The world of cryptocurrency is full of weird and wonderful terms, if you've ever wondered what half of them mean then you're in the right place. Over 150+ crypto-related words explained in plain English.
123
2 Factor Authentication (2FA)
2 Factor Authentication is a double layer security measure. Most crypto exchanges use it. To log in, you not only need to enter a password, but also a code that you receive from your software or hardware-based authentication device.
51% Attack
A majority attack that occurs when more than half of the computer power on a network is run by a single person or a single group of people. The entity has full control of the network and can negatively affect a cryptocurrency by halting mining, stopping or changing transactions and reusing coins.
A
Abstract
An ‘abstract’ is a summary of a (technical) document. A logical place is the beginning of a ‘white paper’ to describe it briefly.
Address
A unique address that identifies where a cryptocurrency sits on the blockchain. It’s this location at which the coin’s ownership data is stored and where any changes are registered when it is traded. Addresses look different among cryptocurrencies but are usually a string of more than 30 characters.
AES256 (Asymmetric Key Algorithm)
AES stands for Advanced Encryption Standard and 256 stands for the key-size (length) of 256-bit. AES is an encryption technique, which is used to encrypt data and is used in most modern encryption protocols and technologies. SSL is an example of such technology. It is also used in algorithms applicable to a blockchain, like Bitcoin for example (SHA-256).
Airdrop
A marketing campaign that refers to the expedited distribution of a cryptocurrency through a population of people. It can occur when the creator of a cryptocurrency provides its coin to low-ranked traders or existing community members in order to build its use and popularity. They can be given away for free or in exchange for simple tasks like sharing news of the coin with friends.
Algorithm
Mathematic instructions coded into and implemented by computer software to produce a desired outcome.
All-time high (ATH)
The highest price ever achieved by a cryptocurrency.
All-time low (ATL)
Lowest price ever achieved by a cryptocurrency.
Alphanumeric
Alphanumeric is something, like a code or password, that consists of both letters and numbers. Such as private and public keys.
Altcoin
A category that includes all coins other than Bitcoin, the first and most successful of all the cryptocurrencies.
Anonymous
Anonymous refers to anonymity. Within the blockchain world, this is an important topic. Bitcoin transactions are anonymous to a certain extent, but the transactions are permanently visible in the blockchain. Eventually, it will be possible to link it to a person. This has led to the creation of privacy focussed coins, such as Monero and PivX. Anonymous can also refer to an international group of activists and ‘hacktivists’, who in recent years have committed several (DDOS) attacks on websites of agencies and governments.
API
API is the acronym for Application Programming Interface. This refers to an interface of applications or websites used to easily get data or push data or commands back. This is a widely used system inside and outside the crypto market. For example, Youtube and Telegram have handy API’s, but in the crypto space pretty much each crypto exchange has one for getting price data and even making trades with external programs like Coinigy. Block explorers, like Etherscan.io for example, also have API’s to retrieve transaction, wallet and coin supply details.
Application-specific Integrated Circuit
Computer hardware – similar to a graphics card or a CPU – designed to mine cryptocurrency. ASICs are built specifically to solve hashing problems efficiently.
APY
APY is short for ‘annual percentage yield’, which is the total return rate that is earned on an interest-bearing asset or savings account. The compounding interest should be taken into account when the APY percentage is projected. An APY of 5% will turn £100 into £105 after exactly one year.
Arbitrage
The act of buying from one exchange and then selling it to the another exchange if the margin between the two is profitable. Multiple exchanges trade in the same cryptocurrency at any given time, and they can do so at different rates.
ASIC (Application Specific Integrated Circuits) Miner
ASIC is the abbreviation for ‘application-specific integrated circuit’. These are microchips or processors, designed to perform a very specific task very well. The Bitcoin ASIC is a very popular one, which makes it possible to mine Bitcoins very efficiently, making it impossible to mine them on a normal computer. ASICs are also developed for other coins, but they can become useless after a protocol upgrade, which makes the blockchain ‘ASIC-resistant’.
Asymmetric Key Algorithm
AKA stands for Asymmetric Key Algorithm. This is a cryptographic system that uses a ‘pair of keys’, the so-called ‘public key’ and the ‘private key’. The public key is needed by both parties to execute a transaction. The private key is only known to the owner and acts as an authentication method for accessing the coins stored on the public address.
Atomic Swap
A way of letting people directly and cost-effectively exchange one type of cryptocurrency for another, at current rates, without needing to buy or sell.
Audit
An audit is an official examination of an organisation’s accounts. The organisation’s records are examined and checked to ensure that they fairly and accurately reflect the transactions that have been made. This is normally carried out by an independent body. If it is done by employees themselves, it is called an internal audit.
B
Bear / Bearish
When the price of a cryptocurrency has a negative price movement.
Bear trap
This is a trick played by a group of traders aimed at manipulating the price of a cryptocurrency. The bear trap is set by this group all selling their cryptocurrency at the same time, which bluffs the market into thinking there is a drop incoming. As a result, other traders sell their assets, further driving the price down. Those who set the trap then release it, buying back their assets, which are now at a lower price. The overall price then rebounds, allowing them to make a profit.
BECH32
Bech32 is a Bitcoin ‘Segwit’ address format. These addresses always start with ‘bc1’ and therefore ‘bech32 addresses’ are also known as ‘bc1 addresses’. The format has not yet been implemented very widely in wallets, so it is not recommended to use it until that situation changes.
