Analyses

Crypto Vocabulary (Glossary of Terms)

This article is a glossary of crypto terms (crypto vocabulary). The world of crypto is full of words and abbreviations unknown to newbies. This page gives you explanations for the most popular terms. If you need further help with crypto terminology, you can always contact us via email!

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Airdrop

The word airdrop is familiar for many people from Apple’s iOS operating system, where it means a wireless file transfer between two devices.

In the crypto world,  it means coins “dropped” into your wallet out of nowhere. How is this possible? Airdrops are actually just marketing operations. You can think of them as free tickets to a football match or discount coupons.

To get airdrops, you might need to install a crypto wallet, share your e-mail address, register to a website, etc. Social media actions are often required too, such as following a Twitter account or sharing a Facebook post. Airdrops are used to spread the word about a new cryptocurrency project.

You can browse websites likes airdropalert.com or airdrops.io to find airdrops. There is a step-by-step guide given for each airdrop.

ASIC

ASIC means an application-specific integrated circuit. It’s a microchip developed for a specific purpose. In this case, we are talking about cryptocurrency mining.

In the beginning, it was possible to mine bitcoins with a standard CPU or GPU. It didn’t take long until ASIC miners were developed. They took over the mining industry by being so cost-efficient.

antminer s9

Bitmain’s Antminer S9 – a popular ASIC miner.

Chinese manufacturer Bitmain has almost had a monopoly on ASIC miner production. Now there is more competition, but Bitmain is still the biggest manufacturer. There are ASIC miners designed to mine other cryptocurrencies too, such as Litecoin.

ATH / ATL

ATH means All-Time High. It’s used to describe the highest ever price of a cryptocurrency in fiat terms. The U.S. Dollar price is the global standard used. ATL is the opposite, meaning All-Time Low.

Atomic Swap

Atomic Swap is an operation for swapping cryptocurrencies between each other. To be more precise, we are talking about cryptocurrencies located in different blockchains! This is done by creating a payment channel between the blockchains.

The first successful atomic swap was achieved by Decred and Litecoin in 2017. You can read more about atomic swaps from here.

Bag holder

A bag holder is an unfortunate investor “who is left holding the bag” after an exit scam. It means holding a virtual bag of coins with zero or close to no value. You can also become a bag holder when investing in a legitimate project, which loses 99%+ of its value over a long period of time.

The word bag is often used to describe a crypto position ironically. You could say “My XRP bag is starting to feel heavy” if it has lost a lot of value.

BTFD

BTFD is one of the most used acronyms in social media. It means “buy the f**ing dip”. BTFD is a war cry shouted during both bull and bear markets. It’s based on the belief that Bitcoin’s price always goes up over time. Hence, when a dip occurs, you should just buy it, before the price will return to its normal (higher) level.

Bull & Bear

Bull and bear are widely used terms in traditional investing. They describe the current direction of the market. A bull market means an uptrend while a bear market means that prices are going down.

Traditionally, a bear market occurs when prices have crashed more than 20% from the previous high. Smaller drops are called corrections.

stock bull

This bronze statue at Wall Street is the world’s best-known bull.

Investors are also using the terms bullish and bearish. Those express the person’s current mood. If you think the Bitcoin price is going up, you could say: “I’m bullish on Bitcoin”.

BYOB

BYOB means “be your own bank”. It’s not so widely used. BYOB refers to Bitcoin’s ability as storing value outside the traditional banking system. If you have a Bitcoin wallet, you can Be Your Own Bank by storing, sending, and receiving bitcoins without any third parties.

Cloud mining

Cloud mining is buying mining capacity online. It’s an alternative to buying physical mining devices, which can cost thousands of dollars. You must typically agree to cloud mining deals for 6-12 months at a minimum.

Cloud mining is a great way to buy a small piece of a mining operation. The problem is that there are many cloud mining scams. It’s could be difficult to know if the advertised mining capacity actually exists or if the service is simply running a Ponzi scheme.

Be extra careful if you are investing in cloud mining during a bear market. Crashing of prices might make the mining operation unprofitable, which could then lead to termination of your contract.

Confirmation

The word confirmation is used when making Bitcoin transactions. When you send bitcoins from your wallet, they go to the memory pool. This is where all new transactions are picked from by miners.

