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With the popularity of cryptocurrencies soaring as they are being adopted into the mainstream, it seems worthwhile for a glossary of cryptocurrency based terms. Below you will find 43 cryptocurrency terminologies that you may find useful if you are looking to buy in.
A 51% attack is when more than half of the computing power on a network is operated by a single individual or concentrated group, which gives them complete and total control over a network. This will allow them to halt all mining, potentially manipulate interpersonal transactions and use singular coins over and over again. This type of attack is largely theoretic and is more nuanced than it seems at first glance because minority mining could still be followed with a hard-fork.
A method of distributing cryptocurrency amongst a population network.
Any digital cryptocurrency other than Bitcoin (and to some extent, Ethereum as well). A digital currency that clones Bitcoin or Ethereum or another successful codebase with only minor mods. Ethereum is a different generation of blockchain from Bitcoin so it is not an alt.
ASIC (Application-Specific Integrated Circuit) mining is a method of mining various coins at a much faster rate than any normal desktop or laptop might allow.
The highest price a coin has ever been
An investor holding onto a cryptocurrency after the price has dropped. also known as ‘holding the bag’.
An expectation that a price of a coin is going to decrease
Blockchain – Distributed ledgers
They are public databases that everyone can access and read but the data can only be updated by its respective owners. Blockchains are constantly growing and data is copied across nodes (computers) worldwide. For more information on Blockchain read: WTF is Blockchain and Blockchain – Where’s The Revolution?
An expectation that a price of a coin is going to increase
Moving crypto-currency offline, either on ‘paper-wallets’ or hardware
A type of digital asset that is designed to be a medium of exchange. This kind of exchange medium uses cryptography to keep transactions secure. Cryptography is also used to control the creation of additional units of currency. Some cryptos are not meant as MoE, but generally this is OK.
Decentralized Application. This refers to an application that uses an Ethereum smart contract as it’s back-end code and a front-end deployed in decentralised storage (IPFS, Swarm, etc). FOr more on DApps read The New Age of DApps Is Here, And It’s Not Based On Ethereum.
Dollar Cost Averaging. Used to reduce the volatility of market portfolios by spreading out buys and sells over a more extended period.
Websites where you can buy and sell crypto-currencies.
Any money declared by a government to be legal tender such as the USD, ie, government-issued currency.
FOMO (Fear of Missing Out)
Remember, don’t get carried away by the hype! Word of advice: do your own research and use your due diligence.
When a blockchain splits into two separate chains. A failure to reach consensus can result in a fork.
FUD (Fear, Uncertainty & Doubt)
Baseless negativity spread intentionally by someone that wants the price of something to drop.
A spreader of FUD
A measurement of how much processing is required by the ethereum network to process a transaction.
The amount of ether to be spent for each gas unit on a transaction.
A complete change to the protocol used for a particular cryptocurrency.
Someone once spelt HOLD wrong on a forum and now everyone does.
ICO (Initial Coin Offering)
Equivalent to crowdfunding whereby you get coins/tokens in return for investing in a project/idea. FOr more information on ICOs read What Is An ICO? Everything You Ever Wanted To Know About ICOs.
Limit order / limit buy / limit sell
Orders placed by traders to buy or sell a cryptocurrency when the price meets a certain amount.
Like stocks and shares, cryptocurrencies can be sold long. This is when a trade hopes to profit from a price increase.
Current price x Total Supply
The process of trying to ‘solve’ the next block. It requires obscene amounts of computer processing power to do effectively and using the Proof of Work algorithm. Other consensus mechanisms refer to mining as “validating”.
Price going up to astronomical heights.
P2P is another way of saying Peer-to-Peer. Peer-to-peer has become a very large focus of blockchain as one of the biggest selling points is decentralization.
Proof of work
A system that ties mining capability to computational power. An algorithm used to prove miners have a sufficiently large investment in the blockchain to guarantee their honesty as validators. It forms the basis for the cryptoeconomic security of most public blockchains.
Proof of Stake
An alternative to proof of work, in which your exiting stake in a currency is used to calculate the amount of that currency that you can mine. A novel consensus algorithm that relies on a different set of premises to PoW. In PoS, the honesty of the miner/validator is guaranteed by the volume at stake and relies on slashing conditions to punish bad blocks and attackers.
A public key is a cryptographic key that can be utilized by any party to encrypt a message. Another party can then receive the message and using a key that is only known to that individual or group, decode the message.
ROI (Return on Investment)
Gains on an initial investment
Like stocks and shares, cryptocurrencies can be sold short. This is when a trade hopes to profit from a price decrease.
A smart contract is an unalterable agreement stored on the blockchain that has specific logic operations akin to a real world contract. Once signed, it can never be altered.
A change to the operating protocol for a cryptocurrency that is backward compatible, so older nodes that don’t upgrade will still function.
A place to store you cryptocurrency that exists purely as a software file on a compute.
Refers to the ‘currency’ of projects built on the Ethereum network that have raised money via issuing their own tokens. Tokens also refers to the “currency” built on top of a blockchain. Bitcoin is a token too.
Total Coin Supply
For many cryptocurrencies, there is a limit on the total number of coins that will ever come into existence.
The smallest denomination of ether. 1 Ether = 1000000000000000000 Wei. Another term to note is Gwei. Gwei is another denomination of ether. Gas prices are most often measured in Gwei. 1 Ether = 1000000000 Gwei. It is also worth noting that 1 ether = 1000 Finney or 1000000 Szabo
Someone who holds a lot of cryptocurrencies or has a big stake in a certain coin
A documentation describing a cryptocurrencies protocol in detail
Contributing editor – JP Antunes