BIP (Bitcoin Improvement Proposal)
BIP is the abbreviation of ‘Bitcoin Improvement Proposal’. This is a standardised way to introduce functions and other issues, such as design issues. Because of the decentralised nature of Bitcoin and therefore the lack of a formal structure, this system is used to improve Bitcoin in a well-founded and consensus-driven way.
Bitcoin
The very first cryptocurrency. It was created in 2008 by an individual or group of individuals operating under the name Satoshi Nakamoto. It was intended to be a peer-to-peer, decentralized electronic cash system.
Block
The blockchain is made up of blocks. Each block holds a historical database of all cryptocurrency transactions made until the block is full. It’s a permanent record, like a bag of data that can be opened and viewed at any time.
Block Explorer
An online tool for exploring the blockchain of a cryptocurrency, where you can watch and follow, live, all the transactions happening on the blockchain. Block explorers can serve as blockchain analysis and provide information such as total network hash rate, coin supply, transaction growth, etc.
Block Height
Refers to the number of blocks connected in the blockchain. For example, Height 0 would be the very first block, which is also called the genesis block.
Block Reward
The block reward is the payment that is offered to the node that is securing the blockchain. In the case of Bitcoin, which is has a Proof-of-Work consensus algorithm, these would be the miners. The payment is in the form of the native cryptocurrency of that blockchain. The amount is a predetermined reward per block, but often that is supplemented with the fees that are paid for the transactions that block contains. For Bitcoin, the current block rewards are cut in half every four years. This is called the ‘halving’.
Block Size
The block size represents the size of each block in a blockchain. Transactions are stored in a blockchain block. For Bitcoin, this is limited to 1MB per block. More transactions can be stored when the blocks are larger. This is the case with many altcoins. There are also disadvantages to large blocks, such as the required storage space. Also, it can become less attractive for miners if the transaction fees become too low as a result of large blocks.
Blockchain
The blockchain is a digital ledger of all the transactions ever made in a particular cryptocurrency. It’s comprised of individual blocks (see definition above) that are chained to each other through a cryptographic signature. Each time a block’s capacity is reached, a new block is added to the chain. The blockchain is repeatedly copied and saved onto thousands of computers all around the world, and it must always match each copy. As there is no master copy stored in one location, it’s considered decentralised.
Bounty program
Bounties are simple tasks of jobs by the team behind a coin. These can be as simple as joining a Telegram channel or by (re)tweeting. It could also be a bit more difficult like a translation job for example. The participants receive rewards in the form of coins in exchange for completing these bounties.
Brute Force Attack (BFA)
A brute force attack is an attack performed by a hacker on a password or PIN. An automated script tries to execute as many different combinations as possible as quickly as possible until the password or PIN is guessed.
Bull market
A bull market is the condition of financial markets where the prices of securities are rising or expected to rise. This concept can now also be applied to the crypto market. Prices rise and fall every day, but the term bull market is only reserved for longer periods of rising prices. This can go on for months or even years. The opposite of this is called a ‘bear market’.
Bullish
If the price of a cryptocurrency has a positive price movement.
Burned
If a coin in any particular cryptocurrency has been made unspendable, it is said to be burned.
C
CBDC
CBDC stands for ‘Central bank digital currency’ and is the fully digital form of fiat money. Unlike Bitcoin, this type of currency would be created by a centralised authority like a central bank or a monetary authority. It may or may not have a distributed ledger. Each central bank in the world can have a custom implementation. Currently, it is still in the test phase or just a concept on paper.
Centralised
Centralised means that one particular organisation has control. For example, governments and companies are centralised. The opposite of centralised is decentralised, such as the Internet and the blockchain.
Central ledger
When a single entity has control of all financial records, it is considered to be a central ledger. This is how banks operate.
Circulating Supply
The total number of coins in a cryptocurrency that are in the publicly tradable space is considered the circulating supply. Some coins can be locked, reserved or burned, therefore unavailable to public trading.
Cloud Mining
Cloud mining is like normal mining, but then with remote processing power. This is usually rented from companies located in areas with low electricity costs. These companies offer mining contracts for a limited or perpetual period. During this period the mining rewards are deposited into your account or wallet. The amount will be based on the hash power you purchased and the mining difficulty.
Cold Storage
Cold storage refers to storing cryptocurrency in a place where the private key cannot be accessed via the internet. This can be done on a hardware wallet, paper wallet or software wallet in an offline environment.
Cold Wallet
A cold wallet is a wallet used for storing cryptocurrency. The private key is stored offline and never exposed to the internet – ultimately, improving security.
Collateral
Collateral refers to an asset that can be used as security for a loan, but only if the lender accepts it. DeFi is growing fast in the crypto world and collateral backed loans are more and more common with an increasing number of cryptocurrencies or tokens that can be used as collateral. In crypto it is not only used for lending but can sometimes also be used when running (master) nodes. Chainlink is a good example of this implementation, where the node provides oracle services. Usually, the node will only get jobs if enough collateral in tokens is provided. This collateral is used to compensate the customer if something goes wrong with the node, like providing inaccurate data.”
Commit
In software development it is common to use version control techniques, like the open-source Git, to track all the development changes. The commit command refers to the command used to save the changes to the repository. This creates one or more commits, or simply a revision, with all the changes to a file or set of files. Each commit has a unique identifier (hash). The number of commits can give some insight into the development speed, but it’s not 100% reliable. Deletions and additions of code also count as commits and thus the number of commits can be faked.
