Cryptocurrency Terms and Definitions

After the release of Bitcoin in 2009, the cryptocurrency market has become an important aspect of the financial world and promises the potential to help the global economy. However, the market is a different world in its own, and understanding the language used and its definitions is the first step to being successful within the virtual market.

There are so many crypto terms and common words you will surely see in the crypto trading world. This page will help you define the 41 most popular cryptocurrency terms and phrases.

Address

A specific string of numbers and characters that make up an identification for Bitcoin payment. This ID can be used much like an email address where customers and clients can conduct payments, verify purchases and selling of Bitcoin, and provide a location for transactions to occur. This is mostly achieved through multiple addresses for maximum privacy and security.

Altcoin

Altcoins are any form of cryptocurrency other than Bitcoin. These alternative forms of cryptocurrency are based on the basic structure created by Bitcoin, but still improves on the limitations presented by the cryptocurrency. Altcoins have as well certain categories that define the types of altcoins: mining-based, stablecoins, security tokens, and utility tokens.

Arbitrage

A type of trading where an asset is bought and sold in two markets at the same time, usually at slightly differing values. When buying cryptocurrency through this method, it is common to purchase both currencies during an imbalance of the two prices. This trade yields profits by exploiting the same assets on different cryptocurrency exchanges.

ATH (All-Time High)

The term is defined as the highest price an asset has achieved on an exchange. The value is the maximum theoretical price that an individual could have sold the asset for, as well as the maximum price a trader is willing to sell that asset for during the period.

Bear / Bearish

A sustained period of time in the cryptocurrency market where traders are more inclined to sell rather than buy. This period is characterized by downward trends. Price correction usually takes place when the price of a currency is overvalued.

Blocks

Records of the Bitcoin network permanently filed away after the most recent transaction. It is like a ledger of sorts, where recent or previous transactions are stored indefinitely. Once a block is finished, focus moves on to the next block in the blockchain for completion. It cannot be modified once it has been written, making it near impossible for any tampering with the data recorded.

Blockchain

A large list of records or blocks linked together in the cryptocurrency market. It records transactions between two individuals efficiently. The data stored in each block cannot be altered once it has been assigned to a block. In a way, a blockchain is like an ever growing library of all recorded cryptocurrency transactions.

Bull / Bullish

The opposite of a bear/ bearish. If the market trend is rising, it is considered a bull market. It is fueled by optimism and investor confidence. It is difficult to predict when these trends might change, but strong results are assumed to continue for a long period of time.

Consensus

A mechanism used in blockchain systems to find the needed agreement on a certain data value in cryptocurrency and other systems. It is most useful in record-keeping.

Cryptocurrency

A digital asset designed as a medium of exchange where coin ownership, along with transaction entries, are recorded in a secure digital ledger. It does not have any physical form, and is usually decentralized in terms of control. Bitcoin is the first decentralized cryptocurrency. Since the release of Bitcoin in 2009, over 6,000 altcoins have been created.

Cryptography

The art of writing or solving codes. The similar technology used in some systems allows for partial or full anonymity. Cryptography ensures the security of the clients and the transactions performed under the implemented technology. This technology is used to assess the authenticity of the transactions, control the generation of newer currencies in the system, and secure the transactions happening within the network.

DDoS Attack

A distributed denial-of-service (DDoS) attack is an effort to overwhelm a targeted network and the surrounding infrastructure through a flood of internet traffic. Computers and other machines are then infected with a particular malware. This grants the attacker control of a network of similar machines, where the attacker remotely accesses these computers.

Distributed Ledger

A Distributed Ledger is a database that is synchronized across multiple sites and is accessible to multiple people. These ledgers allow transactions to have individuals who stand as witnesses to the transactions occurring in the system. Anything recorded in the ledger is immediately copied onto all other existing duplicates of the ledger.

Escrow

An escrow is a service that protects buyers from fake sellers by requiring the desired asset to be given up front before any money exchange takes place. In short, Escrows act as mediators between their client and the seller of the asset. They keep the money to be used in a transaction before the Bitcoin is exchanged.

Fiat Currencies

Fiat currency is legal tender whose value is sponsored by the governing body that issues it. It has no intrinsic value, as its worth is defined by the government. The value of fiat currency is based on the supply and demand, along with the stability and strength of the issuing government.

Exchanges

These are businesses that allow cryptocurrencies to be traded for other assets such as fiat money or other similar cryptocurrency. These exchanges can be a brick-and-mortar business, where exchanges are between traditional payment methods and the desired digital currencies. Or, they can be an online business where exchanges are between electronically transferred money and digital currency.

FOMO (Fear Of Missing Out)

A fear of missing out on asset gains, thus driving someone to buy into a coin already at its peak. It is an idea that rational profit making will cause someone to act on impulse to buy at the peak or sell during a dip. The result is that some or all of the person’s profits would be lost at some point in the process.

Fork

An effect in a blockchain where the chain splits into two different paths. This usually happens when groups participating in the blockchain are not in agreement, giving rise to the alternative chains. Some forks are short-lived, while others are more permanent. Short-lived forks happen because of the difficulty of reaching a fast consensus in a distributed system, while longer-lived forks are due to newly added features of a blockchain, reversing effects of hacking, or bugs on the chain itself.

FUD (Fear, Uncertainty and Doubt)

One of the main causes of the price of a coin to drop. FUD is not based on charts, but on news that spreads through social media. Many times this is not grounded on reality, and instead is exaggerated by people participating in the market. This fear, uncertainty, and doubt affect how a person buys and sells digital assets.

