Crypto and its associated terminology have permeated every corner of the internet, from mainstream media to the most obscure forums. Whether you’re an expert in the field or a newcomer, the language surrounding cryptocurrencies and their underlying technology can be a confusing maze of jargon.
To simplify the subject, we’ve compiled a comprehensive glossary of common terms that you’ll likely encounter when exploring the world of crypto. This guide will make it easier for you to understand the fundamentals, regardless of whether your goal is to invest or simply gain a better understanding of the field.
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A:
Altcoin: A cryptocurrency other than Bitcoin.
ASIC: An application-specific integrated circuit. A powerful and expensive computing device used for cryptocurrency mining.
B:
Bitcoin (BTC): The first, largest, and most well-known cryptocurrency.
Buy the Dip: An investment strategy that involves purchasing an asset when its price has dropped, in hopes of profiting when the price rises again.
Blockchain: The technology behind most cryptocurrencies. It’s a ledger of transactions held by multiple nodes on a network and allows secure, transparent and verifiable transactions.
C:
Coin: A slang term used to refer to cryptocurrencies.
Cold Wallet: A physical storage device such as a flash drive, hard drive, or solid-state drive used to store cryptocurrencies offline for security purposes.
Cryptocurrency: A digital asset used as a store of value or a medium of exchange for goods and services. Transactions are verified through cryptography by a network of participants, rather than a central authority like a government or bank.
Cryptography: The practice of encoding information to protect its confidentiality and security. It involves transforming information into unreadable codes that can only be decrypted with a specific key.
D:
dApp: A decentralized application, meaning it’s not controlled by a central authority. It operates on a blockchain, allowing direct exchange of data between users without the need for intermediaries.
DeFi: Decentralized finance, a system that operates without intermediaries and enables direct transactions between participants. It aims to make transactions faster and more cost-effective.
DAO: A decentralized autonomous organization, a group of people who work towards a common goal and follow rules written in the project’s self-executing code.
Distributed Ledger: A ledger of transactions that’s shared and maintained by multiple nodes on a network, rather than by a central authority like a bank. Blockchains are a type of distributed ledger.
Double Spend: An issue in decentralized systems where a single digital asset can be copied and spent multiple times. Blockchains help prevent double spend by verifying transactions through cryptography.
E:
Exchange: A platform that allows users to buy and sell cryptocurrency assets.
Ether (ETH): The cryptocurrency token of the Ethereum platform.
Ethereum: The second-largest cryptocurrency by market capitalization, after Bitcoin.
Encryption: The process of transforming digital information into an unreadable form to prevent unauthorized access. It involves using a password or key to secure information, making it unreadable to anyone without the proper access.
F:
Fiat Currency: Traditional currencies backed by a nation-state, such as the U.S. dollar, the euro, or the British pound.
Fork: A change to the governing protocols of a blockchain that involves a split from the previous iteration of the blockchain. There are two types of forks: soft forks, which are backwards-compatible changes to the software protocol, and hard forks, which require all nodes to upgrade to the latest version.
G:
Gas: A fee paid in Ethereum for conducting transactions on the Ethereum network. Gas rewards Ethereum validators for their energy consumption and serves as a deterrent against malicious activity on the blockchain.
Graphics Card: A high-end computer component used in PC gaming that has the processing power necessary to validate transactions on a blockchain.
H
Hash – A hash is a compressed alphanumeric string of text that is generated by putting data through a hashing algorithm. This is significant in the context of cryptocurrency as it helps in verifying the authenticity of transactions on a blockchain, which is an unalterable record of transactions.
Hot wallet – A type of online storage for digital currencies provided by either an exchange or a third-party service provider. As it is accessible through the internet and secured by passwords, hot wallets are a common target of cyber attacks. Nevertheless, the operators of hot wallets can assist users in regaining access to their digital assets if they lose their login credentials.
I
ICO – An initial coin offering, which is the equivalent of an initial public offering (IPO) in the world of cryptocurrency. It gives investors a chance to support a new crypto project.
J
Jager – The smallest unit of Binance Coin (BNB).
K
KYC (Know Your Customer) – Some crypto exchanges perform identity verification on their customers as per KYC regulations, although it is not mandatory.
L
Ledger – A record of financial transactions maintained by both centralized financial institutions and decentralized finance applications. The ledger contains information such as the time, date, sender, and recipient of each transaction.
M
Market Cap – The total market value of a cryptocurrency, also known as market capitalization. At present, the combined market cap of all cryptocurrencies is close to $1 trillion.