Confirmation
When a transaction has been confirmed, it means it has been approved by the network and permanently appended to the blockchain. This is done by one of the consensus mechanisms, such as proof-of-work and proof-of-stake.
Consensus
The consensus in the blockchain world can be defined as an agreement by a majority, which is often set to a minimum of 51%. When 51% of the entities or people on the (blockchain) network agree to a change, like a transaction or change to the system the consensus has been reached. Having consensus is a very important part of the cryptocurrency space since it is required to have the validity of transactions on a blockchain verified as well as having a method to manage decentralised systems.
Consortium blockchain
When a transaction is made, all nodes on the network verify that it is valid on the blockchain, and if so, they have a consensus.
Contract address
A contract address is an address used by the smart contract on a DApp platform. For Ethereum, each token is based on the ERC-20 standard and has a contract address.
Cryptocurrency
A form of money that exists as encrypted, digital information. Operating independently of any bank, a cryptocurrency uses sophisticated mathematics to regulate the creation and transfer of funds between entities.
Cypherpunk
Someone who advocates a broad use of cryptography and technology to promote privacy with the aim of social and political change is called a ‘Cypherpunk’. These people form an active community that has been around since the 1980s. The Bitcoin creator was likely part of this Cypherpunk community.
Cryptographic hash function
This process happens on a node and involves converting an input – such as a transaction – into a fixed, encrypted alphanumeric string that registers its place in the blockchain. This conversion is controlled by a hashing algorithm, which is different for each cryptocurrency.
D
DAO – Decentralised Autonomous Organisations
Refers to organizations that are run by an application (computer program) rather than direct human input. Control of this application is granted to everyone rather than a single central entity.
DApp (Decentralised Application)
A computer program that utilises a blockchain for data storage, runs autonomously, is not controlled or operated from a single entity, is open source and has its use incentivised by the reward of fees or tokens.
Dark Web
The Dark Web is referred to a part of the Internet that is not easily accessible without special software and/or access permission. The content is usually not indexed by the Google search machine and could be password protected. The information and content could be secretive or even illegal.
DCA (Dollar-cost averaging)
DCA is the abbreviation for Dollar-Cost averaging. This is an investment technique, where a fixed amount of money is used to invest. Not the entire amount is used at one time, but according to a fixed schedule, no matter what the price is. With this method, you can never buy on the top, but also not on the bottom. Within the crypto space, the term is also used to indicate that someone buys low after a huge price drop of a coin.
DeFi
DeFi is the abbreviation of ‘Decentralised Finance’. It can be defined as a new financial ecosystem consisting of various financial tools, apps and services utilising blockchain technology. It’s an umbrella term for all these projects combined and is growing daily. Examples of DeFi functionality are banking services in the form of stablecoins, decentralised exchanges, derivatives, prediction markets, or lending and borrowing systems. The last one can be either peer-to-peer or with a pool. It is a combination of replicating products and services in the traditional finance industry as well as innovative new ones only possible with blockchain technology.
DEX
A DEX is short for Decentralised Exchange. This is an exchange where people can trade cryptocurrencies and tokens without the need for a middleman. It is usually run by code in a ‘smart contract’. The transactions are generally written to the blockchain, which makes a DEX by default slower than a centralised exchange that uses fast databases. The main benefit of a DEX is that nobody, but yourself, holds the private key to the funds. Even though a DEX will not have a middleman regarding the trades, the exchange and the website are centrally managed. Therefore it’s not 100% decentralised in fact. The level of decentralisation differs per DEX.
Difficulty
When someone refers to difficulty in the cryptocurrency space, they are referring to the cost of mining at that particular moment in time. The more transactions that are trying to be confirmed at any single moment in time, divided by the total power of the nodes on the network at that time, defines the difficulty. The higher the difficulty, the greater the transaction fee – this is a fluid measurement that moves over time.
Digital commodity
An intangible, hard-to-get asset that is transferred electronically and has a certain value.
Digital Identity
Digital identity refers to information used by computers to represent a real-world entity, like a person or an organisation. It could also represent an application or device. It can be seen as a set of attributes related to the entity. This digital identity is used for authentication and verification to access systems on a network, such as the Internet.
Distributed Ledger
A ledger that is stored in multiple locations so that any entries can be accessed and checked by multiple parties. In cryptocurrency, this refers to the blockchain being held on multiple nodes on the network, all of which are checked simultaneously.
Double Spend
This occurs when someone tries to send a cryptocurrency to two different wallets or locations at the same time.
DYOR
DYOR is a term, which you often see in disclaimers and chat groups regarding the cryptocurrency market. It stands for ‘Do your own research’. It is a quick way of saying that no financial advice is given and you have to do your own research before you invest.
E
EIP
EIP is short for ‘Ethereum Improvement Proposal’. This is similar to the ‘BIP‘ that relates to Bitcoin. EIPs describe standards for the Ethereum platform. This includes contract standards, protocol specifications and client APIs. An EIP can be proposed by any Ethereum community member and it is then discussed within the community.
Emission Rate
This is the speed at which new coins are released and thus increases the ‘circulating supply’. This speed is known in advance by the design of the blockchain and can be shown in a graph, the ‘Emission Curve’.
