If you are a newbie in the cryptocurrency space then you are not much familiar with the terminologies being used by crypto enthusiasts people just like me. To understand what they were saying, I have come up to learn and study about it as I want to understand every term being used. I am also eager to learn about cryptocurrency so I also have to learn every detail about it little by little.
An investor may require to explore many areas in conducting proper research on cryptocurrencies. One of the particular areas is to understand basic terminology in the industry proves it is helpful. The digital currency has a highly unique certain lingo, traders have picked it up when studying other asset classes like stocks, bonds, and commodities.
With this, we will explore more popular terms and phrases relevant to crypto providing a strong learning foundation for those who want to explore this innovative asset.
Terminology and Phrases
Address- an address is a destination where users send and receive digital currency. Just like bank account number, these addresses includes a long series of letters and numbers. This what we called “wallet address ”.
Altcoin - it is a term for other digital currency aside from Bitcoin. It also refers to an alternative protocol asset, it means that it follows the protocol or set of rules that differ from that Bitcoin itself. There are a lot of altcoins listed on CoinMarkerCap, just do your research if you want to know.
Arbitrage - refers to taking advantage of price differences between two different exchanges. For example, the BCH price is $250 in coinbase and $255 in Binance the trader will buy the $250 on coinbase and sell it on Binance to gain more profit.
ATH - it is an abbreviation of “all-time high”, this term helps track digital currency markets. If the assets are highly volatile then keeping their ATH can prove it is valuable. Before the assets have their rising all-time high they will potentially hit several local highs first.
Bear/Bearish - it is believed that an asset in digital currency will decline in value. Traders think if a cryptocurrency will depreciate their sentiment surrounding the digital asset is “bearish”. In this situation, traders will expect on taking a short position in an asset, which means they will make a wager that questions the fall in value should pay off the asset.
Blocks- it contains the transactions that were confirmed and then combined.
Blockchain - it consists of a series of blocks which is a distributed ledger system, that is why it is called blockchain because of its series of blocks. These blocks contain confirm transactions. It was designed to be decentralized and immutable which means the entries could not be erased once they are placed on a distributed ledger. Blockchain was first introduced when it was released last 2008 through bitcoin white paper ideas.
Bull/Bullish - If traders believe that an asset will increase in value he/ she is a “bull”. If investors are optimistic towards an asset future bull the mind frame is described as “bullish”.
Consensus - It is a crucial distribution in the ledger system. When the network nodes agreed that the transaction took place will reach a consensus. This is a critical agreement when the network participants (nodes) are to have the same information.
Cryptocurrency - It is a currency that relies on cryptography. For example, Bitcoin leverages cryptography to verify transactions.
Cryptography - It is the process of encoding and decoding information so observers cannot understand the information being sent.
DDoS Attack - Distributed denial of service (DDoS) attack is when multiple parties working together to overwhelm the system by inundating it whether it is a request for information or malicious data.
Distributed Ledger - This is a system of recording information that is distributed, or spread across many different devices. Blockchain is a distributed ledger that was designed to keep track of all bitcoin and altcoin transactions.
Escrow - It refers to a third party who is holding financial resources on behalf of other parties. A third party will hold funds when other entities involved in the transactions do not trust each other in an escrow. To simplify it is like a middle man in both parties.
Fiat Currencies - These are the currency that has value because they are minted by central banks. Fiat means “by decree” these currencies have toe value because the central authority decreed that they have a monetary value. Or in simple terms, it is our local currency, for example, PHP or Peso as Philippine money.
Exchanges - it is like a marketplace where traders can trade their digital currencies.
FOMO - stands for “fear of missing out”. It occurs when investors start buying particular assets based on expectations that will rise in value. These participants want to flock to an asset so they will experience sharp gains. For example, Bitcoin now that it nearly reaches $14k, some want to be on board. Some might be caught up in FOMO can be dangerous, specifically buying an asset because it recently enjoyed a notable upside that will cause one to fall victim to manipulation in market price.
Fork - it is a change in rules or protocols. Developers will update crypto protocols from time to time. The fork can be a hard fork or a soft fork. A hard fork is a change in protocols making the blocks created that uses the old protocol will be incompatible with the new chain.
FUD- It is fear uncertainty and doubt or “FUD”. Behind this idea is the market participants spreading misleading or inaccurate information to make a cause on an asset price decline. Traders want an asset to decline in value so they can buy it at a lower price and has the chance to increase generating gains.
Hard Fork - it is a type of fork that creates permanent change in digital currency protocol or rules. When this fork takes place it will result in a whole new blockchain that does not accept any blocks mined using the old chain. For example, BCH is a hard fork from Bitcoin because some developers on that chain do not want to increase the block size, to change the block size BCH coin was created. Soon another fork speculated to happen on November 15 in the BCH chain which is to implement an 8% mining fee that will be sent to a specific address for funding infrastructure but many are against it if the IFP will push through then this will lead to a hard fork again.
