A Guide to Crypto Terminology: Most Common Cryptocurrency Terms
The cryptocurrency space has not been here for quite a while, with only over a decade since introducing the first coin. A significant population remains clueless about these digital assets, although many are beginning to show interest as the industry gets more mainstream.
If you are just getting started into cryptocurrencies, you will probably be bumping into terms you never heard before. The truth is it can be intimidating when all you see is vocabulary, let alone the complex technology behind cryptocurrencies. Here is a comprehensive glossary of the most common terms you will find in the crypto sphere.
Cryptocurrency– Cryptocurrency is a type of digital money that uses blockchain technology to control how and when miners create it and allow users to exchange it peer to peer.
Stablecoin- A stablecoin is a cryptocurrency pegged to an asset, another cryptocurrency, a fiat currency, or a physical asset. It is a type of cryptocurrency developed to address the volatility problems of cryptocurrencies.
Blockchain– Blockchain refers to the technology behind cryptocurrencies. It consists of a distributed ledger network of interconnected nodes that verify cryptocurrency transactions. Transactions get recorded in interconnected and immutable blocks that form the blockchain.
Nodes– Nodes are the network of computers that form the blockchain infrastructure of a distributed ledger.
Cryptography–Cryptography refers to the encryption and decryption of information so that it is only understandable to those for whom it is intended.
Bitcoin– It is the first cryptocurrency introduced in 2008 by Satoshi Nakamoto.
Altcoin– refers to a general term given to any other cryptocurrency that is not Bitcoin.
Fiat– The currency issued and recognized by a government as its legal tender.
Mining– The process of solving encrypted codes to verify cryptocurrency transactions on a block using high computing power to receive a fraction of the cryptocurrency transacted.
Mining Pool– Refers to the number of transaction verifiers or miners combining their computing powers to verify the number of transactions required to open a new block in the distributed ledger.
Consensus Algorithm– Consensus Algorithm refers to the mechanism used to coordinate the miners’ activities in a block and achieve an agreement. It ensures that all the nodes in a block agree to a single truth when verifying transactions.
Hashing Power– Hashing power is the power consumed by computers to solve different algorithms.
Proof of Work– POW refers to the first and most common consensus algorithm that involves using high computing power to validate transactions on a block.
Proof of Stake– It is a more efficient mining or consensus algorithm that involves miners staking their cryptocurrency holdings to validate new cryptocurrency transactions.
Wallet-A wallet is a virtual space where cryptocurrency owners hold their crypto coins. Each wallet is identified using unique alphanumeric characters known as the wallet address.
Private Keys– Private keys are the passcode to your wallet. Only the wallet owner should know the private keys.
Public Keys– Refers to keys similar to a bank account number that wallet owners share with others so that they can receive crypto coins in their virtual wallet.
ICO– ICO stands for initial coin offering. It is an unregulated method by which startups raise capital for a new cryptocurrency by issuing the coin or token to investors at a discounted price in exchange for another cryptocurrency or fiat.
DeFi– It is a short form for Decentralized Finance. It refers to a form of finance that is not subject to central monetary authority or brokerage.
FOMO– FOMO stands for fear of missing out. It refers to a psychological effect where cryptocurrency investors believe that they will miss an opportunity to make profits by failing to buy a particular coin.
Token– A token refers to an asset’s unit, whether cryptocurrency or a physical asset expressed as a digital coin.
HODL– Stands for ‘hold’ on for dear life. It is a term introduced by cryptocurrency investors as a misspelling for hold. It represents the practice of holding crypto assets in wallets instead of selling or trading with them.
Dapp– It is an abbreviation for decentralized applications. It is an application software similar to mobile applications or websites that runs on blockchain technology to communicate and manage a network.
DYOR: DYOR is the initials for ‘do your own research.’
ERC-20– It is a common standard for all Ethereum tokens. Other cryptocurrencies on the Ethereum blockchain also comply with the standard.
Fork– Refers to a situation when two blockchain versions result after a new one is created. The two blockchain run side by side.
Smart Contract– A smart contract is a transaction protocol meant to automatically control, manage, and execute actions based on a set of agreed principles.
Market Capitalization- The market capitalization of a cryptocurrency refers to the total number of coins in supply multiplied by its price.
Exchange– An exchange is a platform where people can buy, sell, or trade-in cryptocurrencies.
51% Attack- It is a theoretical attack whereby entities that hold 51% of the network’s hash power, and so they can execute double spends and other malicious activities.
Moon– A term used to describe a situation when a cryptocurrency price records a significant rise.
Every industry has its vocabulary. The terminologies are unique to the specific industry, so the cryptocurrency terms are not a surprise. However, it is important to understand them as you enter the crypto sphere. Some of the words may have different meanings in the world outside cryptocurrency, so you must take them in the cryptocurrency sense.
This article puts together the crypto industry’s common terms that people can use to familiarize themselves with and confidently go functional in the field.