ERC-20
ERC20 coins are all tokens on the Ethereum blockchain. It defines the way that each token behaves so that transactions are predictable. Other cryptocurrencies also use the ERC-20 standard, piggybacking on the Ethereum network in the process.
Escrow
When an intermediary is used to hold funds during a transaction, those funds are being held in escrow. This is usually a third party between the entity sending and the one receiving.
ETF
ETF is an abbreviation for ‘Exchange-Traded-Fund’ or a listed fund on a stock exchange. This is a tradable product (security) that follows the price of an underlying asset. Examples are an equity index, a basket of certain securities, bonds and commodities. There are several applications for a Bitcoin ETF, but none of these has yet been approved by the SEC in the United States of America.
Ether (ETH)
Ether is the native cryptocurrency of the Ethereum blockchain. According to their website, it is a necessary element (a fuel) for operating the distributed application platform. It is a form of payment made by the clients of the platform to the machines executing the requested operations. The transaction fees for using the platform are paid for in Ether and measured based on the gas limit and gas price.
Ethereum
One of the top cryptocurrencies by market cap. Despite being open-source and based on blockchain technology, it differs from bitcoin in two key ways: it allows developers to create DApps and also write smart contracts.
Ethereum Classic (ETC)
Ethereum Classic (ETC) is a cryptocurrency that came to existence due to a hard fork of the Ethereum blockchain. After a major hack where over 200 million USD worth of Ether was stolen, the Ethereum Foundation decided to roll back the blockchain. Part of the community didn’t agree with this decision and kept mining the original chain, which was then called Ethereum Classic.
Ethereum Virtual Machine
A virtual machine, effectively sitting in the cloud, that is Turing complete and is used by all nodes on the network during blockchain confirmations. It allows those on the node to execute random EVM Byte Code, which is part of the Ethereum Protocol.
Exchange
The platform through which cryptocurrencies are exchanged with each other, with fiat currencies and between entities. Exchanges can vary widely in the currency conversions they enable and their fee structures.
F
FA
FA is the abbreviation of ‘Fundamental analysis’. It is a method of evaluating an investment, such as a cryptocurrency, by looking at its intrinsic value. Related economic and financial factors are also examined.
Fiat
Fiat money relates to all currencies issued by governments. It doesn’t have any value by itself and is not backed by gold anymore either. It instead maintains value based on the trust of the people. Once the trust goes away it will decrease in value and could eventually cause hyperinflation. Examples are the Great British Pound (GBP), Euro (EUR) and American dollar (USD).
Flippening
The Flippening is a term used to describe the moment that a coin becomes more valuable than Bitcoin. Ethereum has been the second most valuable coin for most of the time, but so far its market cap has been always lower than Bitcoin’s.
FOMO
FOMO is the abbreviation for ‘Fear Of Missing Out’ and is used regarding people who are afraid they are missing the boat and therefore take a position in a coin.
Fork
When a new version of a blockchain is created, resulting in two versions of the blockchain running side-by-side, it is termed a fork. As a single blockchain forks into two, they will both run on the same network. Forks are categorised into two categories: soft or hard.
FUD
FUD is the abbreviation for ‘Fear, uncertainty and doubt’. An article or post can be seen as causing FUD and can have a negative impact on cryptocurrencies or markets in general.
Fully Diluted
Fully Diluted in crypto refers to a fully diluted market cap. This is the market cap of a coin based on its total supply instead of the circulating supply. This is an important metric for investors to compare coins and help with the decision if it’s overvalued or undervalued.
Full Node
Some nodes download a blockchain’s entire history in order to enforce its rules completely. As they fully enforce the rules, they are considered a full node.
Future
The term ‘futures’ comes from the financial markets. It is a financial contract, which obliges the buyer to buy a security or the seller to sell it. This has to be done on a predetermined date and price in the future. It is a trading instrument on the stock exchange and is used for various underlying instruments, including Bitcoin nowadays. Some contracts require the physical delivery of the underlying instrument and others are settled in cash.
G
Gas
Gas’ or ‘Wei’ is used to execute a transaction on the Ethereum blockchain. The ‘gas’ that is used can be seen as a fee for the miners. The more ‘gas’ you set, the faster your transaction will be completed. Because of the higher reward, more miners will be incentivised to process the transaction earlier.
Gas Limit
When users make a transaction on the Ethereum network, they set their gas limit, which is the most they are willing to pay as a fee for that transaction. If the transaction is going to cost more gas than what is offered, the transaction will not go through. If it costs less, the difference will be refunded.
Gas Price
The amount you are willing to pay for a transaction on the Ethereum network. If you want miners to process your transaction fast, then you should offer a higher price. Gas prices are usually denominated in Gwei.
Genesis block
The ‘Genesis Block’ is the first block in a cryptocurrency's blockchain.
Gwei
Gwei is used to measure the cost of gas for transactions on the Ethereum network. A single Gwei amounts to 10⁹ Wei or 10^-9 ETH.
H
Halving
Every time miners approve transactions on the bitcoin blockchain, they earn bitcoin. As each block on the blockchain fills up with transactions, a certain amount of bitcoin enter the marketplace. However, the number of bitcoin that will ever be created is finite, locked at 21 million. In order to ensure this cap is kept, the amount of bitcoin earned by miners for filling one block is halved at the completion of that block. This is called halving. For the record, by the year 2140, all 21 million bitcoin will be in circulation.
