Have you been on Twitter or even a Discord or maybe amid a conversation involving crypto and found yourself confused by some of the terminology being thrown around? You’re not alone. As a noob or even a vet, navigating this space is ever-evolving and new terms pop up consistently.
To make it in the world of DeFi, you need to understand how to speak the language. In this guide, we will list the most common terms and crypto definitions so that you may use them as you see fit in real-world situations with confidence.
A 51% attack, also known as a majority attack, occurs when a single person or group of people gains control of over 50% of a blockchain’s hashing power. That is usually achieved by renting mining hash power from a third-party financial institution.
Cryptocurrency addresses are used to identify where a specific amount of a cryptocurrency is stored on the blockchain network. It’s this location at which the coin’s ownership data is stored and where any changes are registered when it’s traded. Addresses tend to be long strings of more than thirty characters, though the length varies depending on which cryptocurrency you’re using.
An airdrop is a marketing campaign aimed at quickly distributing a cryptocurrency among a group of people. Provided by the creators to community members, they are used as a way to increase the use and popularity of a cryptocurrency. Most often an airdrop is provided for free or in exchange for a task.
ATH stands for “All-Time-High” and refers to the highest trading price of certain equity, stock, digital currencies, etc.
A category that includes all coins other than Bitcoin; currently the most valuable and largest cryptocurrency.
Investing in something irrationally in hopes of short-term gains is known as “apeing.” Rushing into a project is often considered risky because of the high likelihood of fraud and theft. To “ape” into a project is to see its value rising and to throw money into it hoping for the best.
Someone who tried to sell at a higher price but the market moved too fast and they got left with a coin that is now significantly lower in value than they paid for it.
The world’s biggest cryptocurrency exchange, where people buy and trade cryptocurrencies. It’s under investigation by the US Department of Justice and the IRS for tax evasion and money laundering.
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.
An online tool that enables you to participate in blockchain transactions. Block explorers can serve as blockchain analysis and provide information such as total network hash rate, coin supply, transaction growth, etc.
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.
A form of incentive for the miner who successfully calculates the hash (verification) in a block. Verification of transactions on the blockchain generates new coins in the process, and the miner is rewarded with a portion of these.
The blockchain is a digital ledger of all the transactions ever made in a particular cryptocurrency. It consists of individual blocks 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 decentralized.
Bored Ape Yacht Club (BAYC)
A collection of 10000 unique Bored Ape NFTs— unique digital collectibles living on the Ethereum blockchain. Popular amongst many celebrity NFT collectors, it is the largest NFT avatar by market capitalization.
Buy The Dip
This refers to purchasing an asset after its price has dropped.
When an investor believes an asset will increase in value.
If a coin in any particular cryptocurrency has been made unspendable, it is said to be burned.
A single entity that has control of all financial records; also known as a central ledger.
Each cryptocurrency has its blockchain – the digital ledger that stores all transaction records. Chain Linking is the process that occurs if you transfer one cryptocurrency to another. This requires the transaction to be lodged in two separate blockchains, so they must link together to achieve the goal.
The total number of coins in a cryptocurrency that is in the publicly tradable space is considered the circulating supply. Some coins can be locked, reserved, or burned, therefore unavailable to public trading.
A digital asset that is created by an independent blockchain.
When a transaction has been confirmed, it means it has been approved by the network and permanently appended to the 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.
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.
Considered the first-ever NFT collection, CryptoPunks is a set of 10,000 8-bit characters created in 2017.
Decentralized Application (dApp)
A computer program that utilizes a blockchain for data storage, runs autonomously, is not controlled or operated from a single entity, is open source, and has its use incentivized by the reward of fees or tokens.
Decentralized Autonomous Organization (DAO)
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.
Decentralized Finance (DeFi)
Short for “decentralized finance.” DeFi is any financial tool, like a smart contract or DAO, that uses blockchain technology to circumvent middleman institutions.
When someone refers to difficulty in the cryptocurrency space, they are referring to the cost of mining at that moment. Cryptocurrencies are still in their infancy and can be difficult to mine in their current form. When you are sending or confirming transactions, the more transactions that are happening at any single moment in time, divided by the total power of the nodes on the network at that time, define the difficulty.
