Cryptocurrency isn’t just a new financial choice; it’s a completely different world than traditional bonds and stocks in many aspects. Even for experienced investors, mastering the basics takes time due to unfamiliar crypto terms, new technologies, and trying to keep up with current terminology and news.
It’s vital to understand exactly what you’re getting into before you start, as it is with any investment. This is especially true for unstable and ever-changing investments such as cryptocurrencies.
Here are a few crypto terms and acronyms to assist newcomers in grasping the world of cryptocurrency investing.
Crypto Terms You Need To Know
One of the earliest and most valuable digital currencies. While its value has consistently increased since then, it has experienced huge swings. It was first released on the 3rd of January, 2009. Also known by the ticker (BTC).
The fundamental technology behind cryptocurrencies and a digital type of documentation. A blockchain is made up of a series of blocks that are piled on top of one another to create a permanent and immutable ledger of transactions.
Ethereum is a cryptocurrency network and a software platform that allows developers to build new apps. It also includes its own currency, ether. By transaction volume, Ethereum is the second-largest cryptocurrency.
This method distributes power away from a centralized point. Blockchains, unlike central authorities, are often decentralized because they seek confirmation from all participants to function and make modifications.
Decentralized Finance (DeFi)
This is one of the most popular crypto terms. Financial transactions are made without the involvement of a third party, such as a bank, business, or other financial institution. This is achieved through the use of smart contracts on a blockchain.
Decentralized Applications (DApps)
Developer-created blockchain applications that accomplish functions without the assistance of an intermediary. To complete decentralized financial tasks, decentralized apps are frequently utilized. Ethereum is the most popular and main network for decentralized finance.
This is another prominent crypto term. To use the Ethereum network, developers must pay a fee to the Ethereum network; this is known as a “gas fee.” The base charge is normally determined by the network’s congestion level, and it is constantly changed based on the number of users engaging with the network. Gas is paid in Ethereum.
The process of creating new bitcoin coins and keeping track of user transactions. Mining requires the use of pretty advanced computers, which are often housed in a server farm, to solve complicated computational mathematical problems.
(Bitcoin mining machines. Source: CoinDesk)
Once a certain number of blocks have been mined, a function built into Bitcoin’s code lowers the amount of new Bitcoin entering circulation. This is known as halving and usually occurs every four years. It also affects the cryptocurrency’s price.
Blocks are identified by a unique string of numbers and letters that are linked to crypto buyers and sellers. This is known as a hash, and they are randomly generated and different from each other. 256-bit hashes are made up of 64 random characters.
Non-fungible Tokens (NFTs)
Non-fungible tokens are value units used to express ownership of one-of-a-kind digital objects such as artwork or collectibles. The Ethereum blockchain is where most NFTs are stored. Real-world tangible goods can be “tokenized” to make them more profitable to buy, sell, and trade while also lowering the risk of fraud.
On a blockchain, a unit of value has a value proposition other than merely a value transfer (like fiat money). The names “crypto token,” “digital coin,” and “coin” have all been used to describe it.
A wallet where you can keep your cryptocurrency. Digital wallets are available on several exchanges. Wallets can be either hot (internet, software-based) or cold (hardware-based).
A safe and secure way to keep your cryptocurrency offline. Cold wallets are physical devices that resemble USB drives in appearance. This type of wallet can help protect your cryptocurrency from hackers and thievery, but it also has its risks, such as losing it and with it your cryptocurrency.
A hot wallet is an online-accessible virtual currency wallet that enables cryptocurrency transactions between both the owner and end-users. To store and transfer multiple currencies like BTC and Ether, a set of private keys kept on software linked to the internet is used.
(Metamask, a digital wallet. Source: Techozu)
An algorithmic software that automatically enforces the conditions of a contract based on its code. The ability to execute smart contracts is one of the Ethereum network’s core value advantages. They’re usually used to automate the fulfillment of an agreement so that all parties can be certain of the conclusion right away, without the need for any middlemen or time wasted.
When the rules of a blockchain are changed by its users. Changes to a blockchain’s protocol frequently result in two new paths: one that follows the existing regulations, and another that breaks away from the prior one.
The entire value of all the coins that have been produced is referred to as cryptocurrency market capitalization. The market cap of a cryptocurrency is calculated by multiplying the current number of coins with their current value.
This is the name of Bitcoin’s anonymous founder. No one knows who Nakomoto is, or whether he is an individual or a group of members. In 2007, Nakamoto worked on the source code for Bitcoin, and finally, in 2008, a white paper was published for the cryptocurrency, which included the original software reference implementation, a program that set forth the technical standards for cryptocurrency.
Vitalik Buterin came up with the concept for Ethereum, although the dream came true by a small team of software developers in 2015. He also wrote the whitepaper for the cryptocurrency.
It is the address in your wallet. When you allow it, you may share your public wallet key with individuals or institutions so they can send you cryptocurrency or withdraw money from your account.
The code that permits you to get immediate access to your cryptocurrency. Your private key, like your bank account passcode, should never be shared.
Crypto Slang Commonly Used
Whales are companies, institutions, individuals, and exchanges that possess vast numbers of a cryptocurrency’s tokens. A whale account, for example, is one that has 1,000 Bitcoins or more.
FUD is an acronym that stands for “Fear, Uncertainty, and Doubt.” It’s a tactic for swaying public opinion about certain cryptocurrencies or the cryptocurrency market in general by spreading unfavorable, misleading, or fake information.
HODL is an acronym that stands for “hold on for dear life,” it has become a catchphrase among cryptocurrency enthusiasts, signifying a long-term investment strategy.
Pump and Dump
Pump and dump is a type of fraud in which the price of existing stock is artificially inflated by inaccurate and misleading positive claims in order to sell the stock for a greater price.
This is another one of the very important crypto terms you need to understand. Shilling is the act of promoting a product or investment, in this case, a cryptocurrency, especially one of low quality, using misleading or exaggerated claims in exchange for a profit.
The imagined and, some argue, unavoidable moment when the value of Ethereum surpasses that of Bitcoin is referred to as “flipping.”
BTD stands for “buy the dip” and is a term used to describe entering a long position during an anticipated temporary drop in the price of an asset.
FOMO is an acronym for “fear of missing out.” It’s a frequent investor mental condition whereby an investor feels a mixture of panic and envy at not being able to participate in a big market move that others are profiting from.
- Bitcoin is one of the earliest and most valuable digital currencies. It was created by an anonymous programmer going by the pseudonym Satoshi Nakomoto.
- Blockchain is the fundamental technology behind cryptocurrencies and a digital type of documentation.
- Ethereum is a cryptocurrency network and software platform that creators can use to develop new applications, and it has an associated currency called ether.
- Mining is the method by which new cryptocurrency coins are made available and a log of user transactions is kept.
- Halving is a feature built into Bitcoin’s code that reduces the quantity of new Bitcoin entering circulation once a specific number of blocks are mined.
- Non-fungible tokens are value units used to express ownership of one-of-a-kind digital objects such as artwork or collectibles.
- Crypto terms are essential for new investors to understand when entering the crypto world.