Hard Fork
A hard fork is a major change in the Blockchain protocol. A hard fork requires all nodes to upgrade to the latest version of the protocol software. Usually, there is a transition period where the miners can show their support for the hard fork. Once a date is set via a specific block number, everybody will need to have updated their software by that time. The ones that fail to upgrade could cause a chain split. The chain with the highest number of nodes or hash rate will be seen as the original chain.
Hardware Wallet
A physical device, similar to a USB stick, that stores private keys in an encrypted form, completely isolated from the online world. It’s considered the most secure way to hold cryptocurrency.
Hash Rate
Measurement of performance that reveals how many hashes per second your computer is capable of producing. Each hash is an attempt to find a block by creating a unique block candidate and testing it against the network.
Hashing Power
The hash rate of a computer, measured in kH/s, MH/s, GH/s, TH/s, PH/s or EH/s depending on the hashes per second being produced. 1,000 kH/s = 1 MH/s, 1,000 MH/s = 1 GH/s and so forth.
HODL
This is an acronym for hold on for dear life.
Hopium
Hopium is a slang term created from the words hope and opium. In the cryptocurrency trading world, this is used on chats and social media in relation to people who are very positive about the market or a specific coin and keep holding on to their positions.
I
ICO
An ‘initial coin offering’ (ICO) can be compared a bit with an IPO. Investors get an opportunity to invest in a certain coin for the first time. The difference with the stock market however is that a company has to meet all kinds of requirements before the IPO can take place. The market of ICO’s is much less regulated. Therefore, it happens more often that an ICO is fraudulent.
Immutable
A property that defines the inability to be changed. This is especially true over time. Usually, a blockchain has this property by default and makes it distinct from a traditional database. Though a rollback of blocks is possible, this is rare to happen and could cause a chain split. That would also mean that a transaction will be gone and unchanged. The more blocks generated after a transaction the harder it will be to perform a rollback.
Interoperability
The term interoperability in crypto refers to blockchain interoperability. In short, this means the ability to share information between different blockchains. Since the launch of Bitcoin, a lot of new blockchains have emerged of which the most well known is Ethereum. All these new blockchains are in a way competing with each other to get adoption by developers and users resulting in a lot of silos. Since each blockchain usually has its own speciality it would make sense for developers to utilise more than one blockchain. In order for this to work there is a need for interoperability.
J
JOMO
JOMO is the abbreviation of ‘Joy Of Missing Out’ and refers to a trader who is happy that he has not taken a certain position and is often said after a considerable price drop.
K
Key pairs
A key pair is the combination of a public and private key together. During the process of creating a wallet, a pair of keys is generated. The private key is the most important one and should be backed up safely and not shared with anyone.
KYC
KYC is an abbreviation for ‘Know Your Customer’ and was created to combat money laundering via cryptocurrencies. At almost every ICO it is mandatory to prove that you are who you say you are. This is also regularly requested at crypto exchanges.
L
Ledger
A record of financial transactions. A ledger cannot be changed, it can only be appended with new transactions.
Leverage
A loan of sorts offered by a broker on an exchange during margin trading.
Lightning Network
A peer-to-peer system for cryptocurrency micropayments that is focused on low latency, instant payments. They’re typically low cost, scalable and can work across chains, and transactions can be public or private.
Limit Order
With a ‘limit order’, you give the order to the stock exchange to buy an x number of coins for price x. When ‘filling’ the order, the price can’t differ from the order you gave. The number of coins can however differ, but never more than the order.
Liquidity
The liquidity of a cryptocurrency is defined by how easily it can be bought and sold without impacting the overall market price.
Liquidity mining
Liquidity mining refers to the process where a yield farmer will receive a new token as well as the usual APY in exchange for providing liquidity to a pool. The received token is the native token of the specific project and usually represents governance rights. This can be used to vote in favour or against proposed changes to the underlying project.
Liquidity Provider
A liquidity provider is somebody who submits assets of a trading pair on an exchange for market-making. This has become popular in the crypto scene with the launch of the Ethereum based exchange, Uniswap. For example on the Ethereum <> Chainlink pair you can submit the equivalent of $1000 on both assets, so a total of $2000, to the pool. In exchange, you get a pro-rato claim token of that pool. All the trades on that pool are shared with the claim token holders and this way you can earn a passive income. Though there is the risk of one the assets going up/down really a lot and then you might get stuck with too much of the asset on the other side. This phenomenon is called ‘impermanent loss’ and is a risk to be aware of before starting to provide liquidity. In the article ‘What is Uniswap?’ you can learn more about how it works.
Locktime
If a transaction request comes with a rule delaying when it can be processed to a certain time or certain block on the blockchain, that is referred to as the locktime.
M
Market Capitalisation (Market Cap)
The market cap shows the total value of all coins together. Many beginners make the mistake of only looking at the unit price of a coin to decide if the coin in question is worth much or little. The market cap is a more suitable instrument for this. Cap = supply x price.
Masternode
A masternode is a server, ran from home or in a data center, that has an essential role in a decentralised network. It usually performs specific tasks, like storing files or data and keeping it accessible in the network. It could also function to validate the transaction or for consensus purposes like voting on proposals. The technical (memory, CPU, etc) and financial criteria (number of coins needed) are different for each coin. If the masternode you set up does not perform well it’s possible to lose your coins if those are meant as collateral. The rewards could also just stop and then you can just start over again. A masternode usually gives a high reward that’s paid out in the coin itself.