An intangible, hard-to-get asset that is transferred electronically and has a certain value.
Used to confirm that a document being transmitted electronically is authentic. They generally appear as code generated by public-key encryption.
A ledger 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.
A cryptocurrency was created as a joke by Billy Markus, an IBM software engineer, and Adobe engineer Jackson Palmer in 2017. It’s since become one of the biggest cryptocurrencies ever created, with a market cap of over $20 billion at the time of writing. It’s considered the first meme coin.
Acronym for “do your research”.
Converting plain text into unintelligible text with the use of a cipher.
The native cryptocurrency used by the Ethereum ecosystem.
A crypto network and software platform developers use to create new applications. Based on its market capitalization, it is one of the top three cryptocurrencies in the world. 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.
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.
If you find a website that offers to give you free cryptocurrency for connecting with them, it is termed a faucet. The majority of these are scams.
Refers to money recognized as legal tender by governments, such as the US dollar, British pound, Euro, and Australian dollar; any currency controlled by a central authority.
An acronym for “fear of missing out”.
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 fork into two, they will both run on the same network. Forks are categorized into two categories: soft and hard.
Acronym for “fear, uncertainty, and doubt”.
Gas is a measurement given to an operation in the Ethereum network that relates to the computational power required to complete it. That measurement relates to the fee offered to miners who process that transaction. Other operations have a small cost of 3 to 10 gas, but a full transaction costs 21,000 gas.
The first or first few blocks of a blockchain.
The denomination used in defining the cost of gas.
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 enters the marketplace. However, the number of bitcoin that will ever be created is finite, locked at 21 million. To ensure this cap is kept, the amount of bitcoin earned by miners for filling one block is halved after that block. This is called halving. For the record, by the year 2140, all 21 million bitcoins will be in circulation.
During an ICO, the creator can set a hard cap. This is the maximum amount it planned to raise, and it will therefore stop offering coins at this figure.
A fork in the blockchain that converts transactions previously labeled invalid to valid, and vice versa. For this fork to work, all nodes on the network must upgrade to the newest protocol.
A physical device, similar to a USB stick, that stores cryptocurrency in its encrypted form. It’s considered the most secure way to hold cryptocurrency.
A function that meets the encrypted demands needed to solve a blockchain computation. Hashes are of a fixed length since it makes it nearly impossible to guess the length of the hash if someone was trying to crack the blockchain. The same data will always produce the same hashed value.
Acronym for “hold on for dear life”.
An inherent element of blockchains which transactions, and their underlying data, cannot be altered due to consensus.
Initial Coin Offering (ICO)
To raise funds, the creator of a cryptocurrency will put an initial batch of its coins up for purchase. This is an initial coin offering.
Acronym for “know your customer”, which refers to a financial institution’s obligation to verify the identity of a customer in line with AML laws.
A record of financial transactions. A ledger cannot be changed, it can only be appended with new transactions.
A loan of sorts offered by a broker on an exchange during margin trading.
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.
The liquidity of a cryptocurrency is defined by how easily it can be bought and sold without impacting the overall market price.
Market Cap (MCAP)
Market Capitalization – This is defined as the total number of coins in supply multiplied by the price. Cap = supply x price.
A risky strategy used by experienced traders is where they risk their existing coins to magnify the intensity of their trades. This allows them to buy more than they can afford using leverage provided by an exchange.
As opposed to a limit order, a market order does not wait until a certain price to buy or sell; it trades wherever the price is at the time the transaction order is made.
The term, somewhat confusingly, is given to the process of verifying transactions on a blockchain. In the process of solving the encryption challenges, the person donating the computer power is granted new fractions of the cryptocurrency.
Money Services Business (MSB)
A legal term that is used to represent an entity that transfers or converts money.
A term used to describe a major price movement upwards.
Multi-Signature (Multi-Sig) 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.
A network refers to all the nodes committed to helping the operation of a blockchain at any given moment in time.
Any computer that is connected to a blockchain’s network is referred to as a node.
