term blockchain bridges refers to channels that facilitate the transfer of cryptocurrencies or information from one blockchain to another by converting them to derivatives of the target blockchain through interoperation.
BUIDL
BUIDL is a technical term, similar to “HODL.” It refers to a crypto investment strategy whereby traders need to actively build and contribute to the existing system to improve its status.
Bull Market
The term “bull market” describes an extended period of rising crypto prices and optimistic investors. During a bull market, prices are high and the public isn't concerned about potential downturns.
Buy Walls and Sell Walls
Buy walls and sell walls refer to the act of trying to manipulate market prices by placing a massive buy or sell order. This is usually done by “whales” (large shareholders) who want to ensure that prices don’t fall below what they consider acceptable.
- C
Censorship Resistance
Censorship resistance in blockchain networks prevents external parties from modifying the transactions on the network. It’s designed to promote transparency and decentralization in crypto.
Centralized Exchange (CEX)
A centralized exchange (CEX) is a third-party platform that’s privately managed by a central organization and facilitates transactions of crypto assets between buyers and sellers.
Chain Split
A chain split refers to a cryptocurrency fork in which the cryptocurrency code of a coin is separated to generate new cryptocurrencies that are independent from the original blockchain.
Circulating Supply
Circulating supply refers to the number of tokens or cryptocurrencies currently available for trade. It’s a portion of the total supply publicly available for circulation.
Consensus Mechanism
A consensus mechanism, also known as a consensus protocol, allows a distributed system of computers to work together and stay secure. There are many different types of consensus mechanisms, but the most common are proof of work (PoW) and proof of stake (PoS).
Consortium Blockchain
The term "consortium blockchain" refers to a group of private blockchains, each owned by individual institutions that have banded together to share information to improve existing workflows, transparency and accountability.
- D
Decentralized Autonomous Organization (DAO)
Decentralized autonomous organizations (DAOs) are democratized internet-native groups of compatible individuals. DAOs work on the principles of flattened hierarchy and transparency and come together to achieve a common agenda.
Decentralized Finance (DeFi)
Decentralized Finance, or DeFi, is a movement based on the idea that financial structures should be free from the control of any single entity, government, or third party.
Decentralized Exchange (DEX)
Decentralized exchanges, or DEXs, are platforms which enable peer-to-peer transactions of cryptocurrencies to occur without the need for brokers.
Delegated Proof of Stake (DPoS)
Delegated proof of stake (DPoS) is a type of consensus algorithm used by blockchain networks to reach an agreement on the status of a ledger. It allows a subset of network participants, called “delegates,” to do this on behalf of the network.
Dogecoin
Dogecoin is a peer-to-peer altcoin with a fascinating birth story. It’s a cryptocurrency that started as a joke in 2013, and has since exceeded expectations as one of the most valuable cryptocurrencies currently on the market.
DYOR
DYOR is short for “Do Your Own Research,” a disclaimer often used in crypto investment opinions online to remind users to take responsibility for their own investment decisions.
- E
Ethereum Improvement Proposals
Ethereum Improvement Proposal (EIP) refers to any document with suggestions for improving the protocol, network and contract standards on the Ethereum blockchain. Any community member can propose new features and processes.
Exchange-Traded Funds (ETFs)
A cryptocurrency ETF is a fund that consists of a number of cryptocurrencies or crypto futures that investors can purchase to immediately diversify their holdings.
- F
Definition: Fill or Kill Order (FOK)
A fill-or-kill (FOK) order is a type of conditional, short-lived trade that must be fulfilled immediately. Otherwise, the order will be canceled.
Fork
A crypto fork, or simply “fork,” refers to a split or change in a blockchain’s network, specifically in terms of the software protocol it uses to determine an existing rule’s or transaction’s validity.
FUD
FUD refers to fear, uncertainty and doubt, which can be a common tactic used to strike fear in users in order to manipulate cryptocurrency prices downward.
Fundamental Analysis
Fundamental analysis is a method for determining a particular crypto asset’s intrinsic value, and assessing internal and external financial and economic factors affecting its future price.
- G
Gas Limit
Gas limit is the maximum amount of gas consumers are willing to pay for a particular transaction on the Ethereum blockchain. Higher gas limits mean higher fees, but faster transactions.
Gold-Backed Crypto
Gold-backed crypto refers to cryptocurrencies that are pegged to the physical value of gold with a predefined amount assigned to each unit.
Gwei
Short for gigawei, a gwei refers to the smallest denomination on the Ethereum network. A gwei is one-billionth of 1 ETH, and is usually used to pay for gas fees on the Ethereum blockchain network.
- H
Halving
Halving in cryptocurrency means that the production of new tokens or coins is reduced by half, which usually happens after a specific period of time in order to stabilize the currency.
Hard Cap
A hard cap refers to the maximum number of tokens that can be produced in a blockchain in order to maintain the token’s scarcity.
Hard Fork
A hard fork is a change in the code of a cryptocurrency that splits a particular blockchain into two separate protocols.