Maximum Supply (Max Supply)
This is the maximum number of coins that will exist for a token or cryptocurrency. If there is a max supply defined, no more coins can be created. ‘Burned’ coins are part of this supply, so therefore it is always larger than or equal to the total supply. For Bitcoin, the maximum is set to 21 million.
Metamask
Metamask is a popular browser plugin that bridges your cryptocurrency holdings with a website. It allows you to easily perform blockchain transactions and send coins.
Microbitcoin (uBTC)
Microbitcoin is the name for the abbreviation uBTC. This represents one-millionth of a bitcoin and is commonly written as 0.000001 BTC.
Millibitcoin (mBTC)
Millibitcoin is the name for the abbreviation mBTC. This represents one-thousandth of a bitcoin and is commonly written as 0.001 BTC.
Miner
A ‘miner’ is a person or organisation that uses computing power (CPU, GPU or ASIC) required to find the next blockchain block. Once the answer is found, a new ‘block’ is generated, in which a number of transactions are permanently stored. The miner is rewarded with a predefined ammount of cryptocurrency. Usually, this is complemented with the transaction costs, which are paid by the user.
Mining
Mining is also known as ‘Cryptocurrency mining’ or ‘Cryptomining’. It is a process where blocks are added to a blockchain by solving a mathematical puzzle. The block can also contain transactions on that blockchain and will then become verified and immutable. Depending on the blockchain, mining can be done with a CPU, GPU, specialised hardware or a combination of all.
Mining Contract
An investment in mining hardware whereby you rent out the hashing power of mining hardware for a certain amount of time. The renter does not pay for the hardware or the maintenance and electricity required to run it.
Mining Pool
If a number of miners combine their computing power together to try and help complete the transactions required to start a new block in the blockchain, they are in a mining pool. The rewards are spread proportionately between those in the mining pool based on the amount of power they contributed. The idea is that being in a mining pool allows for better chances of successful hashing and therefore getting enough cryptocurrency reward to produce an income.
Multi-Signature Wallets
If, in order for a transaction to go through, more than one user needs to provide their unique code, then it is multi-signature. This system is set up at the creation of the account and is considered less susceptible to theft.
N
Network
A network refers to all the nodes committed to helping the operation of a blockchain at any given moment in time.
NFT
NFT is the abbreviation of non-fungible token. This is a type of token representing a unique asset. These can be either digital or represent real-world assets. NFT’s are generally scarce, unique and indivisible.
Node
Any computer that is connected to a blockchain’s network is referred to as a node.
Nonce
When a miner hashes a transaction, a random number is generated, called a nonce. The parameters from which that number is chosen change based on the difficulty of the transaction.
O
Oracles
The smart contracts stored on a blockchain are stuck within the network. They can only be reached by the external world through a program called an oracle. The oracle sends the data to and from the smart contract and the outside world as required. Oracles are most commonly found on the Ethereum network.
Orphan
An ‘Orphan’ or ‘Orphan block’ is a block in the blockchain that is not further built on. Blockchain blocks are usually generated by ‘mining’ or ‘staking’; occasionally two blocks are created simultaneously by different computers. Only one of the two can be valid on the blockchain, so the other expires and becomes an orphan block.
P
Peer-to-Peer
In a peer-to-peer connection, two or more computers network with each other without a centralised third party being used as an intermediary.
Permissioned blockchain/ledger
Anyone can mine Bitcoins because it is a public blockchain. This is not the case with a permissioned blockchain. There is a layer above it that determines which entity is allowed to write transactions in a block. The <ahref=”https://blockspot.io/coin/xrp/”>XRP coin from the company Ripple Labs is an example of such a blockchain and has CGI, MIT and Microsoft as approved entities for example. These are called ‘transaction validators’.
PoA (Proof of Authority)
PoA stands for ‘Proof of Authority’. This is a validation method to process transactions and blocks in a blockchain only by approved accounts. These are known as ‘validators’ and run specific software to store the transactions in blocks. Since the identity is linked to the system, it can contribute to more trust.
PoB (Proof of Burn)
PoB stands for ‘Proof of Burn’. This is a method to invest in a new cryptocurrency by destroying coins of an existing one, which has been given the term ‘Burning’ in the crypto world. This is done by sending coins to a special, unusable address. That’s usually the only way to destroy coins within a blockchain. This method can also be used when a coin gets a relaunch with a new team and a new coin.
PoD (Proof of Developer)
PoD is the abbreviation for ‘Proof of Developer’. This can be any verification that can serve as proof that a cryptocurrency was created by a real software developer. This method is mainly used when launching a new cryptocurrency to prevent scams.
Proof of Stake (PoS)
The Proof-of-Stake (PoS) consensus algorithm is introduced as an alternative to Proof-of-Work (PoW) without the energy-consuming aspect. In the case of PoS the creator of the next block is randomly chosen based on a combined selection of age and wealth, where the wealth is the ‘stake’ or amount of cryptocurrency that has been put to work. This is done by having it in an unlocked wallet for staking. The staking can usually be done on a VPS or computer at home.
Proof of Work (PoW)
The Proof-of-Work (PoW) consensus algorithm successfully came to life with the introduction of Bitcoin in 2009. It is the algorithm that is used to confirm transactions and the creation of new blocks in a blockchain. Specialised devices, computers or graphic cards can be used to do calculations. In PoW a new block is created or found by solving a mathematical puzzle. The process of trying to solve that puzzle is called mining. The miners are working hard and usually consume a lot of energy to find the solution to the puzzle. This is basically where the definition ‘Proof-of-Work’ comes from.