Mining – The process of validating transactions on a blockchain through a proof of work consensus mechanism. It involves using computer hardware to solve a hash with billions of possible combinations. The more computing power you have, the more guesses you can make within a given time frame, increasing your chances of earning newly minted crypto.
Meme coin – An altcoin that is based on a meme, a type of inside joke in the form of an image that is frequently altered and shared on the internet. Dogecoin is an example of a meme coin.
N
Node – A computer or device that is connected to other computers or devices holding a copy of a blockchain. Nodes support the overall network by sharing information and verifying transactions.
NFT – Non-fungible token, a type of digital collectible that uses the same technology as cryptocurrencies.
O
On-chain – A transaction that takes place on a blockchain and is reflected on the public and distributed ledger.
On-ledger currency – A cryptocurrency that is minted and used on a blockchain ledger, such as Bitcoin.
Orphan block – A block that has been solved but not accepted by the network and is not added to the blockchain. These blocks are sometimes referred to as “stale blocks.”
P
P2P: Short for Peer-to-Peer, it refers to a transaction between two individuals without the involvement of a central authority or intermediary.
Private Key: Also known as a secret key, it is the encrypted password to access someone’s cryptocurrency holdings. It is an extremely long number that is practically impossible to guess. The private key is used to authorize transactions by signing them, and is the only means to access and manage one’s crypto assets.
Public Key: The public-facing address of a crypto wallet that is shared to receive funds. Each public key corresponds to a private key, with the latter being known only to the user in theory.
Proof of Work (PoW): A consensus mechanism employed by many blockchain networks that requires miners to perform computational work to guess a 64-character hash, necessary to add a block to the blockchain. The solution is then broadcasted, allowing other nodes to quickly verify that the hash is correct and the work required has been carried out.
Proof of Stake (PoS): A consensus mechanism used by some blockchain networks that requires verifiers to lock up or stake a certain amount of cryptocurrency to become eligible to add new blocks to the blockchain. The more coins staked, the greater the chances of becoming a validator. However, in the event of deliberately approving a fraudulent transaction, the staked amount is at risk, serving as a deterrent against cheating.
Q
Quantum Computing: A field in computer science that employs principles of quantum physics to process large data sets at faster speeds than conventional computing methods.
R
Regulated: A market where participants must abide by certain rules and regulations, or face fines and/or loss of operating license.
S
Satoshi Nakamoto: The pseudonym for the author of the original Bitcoin whitepaper.
Satoshi: The smallest unit of Bitcoin (BTC), equivalent to 0.00000001 BTC, or a fraction of a penny.
Smart Contract: A program on a blockchain that executes itself automatically when certain conditions are met, without human intervention or the need for an intermediary. Once executed, the contract cannot be altered or undone.
SHA-256: A hashing algorithm developed partly by the U.S. National Security Agency (NSA) that compresses data into an un-reversible alphanumeric string for secure validation of input data. It is used by Bitcoin.
Seed: A random series of 12 to 24 words generated by a crypto wallet for accessing it.
Stablecoin: A cryptocurrency aimed at maintaining a fixed market value, pegged to another currency, commodity, or financial instrument. Tether and USD Coin are currently the largest stablecoins.
T
Tether (USDC): A stablecoin pegged 1-to-1 with the U.S. dollar.
Terahash: The rate at which a computer or network can guess one trillion hashes per second while mining cryptocurrency.
Token: A single cryptocurrency, specifically a crypto running on a specific blockchain. For example, XRP is a token on the Ripple blockchain.
U
USD Coin (USDC): A stablecoin pegged 1-to-1 with the U.S. dollar.
V
Volume: The total amount of currency being traded in the open market at a given moment, typically referred to in a 24-hour period in cryptocurrency markets.
Validator: An individual who pays for the opportunity to validate transactions and earn cryptocurrency on a Proof of Stake blockchain.
Volatility: A market condition characterized by frequent and unpredictable price fluctuations.
W
Wallet. A secure digital storage option or location to keep cryptocurrency assets. The wallets can be found online, known as hot wallets, or offline, called cold wallets.
Wei. The tiniest denomination of Ether. For example, 1 ETH is equal to 1,000,000,000,000,000,000 Wei.
Whitepaper. An accompanying technical document for new cryptocurrency projects that outlines how the system operates.
X
XRP. A token in the cryptocurrency world that operates on the Ripple blockchain.
Y
Yield. The return generated from an investment, expressed as a percentage.
Z
Zero Confirmation. A transaction that has yet to be verified on the blockchain and therefore has not been added to the blockchain.