Next, transactions are minted to a new blockchain block. Before this is done, your transaction has zero confirmations. When a new block is mined with your transaction in it, there is one confirmation. When another block is mined after that, your transaction has two confirmations. And so on.

Bitcoin transactions are usually confirmed by apps after 2, 3, or 4 confirmations. Some altcoins might require dozens or even 100 confirmations. This could be a case with a currency, which creates new blocks every 5-10 seconds. The number of required confirmations depends on the currency and the service (wallet, exchange) being used.

The more confirmations a transaction has, the harder it is to reverse with a 51%-attack.

DeFi

DeFi means Decentralized Finance. It’s like an umbrella covering dozens of different applications. In the beginning, DeFi was a synonym for Ethereum. Now there are DeFi apps built on other platforms too, such as Binance Smart Chain, Polygon, and Polkadot.

The idea of a DeFi app is that it’s built using smart contracts. There is no KYC, no customer service, no human involvement. Users are communicating with smart contracts through their Web 3 wallets, like MetaMask.

The two most popular types of DeFi apps are decentralized exchanges (DEX) and lending platforms. Uniswap and Aave are great examples of such.

(Mining) Difficulty

The difficulty is one of the most important words when it comes to Bitcoin mining. It’s all about changing the difficulty of the mining process, which is a crucial piece of the entire Bitcoin framework.

The mining difficulty is automatically adjusted by the Bitcoin network when the hash rate (mining capacity) changes. When more miners are plugged in, the difficulty goes up. If miners are shut down, the difficulty goes down.

This adjustment keeps the block time in 10 minutes over a long time. Otherwise, the block time would drop closer and closer to zero. This is because the mining machines become more effective and more miners are built every day.

The mining difficulty is adjusted every 2016 block, which is about 14 days.

DYOR

DYOR is one of the most important abbreviations shouted on social media. It means “do your own research”. It’s often used on social media when giving cryptocurrency tips to other investors. DYOR is like a disclaimer. It says to the reader: “Remember to check other sources too, don’t just take my word for it.”

dyor

Exit scam

An exit scam is (unfortunately) a common term in the crypto space. It’s also used to describe other investment plans. An exit scam happens at the moment when scammers take down the Ponzi scheme they have built and run. It means criminals are literally heading for the exit with investors’ money.

Faucet

Faucets are found in every standard bathroom. In the crypto world, it has a different meaning. A faucet is a website or an app giving out free coins to its users. It could be a game, or there are some other small tasks involved. Typically, faucets give you free coins every few hours or once a day.

There used to be faucets giving out several bitcoins a day in the early 2010s! These would be now insanely valuable, but back then, bitcoins were practically worthless.

Fiat

The word fiat has been adopted from the world of precious metals. It is not a car manufacturer, but the word comes from Latin. The English translation means roughly “let it be done”. When used in finance, the word fiat refers to fiat currencies.

A fiat currency is a worthless piece of paper or a coin. These days, most of the fiat currency supply is in digital form. The value is given to it by the government. For example, a bill of 500 euros is worthless on its own. It’s only valuable in countries, where governments have made it legal tender.

Every currency on the planet (USD, EUR, GBP, etc.) is currently fiat. There hasn’t been a gold backing in place since the early 1970s.

euro-fiat

The term fiat money (fiat currency) was previously used by precious metal investors. Now it’s also used by crypto investors. Both Bitcoin and gold are alternatives to fiat currencies, which are debt-based and built to lose value over time. Gold and Bitcoin, on the other hand, are true store-of-values.

The term fiat is often used when buying or selling bitcoins.

FOMO

FOMO means Fear Of Missing Out. This word is also well-known in the world of traditional finance. Now it’s adopted by crypto investors.

FOMO is something every investor feels now and then. It’s often the driving force for newbie investors buying the market top. FOMO is a psychological problem, which makes the investor do irrational things because of the fear of missing out on massive profits.

Fork (soft fork, hard fork)

The word fork is coming from software engineering. According to Wikipedia:

“In software engineering, a project fork happens when developers take a copy of source code from one software package and start independent development on it, creating a distinct and separate piece of software.”