Portfolio
A cryptocurrency portfolio is your total crypto asset holdings in one place.
Pre-Sale
A ‘Pre-sale’ is the phase of an ICO before the ‘Public-sale’. During this phase, investors can make the first investment. The tokens often have a lower price than during the public sale. The money raised is generally used for further development, financing of the public sale and as a method to explore the market’s enthusiasm. It is possible that the ICO itself is not successful and a ‘refund’ is not always guaranteed. This also makes a pre-sale riskier than a public sale.
Privacy coin
A privacy coin is a cryptocurrency, which focuses on security and anonymity of the users. Some examples are Pivx, Dash, and Monero. There are several methods to make a transaction anonymous.
Private key
A private key in the crypto space can be defined as the combination of letters and numbers that corresponds to a specific public key. The private key can be used to gain access to the assets on that public key, also known as the wallet address. Once you share your private key with somebody, store it on your computer in plain text or type it in a website or app, you risk losing all your funds stored on its a corresponding public address.
Protocols
The set of rules that defines how data is exchanged across a network.
Public key
A public key in the crypto space can be defined as a combination of letters and numbers and forms the address to which the cryptocurrencies or tokens can be sent to. Everybody can see the assets stored on that address. Only the owner of the corresponding private key can send those assets out.
Q
QR Code
A QR code is a type of barcode in the form of a square. The letters QR stand for ‘Quick Response’. The code contains many dots, a few small squares and sometimes a small logo in the middle. This is different from most other barcode types, which are rectangular with lines. A QR code can therefore contain much more information. Within the crypto world, it is often used to make a ‘wallet’ address scannable. This speeds up the process of transferring crypto and prevents errors.
R
Replay attack
These are attacks on a blockchain after a fork. When you try to send coins on one of the chains there could be an attempt to mirror the action on the other chain. So when sending 1 BTC it could happen that 1 BCH is also sent. Bitcoin Cash has implemented a replay protection method, but not all (Bitcoin) forks have this, which could be done on purpose. This is a risk when claiming hard fork coins.
Ring Signature
A ring signature is a type of encryption process that retains anonymity for the user. The concept gives the network of nodes the power to approve a transaction on a blockchain without identifying which of the nodes requested the transaction. As a result, it cannot be traced.
Roadmap
A roadmap is a plan that shows what an organisation or team wants to achieve. This usually contains the deliverables for the year, but sometimes it’s even a couple years in the futures. In can be as detailed with specific dates or months, but it can also be broader and based on quarters. In crypto, it’s a common practice that the team shares this roadmap publicly to give insight into the coming features and when those will be realised.
ROI
ROI is an abbreviation for ‘Return on Investment’. This indicator shows the ratio between your initial investment and the return on it. The formula is ((current value – investment) / investment) x 100. Example: if 1 Ether deposit in an ICO total has become worth 1.6 Ether, then the ROI is 60%.
S
Satoshi
A satoshi (sat) is the smallest amount of bitcoin and is named after the creator Satoshi Nakamoto. It is the eighth decimal place, so 0.00000001 BTC
Satoshi Nakamoto
Satoshi Nakamoto is the alias of the creator of Bitcoin, who wants to remain anonymous. Nobody knows who it is. It could be a person, a group, a company or even a government. It is quite likely that it is a person because there are people who have communicated with him or her via e-mail.
Seed Phrase
The origin point from which you created your wallet ID. Usually, a seed is a phrase or a series of words that can be used to regenerate your wallet ID if you lose it. Something to keep very secret.
Segregated Witness (SegWit)
The processes of separating digital signature data from transaction data. This lets more transactions fit onto one block in the blockchain, improving transaction speeds. The goal of SegWit was to make Bitcoin more scalable with the goal of faster transactions at lower costs. The use of SegWit required a ‘soft fork’ which took place Son 21 July 2017. Altcoins like Litecoin, Digibyte or Vertcoin have also implemented SegWit in their Bitcoin-based blockchain.
SHA-256
The name of the cryptographic hash function (the hashing algorithm) used by bitcoin. It’s been subsequently used by a number of altcoins too.
Sharding
Sharding is a way of splitting up the full blockchain history so each full node doesn’t need the whole copy of it. It’s considered a scaling solution for blockchains because as they grow larger, it begins to slow the network performance if every node is required to carry the full blockchain.
Smart Contract
When a contract is written in computer code, as opposed to traditional legal language, it is deemed a smart contract. This programmed contract is set up to execute and carry itself out automatically under specified conditions. When a smart contract is on the blockchain, both parties can check its programming before agreeing to it, and then let it do its thing, confident that it cannot be tampered with or changed. It lets two parties agree to complex terms without needing to trust each other and without needing to involve any third parties. This functionality is the defining feature of the Ethereum blockchain.
Soft Fork
A fork in a blockchain protocol where previously valid transactions become invalid. A soft fork is backwards-compatible, as the old nodes running the old protocol will still consider new transactions valid, rather than disregarding them. For a soft fork to work, a majority of the miners powering the network will need to upgrade to the new protocol.
Software Wallet
A common form of wallet where the private key for an individual is stored within software files on a computer. This is the system you are likely to use if you sign up for a wallet online that is not associated with an exchange.