Non-Fungible Token (NFT)
A token with an inherent quality cannot be exchanged for another token.
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.
Storing your wallet code (your private key) on a physical document makes it a paper wallet. It’s also sometimes referred to as cold storage.
Peer to Peer (P2P)
In a peer-to-peer connection, two or more computers network with each other without a centralized third party being used as an intermediary.
A string of numbers and letters that are used to access your wallet. While your wallet is represented by a public key, the private key is the password you should protect (with your life). You need your private key when selling or withdrawing cryptocurrencies, as it acts as your digital signature.
Proof of Stake (PoS)
Another alternative to proof of work caps the reward given to miners for providing their computational power to the network at that miner’s investment in the cryptocurrency. So if a miner holds three coins, they can only earn three coins. The system encourages miners to stick with a certain blockchain rather than converting their rewards to an alternate cryptocurrency.
Proof of Work (PoW)
To receive a reward for mining a cryptocurrency, miners must show that their computers contributed effort to approve a transaction. A variable is added to the process of hashing a transaction that demands that effort before a block can be successfully hashed. Having a hashed block proves the miner did work and deserves a reward – hence proof of work.
This is your unique wallet address, which appears as a long string of numbers and letters. It is used to receive cryptocurrencies.
Pump and Dump (PND)
The frowned-upon practice of buying a lot of one cryptocurrency to drive up its price and encourage others to invest, then selling the lot when there is a suitable margin.
Shorthand slang for “wrecked” and a term used to describe a bad loss in a trade.
Rug pulls are when the creator of a cryptocurrency vanishes, taking funds with them. “Rug” is essentially shorthand for “scam.”
The individual, or group of individuals – it has never been confirmed – who created bitcoin.
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.
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.
Every industry has shills. In the crypto world, this is someone who promotes an altcoin so they can personally benefit.
A term used to describe a cryptocurrency not expected to have a positive future or any perceived value.
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.
A fork in a blockchain protocol where previously valid transactions become invalid. A soft fork is backward-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.
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.
A cryptocurrency whose value is attached to the value of a fiat currency, a commodity like Gold, or whose supply is controlled by an algorithm, thus ensuring the value of the currency remains stable. The best-known stablecoin is Tether, the value of which is equivalent to approximately 1 US dollar.
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.
The “coin” of a cryptocurrency is a token. Effectively, it’s the digital code defining each fraction, which can be owned, bought, and sold.
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.
The value of cryptocurrency moved from one entity to another on a blockchain network.
Usually, very small fees are given to the miners involved in successfully approving a transaction on the blockchain. This fee can vary depending on the difficulty involved in a transaction and overall network capabilities at that moment in time. If an exchange is involved in facilitating that transaction, it could also take a cut of the overall transaction fee.
An active participant in a network’s Proof of Stake consensus. The individual must stake (delegate) a certain amount of coins/tokens to verify transactions. If a validator violates protocol, it can incur a substantial financial penalty through the staked tokens.
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.
A wallet is defined by a unique code that represents its “address” on the blockchain. The wallet address is public, but within it are several private keys determining ownership of the balance and the balance itself. It can exist in software, hardware, paper, or other forms. A cryptocurrency wallet is similar in function to a physical wallet as it’s a place to store tokens.
The next evolutionary stage of the internet is where value transfer could be sent directly peer-to-peer without the need for an intermediary and in a decentralized fashion.
A term used to describe extremely wealthy investors or traders who have enough funds to manipulate the market.
Before an ICO, interested parties can sign up/register their involvement and intent to purchase or even purchase under pre-sale conditions. The list of these parties is referred to as the whitelist.
The migration of funds from one protocol to another in search of maximizing Yield opportunities per mechanisms such as Liquidity Mining, Fund Leverage, and risk choice.
There You Have It…
Of course, there are far more terms than just the ones included but the purpose of this list was to assist in everyday crypto conversation and we didn’t want to overwhelm your brain.
As time moves on, more phrases will have been adapted and updates will undeniably need to be made in cryptocurrency markets but in the meantime, you should have no problem communicating with these terms and their definitions.