This is how it works in the crypto world as well. There are two types of forks: soft forks and hard forks.

A soft fork is an update, where the old software version is still compatible with the new one. In other words, it’s a voluntary update. Bitcoin’s SegWit update is a good example.

A hard fork makes the new version incompatible with the old one. Hard forks happen when a project is split into two different versions.

Ethereum (from Ethereum Classic) and Bitcoin Cash (from Bitcoin) are probably the two most famous hard forks. In both cases, a new cryptocurrency was born and the blockchain was split in half.

FUD

FUD is something each crypto investor is facing on daily basis. It means Fear, Uncertainty & Doubt. It’s often used together with a person or another entity: “Mike is spreading FUD”.

FUD is spreading conspiracy theories, fake news, and all types of uncertainty. People are usually blamed for spreading FUD when prices are falling. It’s also true that some entities try to manipulate markets by spreading misinformation and uncertainty via news websites.

People spreading FUD are called fudsters. It doesn’t necessarily mean spreading lies, but more like panic and fear.

Genesis block

A genesis block (a.k.a. block 0) is the first block of a blockchain. Bitcoin’s genesis block was mined on January 3rd, 2009. The term genesis block can refer to other blockchains too, not just Bitcoin.

HODL

HODL is probably the best-known acronym in the crypto world. Even so, the origin of the acronym is actually mostly misunderstood. People think it comes from the words Hold On to your Dear Life, but this is not correct.

HODL has its origins in the Bitcointalk.org forum. One of the members was a bit tipsy while writing a forum post and he left a typo in the topic title. The beginning of the message is:

I type d that tyitle twice because I knew it was wrong the first time. Still wrong. w/e. GF’s out at a lesbian bar, BTC crashing WHY AM I HOLDING? I’LL TELL YOU WHY. It’s because I’m a bad trader and I KNOW I’M A BAD TRADER.”. 

There are thousands of HODL memes and GIFs. They are typically posted on social media when Bitcoin price is going down. HODL is a war cry for all Bitcoin holders to keep holding (and not selling).

ICO – Initial Coin Offering

ICO is the crypto equivalent for an IPO (Initial Public Offering). An IPO is held when a private company goes public. It’s a chance for investors to buy the stock before it becomes publicly listed. The idea is to participate early before the masses and make a profit.

This is what happens in an ICO too. It’s a chance to invest in a cryptocurrency project before it’s listed on crypto exchanges. In ICO’s case, investors receiving cryptocurrency instead of a stock. Many argue that ICOs fueled the crypto boom of 2017.

There have been no significant ICOs in the past years since so many of them run into legal problems with the SEC. Many projects have raised money via other methods, where participation has been limited to accredited investors.

IEO – Initial Exchange Offering

IEO is almost the same thing as ICO. The big difference is that it is organized by a cryptocurrency exchange. IEOs were a big thing in the spring of 2019. Many projects raised money on Binance’s IEO Launchpad.

One can argue that IEO has benefits over an ICO. If an exchange promotes a project, it’s probably gone through due diligence and should have more quality compared to a random ICO.

The IEO also guarantees the coin is quickly listed on a big exchange. Many ICOs had problems having the coin listed on serious exchanges and getting any traction to the project. This is not an issue with an IEO.

KYC & AML

A KYC process is familiar for every serious crypto investor. It means Know Your Customer. KYC is the process for verifying a person’s identity, who is using a cryptocurrency exchange. It’s required every time when bank wire transfers are made.

KYC is forced by authorities, who try to prevent money laundering and other criminal activities. A KYC process has usually two parts: confirming your identity with a passport and confirming your home address with a utility bill.

The acronym AML goes hand in hand with KYC. It means Anti-Money Laundering. It’s a wider term, which includes different anti-crime methods. One of them is the KYC process.

Lightning Network

Lightning Network is technology, which solves Bitcoin’s scalability problems. It’s an entirely different network on top of Bitcoin. Lightning Network is also called a Layer 2 scaling solution.

Bitcoin is not suitable for micropayments due to its 10-minute block time and relatively high transaction fees. Lightning Network solves this issue. It enables real-time transactions with close to zero fees. This technology was made famous by Jack Mallers and his Strike app.

Read more about the Lightning network from our in-depth guide.

