Many industries today have its own register, and the crypto industry is no exception. The cryptocurrency industry has its own unique terminologies, definitions, acronyms and slangs that members within the industry must understand. While you’ll be encountering so many mysterious terms and strange acronyms, have it in mind that understanding these slangs can serve as a learning curve to have a clearer view of what the crypto market is all about.
However, understanding the following crypto slangs isn’t difficult even if you’re a newbie in the crypto world. Here are some of the most frequently used terms in the cryptocurrency market.
A Cryptocurrency is simply defined as a digital asset that is designed to work as a medium of exchange;and this kind of exchange makes use of cryptography to facilitate a secured transaction. It can also be referred to as digital money or a virtual currency for example Bitcoin(BTC), Ethereum (ETH), Litecoin (LTC) etc.
Cryptocurrencies are the complete opposite of the centralized electronic money and central banking systems, and they make use of ‘decentralized control.’ In addition, the decentralized control of the respective cryptocurrencies work through distributed ledger technology, which is known as the ‘The blockchain.’
The blockchain can be referred to as the “power house” of every cryptocurrency. In fact,it is the technology behindcryptocurrencies. The blockchain is what makes the existence of cryptocurrencies possible.
Blockchain is a digitized, decentralized, and the public ledger of all cryptocurrency transactions. It is constantly growing as ‘completed’ blocks; usually the most recent transactions are put down and added to it in a chronological order. Another fascinating thing about blockchain technology is that it gives authorizations to market participants to monitor digital currency transactions without central record keeping. Here, every node (i.e every computer connected to the network) gets a copy of the blockchain, and by default it downloads the copy automatically.
At first, the blockchain was developed to play the role of an accountant , that is keeping accounting records for ‘virtual currency’ using what is known as distributed ledger technology (DLT), but today, its application is currently used to verify transactions, code and to enter practically any document into theblockchain. Additionally, any record entered into the blockchain is immutable, that is it cannot be changed or deleted; alsothe record’s authenticity can also be verified by the entire community using the blockchain instead of a one-man centralized authority.
Note: Blockchain isn’t bitcoin.Blockchain is just the main technological innovation of bitcoin, same as with other cryptocurrencies. Aside eliminating the need for a third party to either process or store payment which is one of the major challenges faced in the financial industry, blockchain’s awesome application Is seamlessly attracting many industries like music, insurance, Internet of Things( IoT) etc. to implement its technology.
Cryptocurrency mining can be defined as a process in which transactions for various form of cryptocurrencies (for example, Bitcoin, Ethereum, Litecoin, Dogecoinetc.) are confirmed and added to the blockchain digital ledger. However, note that this process of mining isn’t the same as ‘gold mining’; it’s more about solving complex mathematical problems with cryptographic hash functions that are connected with a block that contains the transactions data.Since the use of cryptocurrencies has dramatically increased in the last few years, it’s obviously true that cryptomining activities have also increase.
Literally, cryptocurrency mining involves two major processes, namely: adding confirmed transactions to the blockchain and releasing new cryptocurrency.
Any time a crypto transaction is made, the crypto miners are in charge of verifying thegenuiness of the information, and also updating the blockchain with the transaction. The mining process is pretty much competitive, and the first cryptominer to crack the code (or solve the puzzle) gets rewarded. The cryptominer is being rewarded for the rendered service which is — being able to speedily compile recent transactions into blocks and to effectively solve a computationally difficult puzzle.
Furthermore, mining was done with desktop computer, CPUs and GPUs (graphics processing units) in the earliest days of cryptocurrency, but today, in other to succeed, you need a special program like ASICs( Application –Specific Integrated Circuit) to speedily solve the puzzle and also make profit. With the latest ASICs, you don’t have to worry about the cost of energy consumption.
In the cryptocurrency industry, an address is simply referred to a code used to send (transfer) or receive (store) cryptocurrency. These addresses can also be called public key or a pair of keys needed to sign the digital transactions. In fact, blockchain address plays the same role as your bank account number (IBAN or SWIFT). Let’s take for instance; you want to send $50 dollars to your son, Tony. Now, for Tony to get the money directly, you need Tony’s IBAN to successfully complete the transaction. This concept is not different from sending and receiving crypto coins. Just as the recipient bank account number is required whenever you want to send or receive fiat currency, so does a recipient( crypto user) address is required whenever he or she want to either send or receive cryptocurrency.
Blockchain addresses are no doubt important concepts to consider in cryptocurrencies, although it looks complex. These addresses consist of about 26- 35 characters, which is a combination of letters and number. Meanwhile in the earliest days of cryptocurrency, it was quite possible to send payments to an IP-address ( for example 220.127.116.118.98). Then, it was pretty convenient to send payment without dealing with a large number of public keys and addresses. However, the bitcoin developers discovered that this method of sending bitcoin could be easily attacked by hackers. So, the option was shut down. This brought about the advent of P2PKH, the new standard format for bitcoin address. In fact, the primary aim of the new address format is to uniquely enhance safer transactions.
