Cryptocurrency Glossary: The Language Of DeFi
- The crypto market carries its own unique, ever-expanding terminology
- Some terms refer to complicated blockchain processes, but traders don’t have to understand every part of the technology to enjoy crypto
Somewhere between cutting-edge financial technology, decentralized monetary systems, and internet meme culture, you arrive at cryptocurrency. From this fusion of technology and populism, digital currencies carry their own language that seems alien to even the most experienced traders of traditional assets.
We’ve compiled a straightforward crypto glossary to help you decode some of the most common crypto terminologies. Of course, this list is by no means exhaustive because the industry is changing all the time, but that’s part of the appeal of this asset class.
An alphanumeric identifier of a transaction’s destination. It is single-use and has no reference to the sender.
Free distribution of crypto to a given audience for promotional purposes.
Short for “alternative coin”, this refers to any coin that is not Bitcoin.
A method of exchanging different cryptos across different chains without using an intermediary.
The original and most popular cryptocurrency! Bitcoin still holds the highest value and the biggest share of the crypto market.
The database of crypto transactions, which are added in blocks. The chain enhances security by making the blocks immutable (unchangeable) whilst being distributed (publicly viewable).
The process of removing coins from circulating supply. This is a deflationary method to increase demand and value.
Central Bank Digital Currency – a concept currently being researched by at least 80% of global banks, whereby banks would release a digital version of a fiat currency in an attempt to harness the crypto hype.
The storage of crypto offline to protect from hacking, most commonly in paper or hardware wallets.
The principle of validating new blockchain data through mutual approval instead of through a single authority, e.g. Proof-of-Stake/Proof-of-Work.
Short for Decentralized Applications, which are applications built on blockchain to perform functions, no single point of control/authority.
Abbreviated from Decentralized Finance, this is the concept behind cryptocurrency whereby no institutional intermediary or centralized exchange is relied upon for transactions.
A committed and optimistic HODLer or investor in a given crypto who will not sell even when prices fall.
The sudden sell-off of crypto that can cause prices to plummet.
A web-based distributer of tiny crypto rewards in return for the completion of menial tasks, games, or adverts.
Derived from the Latin meaning ‘let it become’, this is the term used to describe currencies given value solely through government endorsement, and not backed by a physical asset (such as gold).
Most commonly, this refers to a hypothetical moment in the future when Ethereum will overtake Bitcoin in value or market dominance.
“Fear Of Missing Out” – the emotional hype that can cause traders to rush into crypto investments.
A new branch attached to the existing blockchain with different functionality.
“Fear, Uncertainty, Doubt” – negative coverage of a crypto asset.
A core server that stores all blockchain history and authenticates new transactions.
A process of cryptography whereby an equation processes inputs to create a unique encrypted code.
The term for buying and asset and “Holding On for Dear Life”.
The online storage of crypto through a web or mobile wallet. This makes funds more accessible for transactions, but also more vulnerable to hackers.
The opposite to FOMO, the “Joy Of Missing Out” refers to traders refraining from following the crowd in the investments.
This abbreviation of Lamborghini has become a nickname for the new generation of crypto profiteers according to their customary taste for supercars.
A standalone system that can be overlayed upon existing blockchains to utilize their functionality but avoid restrictions, e.g. the Lightning Network.
A platform that uses Simplified Payment Verification (SPV) via a full node to complete transactions. Essentially, it offers access to the blockchain data without having to download the full chain.
The total value of a coin in circulation, i.e. coin value multiplied by the number in circulation.
The cap of a crypto’s supply to protect value and increase demand, e.g. Bitcoin is capped at 21 million.
The process of computers performing complex calculations to process transactions in “blocks” and earn rewards in new coins.
A group of investors who pool resources for mining operations in return for split rewards.
Crypto-enthusiasts’ notation for astronomical price climbs, i.e. “x is going to the moon”.
Short for Non-Fungible Token – a collectible (e.g. artwork or music) with a digital signature that gives it value through being unique.
Peer-to-Peer – the interaction between network participants without need for centralized mediation.
A cryptographic code that produces a public address to receive crypto transactions.
Pump & Dump
The organized buying and selling of a crypto in mass, causing major volatility.
A 64 character alphanumeric code that functions like a password, allowing the owner of funds to make transactions.
An alternative consensus mechanism that is less energy-intensive than POW – transactions are instead validated by users who have staked funds.
See mining – the consensus mechanism of verifying transactions through computational mining.
The smallest unit of Bitcoin, at 0.00000001 BTC, named in honour of the Bitcoin creator.
A series of words generated from wallet to grant access to funds. It can be used to restore a wallet and private keys.
A coin with low volatility, often backed by a physical asset or fiat currency.
Tokens are distinct from coins in that they have no monetary value and instead offer a specific utility on the blockchain, e.g. security tokens or NFTs.
A bias towards owning whole units of cheaper cryptos than small fractions of more valuable ones.
The rate of change of price – volatility is notoriously high in cryptos, which means opportunity for huge profit and huge loss.
The general method of crypto storage. Each wallet is recorded in the blockchain through a public key, contains the trader’s private keys and is backed up by a seed phrase.
The opposite of diamond hands, this describes a trader who sells at the first sign of prices falling.
A large holder of an asset who is dominant enough to influence its price.
Hopefully, our guide can shed some light on common crypto terminology and help you tackle these assets with confidence. Blockchain technology is highly complex, but you don’t need to understand every detail of how cryptos function to enjoy their value. The beauty of cryptos is their diversity; the industry is constantly evolving and offers interesting opportunities for every kind of trader.