Speaking the Language Of Bitcoin And Crypto: 27 Terms You Need To Know. Image: MMG
The price surges in bitcoin and other cryptocurrencies have enticed many would-be investors to consider making digital assets a part of their portfolio, but investing in them comes with its fair share of due diligence, starting with understanding the crypto terms.
The “newfound” digital investible assets have a multitude of crypto terms that would-be investors need to grasp. Crypto lingo is highly unique and fast-growing, making it unlikely that traders would have picked it up when studying other asset classes such as stocks, bonds and commodities.
Here are 27 crypto terms that might become part of your vocabulary as a crypto enthusiast:
Cryptocurrency coins are identified on the blockchain by unique addresses, in this case, a unique combination of numbers and letters that identifies accounts on a blockchain network. Without an address, no coin is stored. The blockchain can’t confirm nor verify its existence. So, without a proper wallet address, you can’t own a coin.
To transact an exchange, digital assets are sent to and from different addresses. An example of a Bitcoin address is ‘14qViLJfdGaP4EeHnDyJbEGQysnCpwk3gd’.
FUD is an acronym in crypto terms that stands for fear, uncertainty and doubt, used by the crypto community to describe the scepticism that is temporarily skewing bearish in the crypto market. Crypto enthusiasts use the term to describe anything that opposes bitcoin or crypto. They sometimes refer to such opposers as FUDsters. Most governments and central banks are considered FUDsters due to their resistance to adopting crypto.
A rug pull is a malicious maneuver in the cryptocurrency industry where crypto developers abandon a project and run away with investors’ funds. It usually happens in the decentralized finance (DeFi) ecosystem, where malicious individuals create a token and list it, then pair it with a leading cryptocurrency like ethereum.
They then wait for a significant number of unsuspecting investors swap their ether for the listed token. The creators then withdraw everything from the liquidity pool, driving the coin’s price to zero, leaving investors with nothing but virtually worthless coins.
A satoshi is the smallest unit of a bitcoin, equivalent to 100 millionth (0.00000001) of a bitcoin. Bitcoins can be split into smaller units to ease and facilitate smaller transactions. The satoshi was named after the founder or founders of bitcoin, known by the pseudonym Satoshi Nakamoto. Very little is known about Satoshi. In an online profile, he, she or they claim to be a Japanese man born in 1975, but all of his software and online conversations are in perfect English.
BTC (bitcoin) dominance is a measure in crypto terms of how much of the total cryptocurrency market cap is comprised of bitcoin. It can help investors understand if altcoins are in a downtrend or uptrend against BTC. When BTC dominance increases, alts, on the whole, lose value against BTC. When BTC dominance decreases, alts on the whole, gain value against BTC.
Decentralized finance (commonly referred to as DeFi) is a blockchain-based form of finance that does not rely on central financial intermediaries such as brokerages, exchanges, or banks to offer traditional financial instruments. Instead, DeFi uses smart contracts on blockchains, the most common being Ethereum. It cuts out completely traditional financial institutions and intermediaries.
Removing the middleman (like a bank) is a key benefit of DeFi. Middlemen can incur hefty expenses, take up unnecessary time, halt or reverse transactions or even cause clients to lose everything in bankruptcy or fraud.
A cryptocurrency wallet is an app that allows cryptocurrency users to store and retrieve their digital assets. While you do not need a wallet to spend your cash, it certainly helps to keep it all in one place. Wallets can hold multiple cryptocurrencies. The information stored on the wallet only points to your cash’s location on the blockchain, the public ledger that records and authenticates all transactions for a cryptocurrency.
A whale is a cryptocurrency term that refers to individuals or entities that hold large amounts of a particular digital currency. Whales hold enough cryptocurrency that they have the potential to manipulate currency valuations. A good example of a Whales are Elon Musk and Michael Saylor, whose companies hold huge amounts of Bitcoin.
On the Ethereum blockchain, gas is essentially the costs or fees for making transactions on the network. Miners set the ETH gas price based on supply and demand for the computational power of the network needed to process smart contracts and other transactions. Ethereum gas prices are denoted in gwei or nanoeth.
An exit scam is a fraudulent practice by unethical cryptocurrency promoters who vanish with investors’ money during or after an initial coin offering (ICO). The scammers typically launch a new cryptocurrency based on a promising concept. Then, they raise money from investors through an ICO. The business may or may not operate for some time, but eventually, the scammers who collected the funds disappear leaving unsuspecting victims in the lurch.
A Bitcoin maximalist is a person who believes with unwavering conviction that Bitcoin is the only cryptocurrency worth caring about. Most maximalists also feel strongly that altcoins (any cryptocurrency that is not Bitcoin) are not just technically flawed, but are morally questionable. They look beyond the blockchain’s technical advantages and see Bitcoin as a currency and technology that has profound implications for monetary economics, censorship, and governance.
Decentralized applications (dApps) are digital applications or programs that exist and run on a blockchain or person-to-person network of computers instead of a single computer, and are outside the purview and control of a single authority. dApps create an innovative open-source software ecosystem that is both secure and resilient. There are thousands of dApps available for download
Distributed ledger technology (DLT) is a digital system for recording the transaction of assets in which the transactions and their details are recorded in multiple places at the same time. Unlike traditional databases, distributed ledgers have no central data store or administration functionality.