P2PKH (Pay To Public Key Hash) simply means that you can seamlessly pay to a ‘hash’ of a public key. This might sound complex to you especially if you’re a newbie. The P2PKH has about 34 characters and it usually begins with the figure 1 or 3. Additionally, several other cryptocurrencies like Ethereum, Litecoin, Dogecoin, etc addresses format looks more like Bitcoin address.
For example BTC address looks like this: 3QJmV3qfvL9SuYo34YihAf3sRCW3qSinyC
ETH address looks like this: 0x3d3726cd2df572e2077dfad5ef5f443115137ff1
A cryptocurrency wallet can be simply referred to as storage (a digital bank). It is a software program that stores both private keys and public keys, and also interplays with various blockchian to enable crypto users to not just send and receive cryptocoins but to also monitor their balance. If you are a crypto enthusiast, whether bitcoin or any other cryptocurrency, it is very important that you have your own wallet.
In this new age, research has it that millions of people all over the globe make use of their cryptocurency wallet to send money and also conduct other forms of operation online. Literally, when a Crypto UserA sends some bitcoins or any other form of cryptocurrency to Crypto UserB, have it in mind that Crypto UserA is signing off ownership of the ‘coin’ to crypto UserB wallet address. And to be able to spend those coins successfully, the private key stored in your wallet must match the public address the currency is assigned to. Contrarily, if both the private and public keys do not match, the transaction will be unsuccessful.
Interestingly, there are several form of wallets that provide distinguish ways to store and access your cryptocurrency. They are software wallet, hardware wallet and paper wallets.
Software wallet: this wallet is divided into 3 categories: Desktop wallet, online wallet and mobile wallet.
This kind of wallet are downloaded and installed on either a PC or a laptop. You can only access it on the computer in which the wallet is downloaded. Research has it that desktop wallet is one of the safest, but if the computer gets hacked or get attacked by virus, there is the possibility that you may lose all your stored funds.
Online wallet is a kind of wallet that runs on the cloud and also, they are pretty much accessible from any computer device in any location provided there is an internet connection. While this kind of wallet is pretty much convenient to access, they are more vulnerable to hacking attacks because the online wallet stores your private keys and are managed by a third party.
Mobile wallet is a kind of wallet that runs on an App on your phone. With this kind of wallet you can seamlessly run crypto transactions anywhere, even at grocery stores. Also this wallet is usually smaller compared to desktop wallets because of the space available on a mobile.
Just like it sounds, it is a physical copy of your public and private keys. In fact, Paperwallets arenot just easy to use but they also provide a high level of security. Using this kind of wallet isn’t as complex as you think, it is relatively straight forward.
This is a type of wallet where a user’s private key is stored on a hardware device like USB. Interestingly, this kind of wallet can be used to make online transactions and can support several cryptocurrencies. Its security is also top notch against hackers because they are being stored offline. In addition, making transactions with this kind of wallet is easy – all you have to do is to plug your hardware device to any internet-enabled computer, enter your password, and run your transactions.
A hot wallet is referred to a wallet that keeps any kind of cryptocurrency (Bitcoin, Ethereum, etc) stored online. Some crypto enthusiast refers it as a “checking account”. In fact, people who have cryptocurrencies keep small amount of money in their hot wallets for purchasing some stuff online.
Cold wallet is the opposite of hot wallet. Here, your cryptocoins are stored offline, in other words cold wallet are not connected to the internet. Crypto enthusiast also refers it as a “savings account,” and they keep majority of their coins in their cold wallet.
Altcoins(“Alt” and “coin”) are simply referred to as alternative coins or cryptocurrencies. “Alt” signifies alternative and “coins” signifies cryptocurrencies. After the successful launch of Bitcoin as the first P2P (Peer-to-Peer) digital currency, several hundreds of cyptocurrencies that aren’t bitcoin came into play. These cyptocurrencies are known as ‘altcoins,” or alternative to Bitcoin; for example, Ripple, Zcash, Monero, Dash, Sibcoin to name just a few.
Altcoin also differ from bitcoin in several ways. Some of these ways could be different economic model, proof of work (PoW) mining algorithm etc. Some of thesealtcoins offer more versatile programming languages to build apps while others might be designed to offer more privacy protection compared to Bitcoin.
On the other hand, there are many other altcoins that aren’t worth giving a look. For instance, they might promise to offer something useful but it isn’t. There are also some altcoins out there that can really perform some useful tasks; sotherefore, it is pretty much advisable that you do your research before investing or buying any of these altcoins.
