All the Cryptocurrency Terms You Need to Know!
Ever been confused by words like HODL, moon, and everything else that makes it seem like crypto people speak a different language? Here’s the full list of cryptocurrency terms you need to know!
In the crypto space, an address is where you can receive crypto assets like Bitcoin, Ethereum, and Litecoin. Addresses usually consist of a bunch of letters and numbers and can be thought of as the crypto equivalent of an account number for a bank account.
An altcoin is any crypto asset that isn’t Bitcoin, the original crypto asset.
ATH stands for “all-time high” and refers to the all-time high price of a given crypto asset.
A bagholder is someone who is still holding onto a crypto asset, even after its price has tanked completely, likely from a pump and dump (see “Pump and Dump” for more info).
Bitcoin Trading Bots
Bitcoin bots are software programs that connect to your exchange account and place buy and sell orders on your behalf. The bots monitor price actions (such as trading volume, price, time) and follow predefined and pre-programmed rules when making decisions on these orders.
One of the main components of crypto is blockchain, a new way of storing information like transaction records. A block is a group of transactions that are periodically added to a blockchain (chain or series of different blocks).
Following from the above, a blockchain in the traditional sense is a decentralized network where instead of 1 server hosting transaction records, 10s, 100s, or even 1000s of servers host transaction records. This means that the network is much more resistant to attacks since if 1 server or node goes down, there are still many others hosting the same data.
Other types of blockchains include permissioned blockchains, where one needs permission to become a node in the network. However, these act more like distributed databases than they do decentralized blockchains.
In a blockchain network, instead of a central administrator dictating which transactions go through and which don’t, nodes have to somehow agree on whether or not a transaction took place. This process of agreeing on transactions is known as consensus.
The term crypto usually refers to the blockchain and cryptocurrency industry as a whole. However, it can also refer to the crypto assets themselves. For example, “my favorite crypto is Bitcoin”.
A cryptocurrency is a crypto asset that has its own blockchain. Examples would include Bitcoin and Ethereum.
A crypto token is a crypto asset that uses another blockchain. For example, ERC20 tokens use the Ethereum blockchain.
Crypto asset refers to any sort of asset that uses cryptographic methods to verify transactions, whether the asset is a cryptocurrency or crypto token.
Distributed Ledger Technology (DLT)
Distributed Ledger Technology (DLT) refers to a ledger or recordkeeping technology that spreads the recordkeeping across different devices. Blockchain is an example of DLT.
FOMO, while not exclusive to crypto, is used often in the space. The “fear of missing out” in crypto usually refers to the FOMO one gets about not buying a certain crypto asset that is going up in price. When one has FOMO, they worry about missing out on potential financial gains.
Usually, investors and traders who act based on FOMO suffer (see “rekt”), since by the time they buy, the price action reverses and instead of seeing gains, they experience losses.
A fork is a change in a crypto asset’s rules or how it functions.
A soft fork is when the change makes prior blocks invalid. Old nodes will recognize new blocks as valid though, making a soft fork backwards compatible.
A hard fork, unlike a soft fork, is not backwards compatible. Old nodes will have to upgrade to the new software or maintain the old blockchain and have 2 separate blockchains (new and old) emerge.
A good example of a hard fork was the Bitcoin Cash hard fork, which led to Bitcoin splitting into Bitcoin (BTC) and Bitcoin Cash (BCH).
FUD stands for “fear, uncertainty, and doubt”. FUD is often spread to make a particular asset’s price decrease, so that FUDders (people who spread FUD) can make money by short selling the asset, or buying in at a lower price.
A good parallel might be “fake news” in the media world.
Perhaps one of the most famous cryptocurrency terms, HODL is a misspelling of “hold”, as in hold onto your crypto instead of selling it a loss. The term originated from a drunk poster ranting on Bitcointalk about how difficult it is to time the market and that non-professional traders should just HODL.
Initial Coin Offering (ICO)
An initial coin offering, or ICO, is similar to an initial public offering, or IPO, when a company sells stock to the public in order to finance operations. With an ICO, however, instead of selling stock, a company sells crypto tokens.
Though most people know what a Lambo is (Lamborghini sports car), it carries special meaning within the crypto community.
Usually, if and when a crypto user makes a lot of money off of crypto, their first purchase as a sign of “making it” is a Lambo.
Mining is how some blockchain networks, such as Bitcoin’s, create new units of crypto. Mining doesn’t involve miners actually going into some underground mine and extracting BTC (it’s digital, after all).
Instead, mining is usually an energy-intensive process that involves crypto miners using their devices to solve complex mathematical puzzles, which allows them to verify new transactions and add them to the blockchain. For their work, they are rewarded in new units of the mined crypto asset.
When a crypto asset is “mooning”, the price is shooting up drastically.
Proof of Work (PoW)
Proof of Work is a consensus (remember that term?) mechanism that involves mining to validate transactions.
Proof of Stake (PoS)
Proof of Stake is a consensus mechanism that is less energy intensive than PoW. PoS usually involves asset holders staking, or putting up, their crypto assets for the right to validate transactions (and receive crypto for doing so).
A private key usually consists of random letters and numbers and allows anyone who has possession of it to spend any crypto assets associated with a given address. Therefore, you must store them safely!
Using complex math, you can get a public key from a private key. However, using the public key, you cannot reverse engineer the private key. The point of the public key, then, is to prove that you control an address, without having to give away your private key (which would allow others to spend funds tied to your address).
Also, from a public key, you can get an address, where people send you crypto. However, no one with your address can reverse engineer the public key.
Pump and Dump
While this term isn’t exclusive to crypto, it’s used so often, even by inexperienced investors, that we thought we should mention it.
Pump and dumps are schemes where a person or group artificially inflates (“pumps”) the price of an asset so they can sell (“dump”) at a higher price later. Unlike normal price increases, the price of the asset usually doesn’t recover, as the increase in price was a scam to begin with.
Unfortunately pump and dumps happen more often in the crypto space, which isn’t as tightly regulated as other kinds of markets.
You get “rekt” in crypto when you lose a lot of money, such as when you fall victim to a pump and dump.
Satoshi Nakamoto is the mysterious individual or group who created Bitcoin, the original crypto asset. To this day, his/her/their identity is unknown.
To pay respect to Satoshi Nakamoto, the smallest unit of Bitcoin is called a Satoshi, or “sat”.
Just like how a US dollar has 100 cents, a Bitcoin has 100 million Satoshis. A common expression you might hear is “my 2 sats”, which is a play on the American English expression “my 2 cents”, or your opinion on something.
In contrast to FUD, a shill is when someone overly promotes a crypto asset, in order to bump up its price.
A wallet is what you use to send and receive crypto assets. A common misconception is that you “store” your crypto in the wallet, when in reality, the wallet just gives you an easy way to interact with the blockchain, where the record of your holdings is stored.
For maximum security, you should consider investing in a hardware wallet, which are less prone to hacks since your private keys physically cannot leave the hardware wallet device. This is in contrast to other wallets, where your private keys can come into contact with the Internet and its various hackers and viruses.
A whale is a crypto investor or trader who has so much crypto that their transactions can cause significant price movements in the market.
When creating a crypto asset, the creator(s) usually publish a whitepaper to explain what the asset is about. The original Bitcoin whitepaper is a great starting point for anyone wanting to understand Bitcoin and crypto in general on a deeper, more technical level.