Stablecoin
Stablecoins are tokens or cryptocurrencies attempting to have a minimised volatility of its price. It usually tries to keep a stable price of a related asset like USD for example. It can be backed by the related asset or replicated using smart contracts. Stablecoins are usually pegged to fiat money, but it’s also possible to be pegged to precious metals like gold or silver, or even other assets. It enables an easily accessible way to store crypto wealth, temporarily, in a more stable asset during market volatility instead of using the traditional financial ecosystem. Fiat withdrawals can take a few days and could be costly as well.
Staking
Staking the process that belongs to ‘Proof-of-Stake’.
Stock-to-Flow model (S2F)
The Bitcoin Stock-to-Flow model (S2F) is invented by PlanB. This model uses scarcity to quantify the value of bitcoin, but it can also be applied to other assets like gold or silver. Although the model has become very popular in the crypto space, not everybody agrees. This post, for example, contains a list of the greatest blows to the S2F model.
T
TA
TA stands for technical analysis. This involves using a trading tool to look at historical data on a cryptocurrency in the hope of forecasting its future.
Test Net
When a cryptocurrency creator is testing out a new version of a blockchain, it does so on a test net. This runs like a second version of the blockchain but doesn’t impact the value associated with the primary, active blockchain.
Ticker
A ‘Ticker’ is an abbreviation of, among other things, shares on the stock exchange. It consists of a few letters. In the crypto world, this system is also used. In the case of shares, a unique ID has also been developed, the so-called ISIN code. Such a system does not yet exist for crypto. Therefore, a ticker can be used several times for different coins. Make sure to check the name before placing a buy or sell order.
Timestamp
The moment in time when a transaction was encrypted and regarded as proof that the data compiled in that transaction existed.
Token
The “coin” of a cryptocurrency is a token. Effectively, it’s the digital code defining each fraction, which can be owned, bought and sold.
Total Supply
The ‘total supply’ indicates the number of coins already in circulation, supplemented with the coins that are not tradable yet. So it only applies to coins already in existence. This is different from the ‘max supply’, in which future coins are included. The total supply is greater than or equal to the ‘circulating’ supply’. It can consist of tradable and non-tradable coins, such as reserved or not yet released coins for the team or investors.
Tokenless Ledger
When a distributed ledger exists but doesn’t need a currency in which to operate. With these blockchains, the miners upholding the network typically don’t get a reward/payment.
TPS
TPS stands for transactions per second and refers to the number of transactions that a network can process each second.
Transaction
The value of cryptocurrency moved from one entity to another on a blockchain network.
Transaction fee
The ‘transaction fee’ is the amount that has to be paid to execute transactions on the Blockchain. This fee is usually paid to the ‘Miners’, but sometimes they are burned. There are also several cryptocurrencies, where you don’t have to pay a fee.
Transaction ID
All transactions in the Blockchain, such as the amount, the address of the sender and recipient and the date of transfer, are provided with an identification, which is publicly accessible in the ledger of the Blockchain. This is the ‘Transaction ID’.
U
Unconfirmed
When a transaction is proposed, it is unconfirmed until the network has examined the blockchain to ensure that there are no other transactions pending involving that same coin. In the unconfirmed state, the transaction has not been appended to the blockchain.
UXTO
UXTO is the abbreviation of ‘Unspent Transaction Output’. The total balance of bitcoins on an address can be spread over multiple blocks in the blockchain. The unspent bitcoins have a UXTO attribute. By searching the blockchain for the UXTO’s, which belong to a ‘wallet’ address, the total spendable balance can be determined. This is displayed by the wallet when it is fully synchronised.
V
Volatility
The fluctuation in an asset’s price is measured by its volatility. Cryptocurrency prices are notoriously volatile compared to other assets, as dramatic price shifts can happen quickly.
W
Wallet
A wallet is defined by a unique code that represents its “address” on the blockchain. The wallet address is public, but within it is a number of private keys determining ownership of the balance and the balance itself. It can exist in software, hardware, paper or other forms.
WEB3
Web3 is an idea for a new iteration of the World Wide Web based on the blockchain, which incorporates concepts including decentralisation and token-based economics. Web2 refers to the internet as we know it today.
Wei
A ‘Wei’ is the smallest denomination of Ether. 1 Ether = 1,000,000,000,000,000,000 Wei (10-18)
Whale
A ‘whale’ is someone with a very large position in a coin.
Whitelist
A “Whitelist” is a list of approved participants, who may participate in an ICO or Pre-ICO. A ‘whitelist’ is not always used, but it is usually used to generate ‘hype’ and exclusivity for the ICO.
Whitepaper
A detailed explanation of a cryptocurrency, designed to offer satisfactory technical information, explain the purpose of the coin and set out a roadmap for how it plans to succeed. It’s designed to convince investors that it’s a good choice ahead of an ICO.
Wholecoiner
A wholecoiner is someone who owns 1 full Bitcoin. The higher the price of Bitcoin gets, the harder it becomes to achieve this. Therefore, the number of ‘wholecoiners’ will also be limited.
Y
Yield farming
Yield farming is the process of generating the most return possible on your crypto assets by putting them to work. Within the crypto space, DeFi has taken on a big role and services inside this space are making yield farming possible. There are now ways to move your crypto assets into pools to gain interest on those assets giving them an annual percentage yield (APY). Just buying crypto-assets and holding them in your wallet, won’t generate any yield, but lending them out with DeFi services does make this possible.