Long & Short

These words are used in traditional investing as well. They are known by every active investor. Long and short are used in margin trading, where leveraged positions are established. When you take a long position, you believe the asset price goes higher. Your short position makes money the opposite way.

Margin trading has become really popular in the crypto markets too. The biggest volumes are seen in the derivatives exchanges, where you can go long or short with up to 100x leverage.

When making traditional spot purchases (buying or selling), you always have one major limitation. It’s only possible to make a profit when your investment goes up in price. Only thing you can do is buy an asset and hope it goes up. Shorting enables investors to make money when prices go down as well.

Mining

Mining is blockchain maintenance work. When it comes to Bitcoin, mining is done with physical mining devices. This is how every Proof of Work cryptocurrency operates. When a new block is mined, new coins are also minted into existence.

The Proof of Work consensus algorithm has been replaced with Proof of Stake in the past years. It means no physical mining devices are needed. In a Proof of Stake system, blockchain is maintained by validators. Such coins are usually all pre-mined when the blockchain is created.

Mining pool / pooled mining

A mining pool is a mining syndicate. It’s a group of miners working together to win block rewards. This makes sense because block rewards are so difficult to get. When thousands of miners group together, it becomes more likely that one of the group members wins a block every now and then.

When block rewards are won by a pool member, they are divided into all miners in the group. You could mine a block by yourself too, but it could take a lifetime to win one single block. In a mining pool, you are guaranteed to get some income all the time.

Pump & Dump

Pump & Dump is an operation, which is seen unfortunately often in the crypto market. It is simply market manipulation. The price of a cryptocurrency is pumped up quickly and then dumped on retail investors. This will create lots of bag holders.

Profit is made by the insiders, who orchestrated the market rally.

Pump & Dump operations are usually done with small cryptocurrencies. It’d take so much money to move Bitcoin or Ethereum, that individual Pump & Dump groups couldn’t pull it off.

There are even Pump & Dump Telegram groups used to coordinate these schemes. They could have tens of thousands of members. In the pump phase, everyone is asked to shill the coin on their social media accounts. Even fake news could be published. In the last stage, a time is agreed when everyone starts selling their coins.

Nocoiner

Nocoiner is an individual, who owns no cryptocurrency. This label is usually given to people who describe Bitcoin as a bubble, Ponzi, pyramid scheme, tulip mania, and so on. Such comments are usually just nocoiners’ way to express their frustration with the fact they never bought in.

Satoshi (unit)

Satoshi, the unit, is one hundred millionth of a single bitcoin (0.00000001 BTC).  It is the smallest amount of bitcoin that can be stored in the blockchain and sent in a transaction. It’s named by the founder of Bitcoin, Satoshi Nakamoto.

Satoshi (sat) is the unit used in the Lightning Network. It’s easier to express a very small amount with for example 200 satoshi compared to 0.000002 BTC. Note, that satoshi is both singular and plural (1 satoshi, 10 satoshi, 100 satoshi, etc.).

Satoshi (person)

Satoshi Nakamoto is the founder of Bitcoin. It’s not a real name but a pseudonym the founder (or founders) chose. The true identity of Satoshi Nakamoto is yet to be revealed. It’s probably the biggest mystery of this millennium.

Satoshi Nakamoto started to work with Bitcoin in 2007. He published the famous white paper in October 2008. Satoshi was heavily involved with Bitcon until December 2010. He disappeared completely in April 2011.

SegWit

SegWit means Segregated Witness. It is one of the most important software updates ever done in the Bitcoin program code. SegWit was activated in August 2017. It is a soft fork, which means a voluntary update. There are thousands of nodes that are still running the older software version.

SegWit had two main impacts. First, it practically doubled Bitcoin’s transaction capacity. Second, it was needed for the Lightning Network.

SegWit2x

SegWit2X means Segregated Witness 2x. It was an update planned for Bitcoin in late 2017. This was a hard fork, which would have split the Bitcoin blockchain in two. The idea was to double the Bitcoin block size from 1MB to 2MB.

SegWit2X was a very controversial update. It split the community into two camps and caused heated discussions. Eventually, SegWit2X was canceled in November 2017, just a couple of weeks before the planned activation.