Hard Fork

A rule change in a blockchain that forces the old rules to perceive newer blocks made under the new rules as invalid. In this case all nodes in the caching need to have their software upgraded to work with the newly added rules. If a split between the new and old rules still exist, then a permanent split can occur.

HODL

An acronym meaning Hold On for Dear Life. It refers to strategies in Bitcoin and various cryptocurrencies. This happens when a person, or a crypto trader, who buys a coin does not see trading the digital asset for the foreseeable future. This strategy ignores trading and instead keeps their coin close believing to prevent any losses in investment.

ICO (Initial Coin Offering)

The cryptocurrency’s market of Initial Public Offering. It is a method to raise funds to create a new coin, app, or services. Investors interested can buy the offering with fiat or digital currency. The investors then receive tokens which represent the shares of the project.

KYC (Know Your Customer)

KYC stands for Know Your Customer. When participating in the cryptocurrency market it is required that a person should know and comply with KYC. These rules protect traders from money laundering, terrorism, and other corrupt acts. For this, some items of information should be gathered from customers and clients.

Long Position

A trader who opens a long position believes in the asset they are buying into. This means that when someone buys a coin they believe that the coin has potential to increase in price. When someone says they’re taking a “long position”, it usually means they are purchasing the coin or asset.

Market Cap

A market cap or market capitalization refers to the value that measures the size of a cryptocurrency. It offers insights about the size and the performance of a particular company or coin, but does not provide information about the inflow of money. It is calculated by multiplying the price of a stock by its total number of outstanding shares.

Mining

A process where transactions of various cryptocurrency are secured and verified by a miner. Each time a transaction is made, a miner is responsible for ensuring the transaction is authentic and the information is updated in the blockchain with the most recent transaction. It is performed by computers equipped with specific hardware to be able to do cryptocurrency mining.

Mining Incentive

Mining is also a competition among other cryptocurrency miners. It includes the ability to solve complex mathematical problems and cryptographic functions associated with the block containing the transaction data. The miner able to perform is awarded the fees paid by those participating in the transactions, making the percentage earned from mining an important aspect.

Mooning

A sharp and rapid rise in a cryptocurrency’s price, seeing that the coin is “shooting for the moon”. It is an explosive and sudden increase in its value, proving that any asset is going to have a certain degree of volatility. This also reflects the beliefs of investors and not the market itself.

Noob

Internet slang for newbie investor. A noob would normally make the usual mistakes when first entering into the cryptocurrency market, and fall for the same traps of trends and crazes. They enter into the market by hopping on the latest trend, commonly during a spike in cryptocurrency values.

POW (Proof Of Work)

A digital certificate that is difficult to create, but allows others to easily verify. It also aids in satisfying certain required bits of information. Proof of works are randomly generated, and a lot of trial and error is inlaid in the process before a valid proof is made. Because of its difficulty, it is also time-consuming.

POS (Proof Of Stake)

A person can validate a block transaction according to the amount of cryptocurrency he or she holds. The more coins that are owned by the miner, the more power the person has. It was created as an alternative to proof of work by proportioning mining power to the amount of coins.

Private Key

Is a secret key in cryptography used with certain algorithms that encrypt and decrypt codes in the system. It is mostly created with a long number of characters that have been randomly generated. Private keys have an important role in the cryptocurrency market due to their highly secure code.

Public Key

Opposite to a private key, public key cryptography uses both public and private keys to ensure data security. In this system, anybody can encrypt messages and data with a public key, but a private key is required to decrypt a message. The algorithms of public keys are necessary components in cryptosystems and assures security and authenticity of data storage.

Pump and Dump

A scheme used to boost the price of a stock or cryptocurrency through falsified statements or reports. They use hype and positions in a company in order to incentivize the rise of the stock’s value. This method is extremely illegal and investors should be careful to notice the values of stocks and their behavior.

Rekt (Wrecked)

A misspelling of the word wrecked. It is defined as a massive financial loss in the cryptocurrency market because of a failed investment. Rekt can also be defined when an investor's assets have been affected by liquidation or due to a quick drop in prices. When an investor has lost the value of his or her assets, he is considered "rekt".

ROI (Return On Investment)

The formulaic ratio between the net profit and investment costs. It reflects the investment’s efficiency and can be used to compare multiple types of investments. A high ROI value indicates a profitable investment while a negative value means the exact opposite.

Satoshi Nakamoto

A name used by the individual or group who developed Bitcoin, similar to John or Jane Doe. Nakamoto also devised the first blockchain database. Because of the name being as a placeholder for the real inventors of Bitcoin, the real name of the developer or developers have remained anonymous. There have been some theories on the real individual’s name that have been formulated through the years.

Shorting

A method by borrowing assets and selling it at the current price. The buyer can then pay back the individual or company who lent the asset. In theory, a person can profit from selling an asset short after a drop in its price. However, it would be difficult to find someone willing to lend a Bitcoin and be paid in the same value of the digital asset.

Token

A type of cryptocurrency used to represent an asset in the market. It is created through an ICO, and is often used in their own blockchain. They serve as a substitute for a variety of things in the market such as a customer’s loyalty points. They are transferable and tradable among members of the blockchain.

Whale

Someone that owns a large amount of cryptocurrency. The value that would consider someone as a whale is around one thousand BTC (Bitcoin) or more. Such people are so influential in the cryptocurrency market that they are able to move the market themselves. These players are institutions such as Hedge Funds and Investment Funds.

White Paper

An authoritative report that informs readers about a complex issue and the philosophy on the matter. It aids a reader to understand and resolve an issue, or to make a decision regarding the matter. In the cryptocurrency market, White Papers were used to introduce Bitcoin and built the foundations for other cryptocurrency and blockchain technology.

More cryptocurrency terms and definitions will be added in this page.