Fiat currencies are currencies that government have declared to be legal tender, and their values are not backed by a physical commodity, but driven by market forces—supply and demand. It can also be referred to as ‘paper money.’ “Fiat” is a Latin word for “let it be done.” Examples of fiat currencies are U.S dollar, Japanese Yen, Euro etc.
According to history, fiat money was first introduced as an alternative to commodity-backed money; and in its early days of existence, its risk of becoming worthless was high due to “hyperinflation.” If the country people decided not to further trust the nation’s paper money, let’s say for U.S dollar bill or EURO bill etc., economically, the paper money will no longer hold any value. Therefore, we can say that the value of fiat money was based wholly on faith and credit of the nation’s economy.
In the cryptosphere, a bag holder is a trader who bought some altcoins at a high, and because of his naiveness act, he or she misses the opportunity to sell; leaving him or her worthless coins. A bag holder can be someone who holds a coin all through a ‘pump’ and ‘dump’ cycle for future rewards.
Pump is a state where by the price of a coin goes up at full tilt. This could be as a result of a catalyst, usual market cycles, etc.
Dump is a state where by the price of a coin goes down at full tilt. This situation doesn’t look good especially when you are expecting the coin’s price to go up. This also could be as a result of the normal market cycles, catalyst etc.
Hard fork in blockchain can be formally defined as ‘’a permanent divergence from the version of the blockchain, and nodes running previous versions will no longer be accepted by newest chain.”—Investopedia.
In a simple term, a hard fork occurs when a cryptocurrency splits in two. It can also occur when a ‘cryptocurrency’ existing code is changed, resulting in both an old and new version. This is same for a soft fork;just that here, only one blockchain and one coin will stand valid as users adopt the update.
Note that both ‘hard fork’ and ‘soft fork’ creates a split, but that of hard fork is meant to create two coins, and that of soft fork is meant to result in one coin. For example, Segwit is a soft fork, while Bitcoin Cash and Bitcoin Gold are all hard fork.
The term hashing in the crypto world is usually referring to ‘cryptographic hashing.’ Cryptographic hashing is a vital part of cybersecurity and some othercryptocurrency protocols such as BTC, ETH etc. It is a method of cryptography that converts any form of data or input strings (whether big or small) into an output of a fixed length. In other words, no matter the sizes of the input strings, the output always has a fixed string of text.
Let’s see how the hashing process works as we take Bitcoin for example. Also note that Bitcoin makes use of SHA-256 hashing algorithm.
From the diagram above, you’ll see that the first is ‘On’, smaller compared to the second ‘Enter’, yet their outputs are fixed.
However, it could be a bit confusing when dealing with a huge amount of data and transactions especially when the input strings are much. So, instead of worrying over the inputs, it is a wise approach to focus on the output since they are fixed. In a simple way, just remember the ‘hash and keep track.’
Proof of work:
Proof of work(PoW) is simply describedas the original concord algorithm in a blockchain network. In fact, PoW is a requirement that defines the computational effort of a miner and also help deter the malicious use of computing power such as launching Distributed Denial of Service attacks (DDoS) and sending unsolicited emails.PoW primary aim is to deter any form of cyber-attacks that target on exhausting the computing power of the computer system.
Interestingly, Proof of Work does not work for Bitcoinalone; it is also the basis of other cryptocurrencies as well.
Just like any other market (stocks and forex trading), cryptocurrency can also be shorted in much same way. In the cryptocurrency market, whenever a trader takes a ‘short position’ on a cryptocoin, it means that the trader has faith that he or she will make profit as the value of the ‘cryptocurrency’ drops in the future.
For example, if John takes a short position on Y-coin at $0.50; this means that John believes that he will make profit if the value of Y-coin falls from “$0.50” to “$0.50-X”, where “X” is the price decrement in the value of Y-coin, and Y-coin is arbitrary, and could be the name of any cryptocurrency.
Longing is the exact opposite of Shorting. In the cryptocurrency market, whenever a trader takes a ‘long position’ on a cryptocoin, it means that the trader believes that the value of the cryptocurrency will rise in the future.
For instance, let’s take John as a case study again. If John takes a long position on a Y-coin at $0.50; this means that John believes that the value of will rise from $0.50 to $0.50+X, where X is the price increment in the value of the Y-coin. And Y-coin here could be any crypocurrency.
Cryptocurrencies are not different from other commodities; their prices are also being regulated by the market law of demand and supply. Nevertheless, in the crypto world, volatility is the measure of the rate at which the price of a cryptocurrency will change over time. For example, if the rate of demand on a particular coin increases so high, according to market law of demand and supply, the price of this particular coin will also increase and vice versa.