Shill

To shill means to advertise. A person doing shilling is also called a shill. This action is usually performed on social media by people, who have large audiences. The purpose is to create excitement over a project and get people to buy in the coin the shill already owns.

Sometimes it’s difficult to draw a line between positive reviews and shilling. How do you know when a person is honestly excited about a good project? Therefore people writing positive views are often labeled as shills by people who support a rivaling cryptocurrency.

Shitcoin

Cryptocurrencies, which have no special purpose or use case, are labeled as shitcoins. There are currently over 10.000 cryptocurrencies publicly traded. Most of them are just copies of more successful projects. Though, there is no absolute way to define a coin as “useful” or “shitcoin” currently.

Some investors would argue that a shitcoin is any cryptocurrency that isn’t in my own portfolio. This is also a term Bitcoin maximalists are using a lot. For Bitcoin maxis, every cryptocurrency besides Bitcoin is a shitcoin.

Smart Contract

A smart contract is a piece of software running on a blockchain. Cryptocurrencies labeled as platforms (operating systems) are the ones with a good smart contract supports. These include Ethereum, Binance Smart Chain, Polkadot, etc.

The term smart contract is quite misleading. There is nothing inherently smart about it and it’s not necessarily a contract either. It can be just a few lines of program code. A smart contract is simply doing what it’s been programmed to do.

Read more about smart contracts from our in-depth guide.

Token

The difference between a token and a cryptocurrency is usually unclear for beginners. Tokens are called cryptocurrencies and cryptocurrencies are called tokens. However, there is one clear difference. Tokens don’t have a blockchain of their own.

It means tokens are minted on one of the existing platforms. Ethereum is the best-known, but there are lots of popular tokens created on Binance Smart Chain too. Each platform has its own token standard. Ethereum has ERC-20, Binance Smart Chain has BEP-20, and so on.

If you have Ethereum tokens, they can be all stored in one single Ethereum address. This is how other blockchains work as well.

Cryptocurrencies are usually transferring value. Tokens could be seen as programmable money. They have either utility or governance use cases. They could give you voting rights in the governance of a project or make it possible to use a certain Dapp.

There are also non-fungible tokens or NFTs, which can represent unique digital assets like art, stocks, or game items. Read more from our in-dept NFT guide.

TA

TA means Technical Analysis. In practice, TA is a collection of indicators used to predict market movements. TA is coming from the world of traditional finance. Some of the oldest indicators have been invented over 100 years ago.

In the crypto world, investors are divided into two separate groups. One group feels TA is completely useless in the manipulated crypto markets. Others use TA to predict crypto movements the same way they are using it for stocks.

There is no doubt TA can be useful for crypto traders too. However, you have to be very careful and know what indicators & time frames to use.

ta

The picture above has support and resistance lines drawn into it. Popular indicators include MACD (Moving Average Convergence Divergence) and Bollinger Bands.

TXID

TXID is a string of numbers and letters. It means a transaction ID. With TXID, you can check the status of any transaction in the Bitcoin blockchain. A TXID is created automatically by your wallet app when sending coins.

Other blockchains use transaction IDs too and each has its own blockchain explorer. Blockchain.com is a popular explorer for the Bitcoin blockchain.

Whale

Whales are the biggest players in the cryptocurrency market. This term is also used for large-stake gamblers on casinos.

Market participants can be divided into two groups: small fish (retail investors) and big fish (professionals). Few of the big fish are so big they can be called whales.

Whales can have control over tens of thousands of bitcoins. These are so big players they can move any market up or down. A whale address is an address with a large number of bitcoins in it. Transactions of these addresses are closely monitored by other investors.

White paper

A white paper is a report or a guide about a cryptocurrency project. It can be short, long, technical, or not-so-technical. White papers are usually released at the beginning of the project. It gives potential investors an overview of the project: technology, tokenomics, roadmap, personnel, etc.

This term white paper was first used by Winston Churchill in the 1920s. White papers are also done in marketing and other fields of technology. The best-known white paper is the Bitcoin white paper, published by Satoshi Nakamoto in October 2008.

Image credit: Pixabay | HODL meme: RedditAlankitassigments / CC BY-SAGerd Altmann from PixabayPexels from Pixabay

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