Decoding Cryptocurrency

A Guide to Basic Cryptocurrency Terms

The world of cryptocurrency can seem intimidating, especially because it involves a lot of unfamiliar vocabulary. The underlying mechanisms behind cryptocurrency are highly technical, and so is the vocabulary needed to understand it. If that weren’t difficult enough, the cryptocurrency community has developed slang terms that often pop up in routine conversations.

But don’t let that scare you away. If you can decode some basic terms, the world of cryptocurrency starts to make sense. Here are some of the most common words and phrases you’ll run across as you get into cryptocurrency:

Algorithm

A process or set of rules to be followed in calculations or other problem-solving operations.

Altcoins

Any cryptocurrency other than Bitcoin. Bitcoin was the first cryptocurrency, and all coins that came after it are considered Bitcoin alternatives.

Bagholder

A person who is stuck with a cryptocurrency after the coin’s value has crashed, usually after a pump and dump scheme.

Bitcoin

The first and most famous cryptocurrency. Bitcoin was released in 2009 by a person or persons going by the name Satoshi Nakamoto.

Block

A block is multiple transactions grouped together on the blockchain.

Blockchain

A digital ledger that records all of a cryptocurrency’s transactions since its inception. There is no master copy of this digital ledger. Instead, it’s available for the users to download at any time. The users maintain the blockchain by updating it with verified transactions grouped into blocks. A verified block is linked to the previous block with a cryptographic signature.

Coins

A common term for cryptocurrency. However, because cryptocurrency is intangible, there is no actual physical coin or item.

Cold Storage

A means of storing cryptocurrency offline in a paper wallet. Coins in cold storage are often thought to be the most secure, since they can’t be accessed by computers and can’t be hacked.

Cryptocurrency

Digital cash that can be exchanged for goods or services. Unlike fiat currency, cryptocurrency is decentralized and is not backed or regulated by governments or banks. Cryptocurrency works by using blockchain technology and is based on cryptography. Bitcoin is the original cryptocurrency, but there are now many others.

Cryptography

A process of encrypting and decrypting information.

Decryption

The process of returning information that has been made unintelligible back into readable information.

Digital cash

A form of virtual money that's transmitted electronically between parties. Unlike fiat currency, there's no physical dollar bill or coin. Cryptocurrencies are digital cash.

Digital Commodity

This is an intangible asset that’s transferred electronically.

Digital Wallet

An electronic device or online service used to store cryptocurrency. A digital wallet acts as an address or location where coins can be sent to or form.

Distributed Ledger

A public ledger, or record of transactions, that exists on a peer-to-peer network instead of being kept by a central authority. In cryptocurrency, the distributed ledger is the blockchain. Users are able to access and check the ledger at will.

Double Spend

The attempt to send cryptocurrency to two separate locations at the same time. For example, when a cryptocurrency user tries to purchase something with a coin she or he has already spent.

Dump or Dumping

The act of selling all or most of a particular cryptocurrency.

Encryption

The process of converting regular information of plain text into unintelligible text by using a cipher.

Exchange

A platform that allows users to buy, sell, and exchange cryptocurrency for other cryptocurrency or fiat currency for a fee.

Fiat Currency

Traditional currency that is recognized by governments and banks as legal tender, such as the US Dollar, the Japanese Yen, and the British Pound.

FOMO

An acronym that stands for “Fear Of Missing Out.” FOMO often drives people to invest in new coins because they don't want to miss out on the next big cryptocurrency.

Fork

A permanent split in a cryptocurrency’s current blockchain. The result is that there are now two separate functioning blockchains. A fork usually occurs when there’s a disagreement in a community about a cryptocurrency’s future developments. After a fork, the original cryptocurrency continues on the original blockchain, and a different version of that cryptocurrency operates on the new blockchain. For example, Bitcoin’s blockchain forked and Bitcoin Cash was created in August 2017.

FUD

An acronym that stands for “Fear, Uncertainty, and Doubt.” This term is used when investors are uncertain or lose confidence in the cryptocurrency market.

Genesis Block

The first block that establishes a cryptocurrency on a blockchain.

Hash

A piece of encrypted data embedded in blocks. A hash a created by a hashing algorithm and links blocks together on the blockchain. Blocks can’t be verified until the hash is solved by a user on the blockchain network. The user who solves the hash is usually rewarded with a set amount of cryptocurrency.

Hodl

An infamous typo for the word “hold,” from an online forum in the early days of cryptocurrency. “Hodl” has transformed into a commonly accepted slang term that means to “Hold Onto for Dear Life.”

ICO

Also known as an “Initial Coin Offering”; a way for companies to fundraise, similar to an Initial Public Offering. A company doing an ICO will offer a crypto token related to a project or venture in exchange for other funds such as Bitcoin or Ether. In theory, the value of the company’s ICO token is based on the value of the underlying project or technology that the company is trying to create. However, some ICOs are scams designed to lure investors into buying a fictitious product or idea.

Lambo

Shorthand for Lamborghini, Lambo is used to express the hope of making a lot of money off cryptocurrency. For example, someone might ask, “When lambo?” meaning “When will this make me enough money to buy a Lamborghini?”

Market Capitalization

This is the total number of coins in supply multiplied by the price of the coins. The market capitalization is used to determine the value of cryptocurrency.

Mining

The act of verifying blocks on the blockchain to earn a reward, usually cryptocurrency. Miners are people who use their computing power to solve the encryption challenges, or hashes, that link the current transaction block to the previous verified block. Miners are usually rewarded with a set number of coins or fractions of a coin for solving a challenge.

Mining Rig

A computer used to mine coins. These machines are specialized computers designed to have good hashing rates to more efficiently verify blocks and earn coins. Rigs can cost thousands of dollars to build and maintain.

Moon or Mooning

An upward price spike or trend in a cryptocurrency. For example, when Bitcoin rapidly increased in value, people said the price was going to the moon.

Network

When dealing with cryptocurrency, a network is all the nodes, or computers, used to help the blockchain operate at any given point of time.

Node

Any computer connected to a blockchain’s network. A full node refers to a node that has downloaded the entire blockchain to fully enforce the rules.

Peer-to-Peer

A connection between two or more computers without using a centralized third party as an intermediary. Most cryptocurrencies operate on a peer-to-peer network.

Private Key

A unique string of text made up of numbers and letters that, when paired with the corresponding public key, allows coins to be transferred. Private keys are known only to the owner of the coin and aren’t recorded on the blockchain.

Public Key

A string of text that identifies a coin and is recorded on a blockchain each time that coin is used in a transaction.

Pump and Dump

The practice of buying a lot of one type of cryptocurrency to drive up or “pump up” the price to encourage others to invest, and then selling or “dumping” the coins once there’s a profitable margin. Pump and dump scams are common on smaller or new cryptocurrencies and prey on people’s fear of missing out on the next big coin.

Stable Coin

A cryptocurrency that has very low volatility and can be used to trade against the overall market.

Token

Sometimes called a coin, tokens are offered by companies during an ICO to fundraise capital.

Wallet

A device, method, or system used to store cryptocurrency. A wallet has a unique code that acts as a location or address on a blockchain and allows people to send and receive cryptocurrency. A wallet’s address is public, but the private keys it stores are known only to the owner of the wallet. Cryptocurrency wallets can have many different forms such as software, hardware, or even paper.

Whale

A term used to describe a person or group of people who own so much cryptocurrency that their collective transactions can shift the market.

White Paper

A detailed explanation of technology, usually cryptocurrency. White papers contain technical information that explains the purpose of a coin and other information of interest to readers and potential investors.

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