HODL
HODL is an expression which means an investor refuses to sell their assets, essentially “holding” them for an extended period, regardless of the current price on the market.
- I
Initial Coin Offering (ICO)
An initial coin offering (ICO) is a one-time money-raising event for a cryptocurrency project. The company creates or sells coins to interested users as a way of launching its crypto.
Initial DEX Offering (IDO)
An initial DEX offering (IDO) is a token offering that occurs on a decentralized exchange.
Initial Exchange Offering (IEO)
An initial exchange offering (IEO) is a fundraising event that helps startups sell utility tokens through a cryptocurrency exchange to raise the necessary capital and ensure timeliness, transparency and security.
Initial Game Offering (IGO)
An initial game offering (IGO) is a pre-purchase option for buying the NFTs related to a GameFi project. Buying these tokens ahead of time gives investors a way to ensure their participation in the video game.
Initial Public Offering (IPO)
The term “initial public offering” (IPO) refers to the sale offering of a private company’s crypto assets to the public.
- K
Key Management Interoperability Protocol (KMIP)
Key Management Interoperability Protocol (KMIP) is a universal language for securing data across platforms and networks.
Know Your Customer (KYC)
Know Your Customer (KYC) is a process instituted by organizations or governing bodies to verify the identities of individuals wishing to conduct business with them.
- L
Latency
Latency is the time discrepancy in data transmission between a network’s input and received output, which in the crypto world refers to the time delay in crypto transactions.
Layer 1 Blockchain
This term describes the main blockchain architecture, on top of which developers build other solutions and layers. A network like Ethereum, on which many applications are built, is an example of a Layer 1 blockchain.
Layer 2 Blockchain
A Layer 2 blockchain is a blockchain that acts as infrastructure, runs parallel to another blockchain like Bitcoin or Ethereum, and supports systems that require high transaction throughput.
Leveraged Trading
Leveraged trading allows investors to make timely investments with the help of capital borrowed from brokers.
Limit Order
A limit order is a function in cryptocurrency trading that allows you to establish the exact price range for selling or buying your digital assets, particularly in terms of the minimum and maximum prices.
Liquidation
Liquidation is the selling of cryptocurrencies for cash, usually involuntarily, as a result of the investor’s inability to meet the minimum margin for their leveraged position.
Liquidity Pool
A liquidity pool is a collection of crypto assets locked in a smart contract on a DeFi platform to ensure liquidity in decentralized trading.
Liquid Proof of Stake (LPoS)
Liquid proof of stake (LPoS) is a consensus algorithm that was designed to be an improvement on the proof of stake (PoS) and delegated proof of stake (DPoS) algorithms.
- M
Mainnet
A mainnet is an independent blockchain with a unique network, technology and protocol. It’s a blockchain project’s end product, with cryptocurrencies or tokens with monetary value available to the public.
Margin Trading
Crypto margin trading is the borrowing of funds from the brokerage firm or exchange you’re trading on to finance a trade for crypto assets, which become collateral for the loan.
Market Capitalization
The market capitalization of a specific cryptocurrency refers to the total value of its mined coins. It represents its current market value, and showcases its popularity.
Market Order
In crypto trading, a market order enables investors to buy or sell digital assets at the current market price.
Merged Mining
Merged mining is simultaneously mining two different cryptocurrencies by using auxiliary proof of work (AuxPoW). It helps miners earn extra coins with the same hashing algorithm without splitting the hash rate.
- N
Network Congestion
Network congestion on a blockchain occurs when the number of transactions exceeds the network’s capacity. This results in slow transaction processing and high transaction fees.
NGMI
NGMI means "Not Going to Make It." This popular crypto slang is often used when one anticipates a future loss as a result of a poor decision.
Nominated Proof of Stake (NPoS)
Nominated proof of stake (NPoS) is a type of blockchain consensus algorithm that uses stakeholder voting to determine which nodes are able to participate in the validation of new blocks. Only nodes that have been nominated by other voters are allowed to validate new blocks, and earn rewards for doing so.
Non-Fungible Token (NFT)
Non-fungible tokens (NFTs) are one-of-a-kind digital assets stored on the blockchain that are not fungible — that is, unique and not interchangeable.
- O
Off-Chain, Oracle and Orphaned Block
Curious about the ins-and-outs of how a blockchain network operates? We explore three terms that start with the letter “O” on this week’s Crypto
Order Book
An order book is a digital list of all the currently available open orders for a specific digital asset, such as cryptocurrency trading pairs. It also details the buy-and-sell activities of the asset on trading platforms such as crypto exchanges.
- P
Private Key
A private key is an encrypted string of alphanumeric characters that creates a unique digital signature and safeguards crypto transactions. It lets users send, receive and access cryptocurrencies.
Proof of Authority (PoA)
Proof of authority is a consensus mechanism that provides fast transactions using identity as a stake. More commonly referred to as PoA, it relies on well-known vendors to produce blocks. It allows the blockchain network to perform transactions more quickly using a Byzantine fault tolerance (BFT) algorithm.