In DLT, the database is managed by multiple participants, across multiple nodes. The transactions are then grouped in blocks and each new block includes a hash of the previous one, chaining them together, which is why distributed ledgers are often called blockchains.
A cryptocurrency public ledger is a record-keeping system. The public ledger organizes into a long chain of blocks of information. When a buyer and a seller engage in a transaction, the blockchain verifies the authenticity of their accounts. This is done by using the public ledger and by checking if the funds are available before proceeding with the transactions.
KYC (know your customer), is a crypto term that refers to the verification process customers go through to verify their identity and link it to a cryptocurrency wallet. The process allows stakeholders to get a better understanding of the potential customer’s activities and determine whether or not these are legal. KYC measures generate a lot of controversy in the crypto community. Many users do not want regulators breathing down their necks. Sharing personal data runs contrary to the basic premise of cryptocurrencies.
An NFT or non-fungible token is a crypto term describing a digital asset class that includes gaming, digital art, event tickets, and physical items managed using blockchain technology. “Non-fungible” more or less means that it is unique and cannot be replaced with something else. A one-of-a-kind trading card is non-fungible, but bitcoin is fungible because if you trade one bitcoin for another, you will have exactly the same thing. At a very high level, most NFTs are part of the Ethereum blockchain.
Proof of work (PoW) describes the process that allows the bitcoin network to remain robust by making the process of mining, or recording transactions, difficult. It is a decentralized consensus mechanism that requires members of a network to expend effort solving an arbitrary mathematical puzzle to prevent anybody from gaming the system. Proof of work is used widely in cryptocurrency mining for validating transactions and mining new tokens.
PoS or the concept of proof of stake states that a person can mine or validate block transactions according to how many coins they hold. This means that the more coins owned by a miner, the more mining power he or she has. PoS was created as an alternative to proof of work (POW), which is the original consensus algorithm in blockchain technology, used to confirm transactions and add new blocks to the chain. Experts say that PoS can provide a dramatically greener future for the cryptocurrency sector.
In crypto terms, a seed is a username-password combination to access your funds in a cryptocurrency wallet. Each seed is unique and extremely difficult to guess. These seeds are used to generate the keys used to sign transactions and generate the public address where the funds are stored. A seed phrase, seed recovery phrase or a backup seed phrase are lists of words that allow you to access your funds in your digital wallet.
Satoshi Nakamoto is the supposed name of the founder, or founders, Of Bitcoin. Very little is known about Satoshi. In an online profile he claims to be a Japanese man born in 1975, but all of his software and online conversations are in perfect English. The actual person or people that the name represents has never been verified, leading many people to believe that it is a pseudonym for a person with a different identity or a group of people.
SegWit (segregated witness) is the process by which the block size limit on a blockchain is increased by removing signature data from bitcoin transactions. When certain parts of a transaction are removed, this frees up space or capacity to add more transactions to the chain. “Segregate” means to separate, and witnesses are the transaction signatures. Hence, segregated witness, in short, means to separate transaction signatures.
The “diamond hands” emoji is a reference to meme in which the holder of a specific asset – not just cryptocurrencies – makes it clear that they are holding, not selling. Tesla’s CEO Elon Musk is fond of tweeting diamond hands to connote that his company is holding Bitcoin for the end goal, despite the potential risk.
“Weak hands” is a crypto term used to describe cryptocurrency newbies who get jittery and sell their coins at the slightest sign of negative news. Some weak hands bail out of Bitcoin in favor of so-called alt coins — cryptocurrencies other than Bitcoin.
In crypto terms, Hodl originates from misspelling the word “hold” by a bitcoin trader in an online forum in 2013. It often refers to retaining crypto assets that you own for the long term despite highly volatile market movement. It is used to reassure nervous traders that they should ride out any given slump because of what others see as Bitcoin’s long-run advantages.
FOMO, or fear of missing out, is one of the forces said to drive the crypto markets – and most markets. This fear has been attributed to the recent rally in many digital assets. It is the urgent feeling of wanting to get into what one thinks everyone else is doing even though the price of the asset may already have rallied for a while.
Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?
Shitcoin in crypto terms refers to a cryptocurrency that has no immediately discernible purpose or little to no value. The word is often used to describe altcoins developed after bitcoin became popular. Shitcoins are characterized by short-term price gains followed by nosedives caused by investors who want to capitalize on short-term gains. The diminished value of a shitcoin is often due to failed investor interest because its price was based on speculation or it was not created in good faith. Shitcoins are considered bad investments.
Bubblehead was coined by The Moguldom Nation founder and CEO Jamarlin Martin to describe extreme one-way thinking of bullishness on a particular asset or industry. The bubblehead ignores material risk factors and fails to consider real fundamental analysis such as profits, cash flow, market share, valuation and increased user adoption growth that are contrary to prices going up. This investor struggles to soberly look at facts, outside the euphoria bubble environment. Bubbleheadedness usually hits extremes accompanied by high risk and leverage, right before big market crashes.