HODL - Crypto investors created the term "HODL" which means “hold on for dear life”, it was originally coming from a misspellings word of “hold”. Cryptocurrency is highly volatile, when they start experiencing price fluctuations, some traders simply “HODL” waiting for the price increase.
Initial Coin Offering - it represents organizations offering digital tokens to the public to raise money for the first time, these companies hold offerings so they can finance the project.
These digital token sales have often been likened to initial public offerings (IPOs), where companies sell more traditional assets such as stocks and bonds to raise money.
KYC - “know your customer” is to verify the identity of investors regulated by the companies that holding digital toke sales.
Long/Long Position - is also known for taking a long position making a wager that an asset will increase in value.
Market Cap - it is a short term for market capitalization which term for the total market value. The number of coins outstanding multiplied by its digital currency's price. Or can be referred to other terms as a group of digital currencies.
Mining - it is the process of creating new coins of a digital currency. The network releases newly minted coins every time a block is mined, it involves confirming transactions combining into a block. This requires hardware and electricity, miners will be rewarded with digital tokens for their contributions of resources.
Mining Incentive - This is what miners get in confirming transactions and mining them into blocks. They are compensated with these mining incentives.
Moon/Mooning - this means the digital currency rises sharply in value. It is like the coin is going “to the moon”.
Noob - it means newcomers in the industry insiders. If you are one of these persons just set back and observe first before jumping, digital currency is highly volatile. You should keep in mind this is a risky nature.
POW - or “proof of work” a system that provides digital asset transactions that have been verified. Miners must do the “work” that is difficult to contribute but easy for the broader network to verify.
POS - or “proof of stake” another method of confirming transactions. Digital currencies that use this approach of verification provide all their tokens upfront. Miners are selected based on how many units they have (stake). Users who confirm transactions is called “forgers”, they will recognize transaction fees in their contributions under these case. Staking platform for example.
Private Key - it is a piece of information in string numbers and letters presentation that investors will use to access their digital assets.
Public Key - it is an address where investors received their digital asset it is like a private key that has numbers and letters combined.
Pump and Dump - It's a scheme where market participants work together to inflate the price of an asset so they can sell it when the value is high.
Rekt - it is slang for “wrecked” which means a trader lost a lot of money.
ROI - or return of investment investors put an amount of money into an asset hoping they will get compelling returns.
Satoshi Nakamoto - is the pseudonym for the Bitcoin creator. Many personalities have been speculated that they are the creator of Bitcoin but until now it is still uncertain who he is or who are they.
Token - is a unit of digital currency. Some of the tokens are used for a specific ecosystem, those are referred to as utility tokens while other tokens are essentially securities.
Whale - Those who hold more than $1 billion on their Bitcoin wallets are whales. When they move they can easily manipulate the market price, it's like they are “making waves in the ocean”.
White Paper - Developers who created digital currency provide white paper for their innovative assets. It is a document that offers comprehensive information on digital tokens in a question and the underlying technology. For example “peer-to-peer electronic cash system” of Bitcoin Cash. If any interested investor wants to participate in the project they can review the subject on the white paper.
Accumulation - is a phase in which price is not as volatile as other times. The price accumulates power to make a sharp move, this happens before the altcoins start pumping. (Credits to @idiosyncratic )
DYOR- “Do your own research ” in crypto some people will tell you this when they are giving you suggestions about something related to crypto but not financial advice, so they will always advise you to do your research and don't just rely on them.
TA- “Technical Analysis ” is an analysis of charts in trading. This analysis only bases on indicators shown in the charts.
FA- “Fundamental Analysis ” this analysis is based on the fundamentals of the coin, how strong are the project, its development, and its community. Some traders used this strategy aside from TA to make a sure wins trade.
TAYOR- “Trade At Your Risks” is when technical analysis traders give their TA on a certain coin but always remind you to trade at your own risk because there is no wrong TA but a wrong market instead.
Short/Shorting - also known as taking a position on making a bet that the asset will fall in value. Future, options, and margin trading are several methods of practice by traders to shorten digital assets.
Buy long/ Long- this is known as taking a position making a bet that the asset will rise in value in Futures Trading.
This is simplified writing from my understanding according to the terms and phrases meaning given by the source. If I happen to distort the info, feel free to correct this noob writer and learner, especially on the hard fork example I gave which is the BCH upcoming upgrade as it is a crucial topic to tackle. Thank you so much, I hope many newbies will now understand the terminologies using the d in the cryptocurrency space.
Useful information to keep us abreast with cryptocurrencies