Meanwhile, the crypto market is being known for their high rate of volatility. For example, around December 2017, Bitcoin price was at its all-time highof $19,738 but the price exponentially dropped to about $6,953 in 50 days. Statistically, that’s a staggering loss of 65% of Its value over this period of time.
Whenever you’re trading cryptocurrencies and you opened a leveraged position, some crypto exchanges grants you the opportunity of borrowing coins at a pre-planned rate. However, the rate at which you borrowed coins will reflect on your overall profit and loss position.
Just as it sound, it is simply an order you place at a future price that will execute whenever the crypto market price hit the set price. For instance, if a coin’s price is at $200, and you believe that value will appreciate to some degree let’s say $300, and then you set a longing position to execute at $220. This simply means that if the coin price hits $220, your order will automatically execute itself.
Margin trading can also be referred to as ‘trading with leverage.’ In this scenario, all you have to do is to borrowfrom one side of the trading pair at an agreed loan rate and sell it for the other side of the trading pair. E.g, let’s take BTC/ETH as a case study. You borrowed ETH at an agreed loan rate and sell it for BTC. Thus, your analysis on which direction the market will go will determine if you’ll place a long or a short bet on the trading pair of concern.
If the exchanges you’re trading have a lending account, you can seamlessly lend your coin to others to execute their leveraged trades. More importantly, note that lending rates isn’t stable or fixed; they fluctuate throughout the day based on the demand for the shorting coins.
Fill or Kill:
‘’Fill or Kill’’ is a limit order that will not pull through or execute, unless an opposite order exceeds this limit order’s amount. It is a time-in-force designation form of trading used in securities trading whose primary aim is to ensure that a crypto trader enters a position at a desired price.
Although tokens and coins are being regarded as cryptocurrencies, but tokens are not really coins. They are basically representations of a particular asset or utility that usually stays on top of another blockchain. Tokens are also tradable digital assets. They are created and distributed to the public through Initial Coin Offerings (ICOs), which is a crowdfunding means of raising money to fund a particular project. This process is pretty much similar IPO(Initial Public Offering) for stocks.
Shilling is an unsolicited act of endorsing a coin in public. It is a process of creating a ‘hype’ that a particular coin will increase in value. So, if a trader buys a coin and starts shilling about it and peradventure the coin shilled successfully, several investors will love to invest on that coin.
2FA stands for ‘2-Factor Authentication.’ It is a simple method of strengthening ‘cryptocurrency security.’ The digital nature of cryptocurrencies makes them vulnerable to different forms of security risks.2FA is primarily designed to greatly enhance your security. So, in other to control this vulnerability, the 2-factor authentication is being implemented in the crypto world. After correctly entering your username and password when logging into your exchange account, 2FA requires that you enter the OTP(One Time Password) that was sent to your phone to further complete your login process. OTP is just a 6-digit code generated every minute by an App on your phone.
P2P stands for ‘Peer -to-Peer.’ P2P network is a very vital part of how blockchain technology operates, and why it is so solid and secure. P2P system is a network of interconnected computers that does not depend on third party (or central party) to make interaction or transaction possible. Initially blockchain was designed for P2P money only, but later on, it revealed that it can be used for any kind of Peer-to-Peer value transaction on top of the internet.
DAPPS stands for ‘Decentralized Applications.’ They are digital applications that run on blockchain or P2P network of computers instead of a lone computer. Meanwhile for any application to be regarded as DAPPS it must meet all the following criteria:
It must have an Open Source
It must be Decentralized
It must beIncentivised
Algorithm/Protocol must be implemented.
FOMO stands for ‘Fear of Missing Out.’ It is that feeling you have when you see a huge opportunity lurking round a coin you don’t own on a chart, so in other not to miss out from the opportunity at that moment, you sell your other coins to buy it. Crypto trading can be very emotional and FOMO is a huge factor that can facilitate swing trading.
FUD stands for ‘Fear, Uncertainty and Doubt.’ It usually holds when big market players spread it.
ICO stands for ‘Initial Coin Offering.’ ICO is an unregulated means whereby funds are being raised for a new cryptocurrency venture. ICO simply means that a new startup offers investors some units of a new crypto-token in exchange for other digital currency like Bitcoin or Ethereum.
TA stands for ‘Technical Analysis.’ This is a form of analysis where by a trader or an analyst interprets the future price of coin pairs with chart patterns.
ATH stands for ‘All –Time –High.’ It simply means the highest peak the price of any cryptocurrency has ever hit in history.
DDOS stands for ‘Distributed Denial of Service.’ DDOS is referred to a well-timed malicious attack at crypto exchanges during volatile movements. It aims at devastating crypto traders, halting them from executing any order manually.