Proof of Burn (PoB)
Proof of burn (PoB) is a type of proof of work (PoW) algorithm that incentivizes miners to burn a portion of their rewards in order to receive block rewards.
Proof of Capacity (PoC)
Proof of capacity (PoC) is an energy-efficient consensus mechanism that allows nodes on a blockchain to use the empty space on their hard drives to mine crypto.
Proof of Developer (PoD)
Proof of Developer, or PoD, is a verification system designed to prove to investors who the real developer behind a certain cryptocurrency or crypto project is. It’s intended to prevent investors from falling victim to fraudulent transactions.
Proof of Replication (PoRep)
Proof of replication (PoRep) is an extension of proof of work (PoW) that allows distributed systems to agree on the state of a blockchain without trusting any single node.
Proof of Stake (PoS)
Proof of stake, or PoS, is a consensus mechanism for processing transactions and creating new blocks in a blockchain. With a PoS consensus, miners are replaced by validators, who stake their cryptocurrency to bet on the next block. If the block they bet on is validated, they earn rewards.
Proof of Work (PoW)
Proof of work is a system that uses computational power to secure networks, process transactions and add new blocks to a blockchain. It is the most popular consensus mechanism in crypto and is used most prominently in Bitcoin.
Proof of Reserves (PoR)
A proof of reserves (PoR) is an independent third-party audit of an exchange’s reserves done via a mathematical data structure known as the Merkle tree.
- R
Ransomware
Ransomware is a type of malware. It's used by cybercriminals to lock a computer or files and prevent access until a victim agrees to pay a ransom, usually in cryptocurrency.
Relay Chain
The Relay Chain acts as the central chain for the Polkadot network. Polkadot is considered to be a heterogeneous multi chain that consists of shared interoperability and security.
- S
Seed Phrase
A seed phrase is a randomly generated list of 12 or 24 words that is used to recover access to a software or hardware wallet containing cryptocurrency funds.
Shard Chain
A shard chain is a sub-blockchain of the main Ethereum blockchain that’s intended to ease blockchain network congestion issues and improve the transactions per second (TPS) rate.
Soft Fork
A soft fork is a change in a blockchain’s software protocol that is backward compatible with older nodes.
Supply and Demand
Supply and demand refer to the amount of goods or services suppliers are willing to produce and the amount consumers are willing to buy.
- T
To the Moon!
“To the moon” is a slang expression in the crypto world. It refers to a significant spike in volume and price for a specific digital currency. It’s also used to describe a trader’s desire to see their assets gain a sky-high value.
Transaction ID
A transaction ID (TXID) is a unique string of alphanumeric characters that identifies a blockchain transaction. Every verified cryptocurrency transaction receives a TXID, ensuring transparency, authenticity and security.
Transactions Per Second (TPS)
Transactions per second (TPS) refers to the number of transactions a particular blockchain can handle per second. Higher speeds mean higher payment efficiency, possibly at the expense of decentralization.
Trustless System
A trustless system is a decentralized platform that functions without the need for participants to know or trust each other. Blockchain technology ensures trust, eliminating the need for third-party intermediaries such as banks.
Turing Complete: Explained
Turing-complete is a term used to describe a computing machine capable of solving any problem that a Turing machine could solve given an unlimited amount of time and memory. To understand Turing completeness, you must first understand what a Turing machine is.
- U
Unspent Transaction Output (UTXO)
Unspent Transaction Output (UTXO) is a cryptocurrency transaction output that can be used as an input in a later transaction. It essentially lets you break up cryptocurrency into fractional pieces.
Utility Token
A utility token is a crypto asset, typically issued during an initial coin offering (ICO), that allows token holders to perform a specific function on the network.
- V
Vesting
Vesting is a process in which a certain amount of tokens are set aside for a period of time for those who contribute to the development of the crypto project.
Volatility
Volatility is the tendency to change quickly and unpredictably. The word is often used in reference to securities or crypto assets and their price changes.
- W
WAGMI
WAGMI stands for “We’re All Going to Make It.” It’s a phrase often used in the crypto community to inspire confidence and encourage community members not to lose hope.
Weak Hands and Wrapping
We have been through a whirlwind of glossary terms so far. In this week’s Crypto Terminology: A to Z series, here are another two under the letter “W”.
Whale
A crypto whale is a person or entity that owns an exceptionally large amount of a cryptocurrency. These large holdings mean that a single holder can impact the entire market with their transactions.
Wrapped Ether
Wrapped Ether (WETH) is an ERC20-compatible token pegged to Ether’s value, meaning that users can redeem it for the original coin anytime without affecting its value.
- X
- Z
Zero-Knowledge Proof
A zero-knowledge proof offers a method of data authentication that limits the actual disclosure of the data in question.
Zero-Knowledge Rollups
Zero-knowledge rollups are a type of smart contract frequently used in Ethereum transfers. They’re popular because they let you quickly and cheaply validate a block.
