Learn the language around cryptocurrency. This glossary unpacks common terms you might encounter in the world of cryptocurrency.
Learn the language around cryptocurrency. This glossary unpacks common terms you might encounter in the world of cryptocurrency.
A cryptocurrency that is not Bitcoin. There are thousands of altcoins with varying values and use cases
Anti-money laundering (AML) refers to a set of laws, regulations, and procedures intended to prevent criminals from disguising illegally obtained funds as legitimate income.
An application program interface (API) is a set of routines, protocols, and tools for building software applications.
A trading strategy of simultaneous buying and selling of securities, currency, or commodities in different market regions to take advantage of differing prices for the same asset.
An application-specific integrated circuit (ASIC) miner is a device designed for the sole purpose of mining Bitcoin. Think of them as specialised Bitcoin mining computers.
A sell order.
A bear market is a market in which share prices are falling, encouraging selling.
A buy order.
The first cryptocurrency built on a blockchain and capped at 21 million units. Created by Satoshi Nakamoto in 2009, Bitcoin is the original cryptocurrency.
A cryptocurrency, which hard-forked from Bitcoin on 1 August 2017, with bigger block size, intended to let miners process more transactions per block.
A block explorer is a tool that people use to view all cryptocurrency transactions online. Specifically, to view all current and past transactions on the blockchain. It gives the user information on the blockchain’s hash rate. It also tells us the rate of transaction growth and provides other useful information.
The block height of a particular block is defined as the number of blocks preceding it in the blockchain.
The new coins issued to miners when they have successfully mined a block of transactions on the Bitcoin (or any other cryptocurrency) network.
A decentralised network that records transactions, much like a traditional ledger. These transactions can be any movement of currency, goods or secure data.
Contain transactional information. Blocks can be thought of as the pages of a ledger.
When the price of an asset becomes inflated and exceeds the true value of that asset. When a bubble “pops” prices fall drastically.
A market in which prices are rising, encouraging buying.
A candlestick is a type of price chart used in technical analysis that displays the high, low, open, and closing prices of a security for a specific period.
Capitulation is when investors give up any previous gains in any security or market by selling their positions during periods of declines. Capitulation can happen at any time, but typically happens during high volume trading and extended declines for securities. A market correction or bear market often leads investors to capitulate or panic sell.
Circulating supply refers to the amount of a stock or currency that is on the market.
A wallet that is kept offline. This is a security measure to prevent unauthorised access.
Confirmation time is defined as the time elapsed between the moment a blockchain transaction is submitted to the network and the time it is finally recorded into a confirmed block.
A consensus mechanism is a fault-tolerant mechanism used in computer and blockchain systems to achieve the necessary agreement on a single data value or a single state of the network among distributed processes or multi-agent systems.
Any digital currency that uses cryptography to validate and secure transactions.
The practice and study of techniques for secure communication in the presence of third parties called adversaries. In the context of cryptocurrency, cryptography validates and secures transaction information.
An abbreviation for decentralised application. A DApp has its backend code running on a decentralised peer-to-peer network.
A governance protocol, characterised by distributing control and authority amongst all participants. Bitcoin is decentralised because many different miners secure the network. As opposed to a centralised network, like banking, where one authority such as the central bank makes decisions.
A decentralised exchange is a cryptocurrency exchange which operates in a decentralised manner, that is, without a centralised authority. Decentralised exchanges allow peer-to-peer trading of cryptocurrencies.
Decentralized finance refers to the digital assets and financial smart contracts, protocols, and decentralized applications (DApps) built on Ethereum
The amount of effort needed to mine blocks. Different cryptocurrencies implement different methods of adjusting the difficulty. In Bitcoin, the mining difficulty adjusts approximately every two weeks to ensure that changes in the number of miners processing transactions don’t drastically increase the rate new Bitcoin is issued into circulation.
A digital asset is anything that exists in binary data which is self-contained, uniquely identifiable, and has a value or ability to use.
A digital code (generated and authenticated by public key encryption) which is attached to an electronically transmitted document to verify its contents and the sender’s identity.
A large database that is consensually shared and synchronised across multiple sites, institutions or geographies. It allows transactions to have public “witnesses”, thereby making a cyberattack more difficult.
Double-spending is a potential flaw in a digital cash scheme in which the same single digital token can be spent more than once.
A dusting attack is a kind of malicious activity through which hackers and scammers try to dismantle the privacy of Bitcoin and cryptocurrency users by sending out tiny amounts of coins to their personal wallets. The attackers will then track the activity of these wallets. They can then perform a collective analysis of multiple addresses, which allows them to identify wallet owners.
Stands for ‘Do Your Own Research’.
Stands for ‘Explain Like I’m 5.’ The 5 refers to a five-year-old child, the implication being that the person requesting the explanation has a limited or naïve understanding of the issue.
Encryption is the method by which information is converted into secret code that hides the information’s true meaning. The science of encrypting and decrypting information is called cryptography.
ERC-20 is an official protocol for proposing improvements to the Ethereum (ETH) network. ERC stands for Ethereum Request for Comment, and 20 is the proposal identifier. This is a common standard for creating tokens on the Ethereum blockchain.
ERC-721 is a free, open standard that describes how to build non-fungible or unique tokens on the Ethereum blockchain. While most tokens are fungible (every token is the same as every other token), ERC-721 tokens are all unique. Think of them like rare, one-of-a-kind collectables.
The cryptocurrency generated by the Ethereum platform, and used to compensate mining nodes for computations performed.
Created by Vitalik Buterin, Ethereum is a distributed computing platform, a blockchain built to process transactions and other information, such as smart contracts. See our Learning Portal series about Ethereum.
A place where buyers and sellers meet to buy and sell an asset, like Bitcoin, shares or derivatives.
Conventional or government-issued money (your local currency).
An attack on a blockchain by a group of miners 50% of the network’s hash rate or computing power.
The assurance or guarantee that cryptocurrency transactions cannot be altered, reversed or cancelled after they are completed. The latency level of a blockchain will ultimately affect the chain’s finality rate.
Stands for the ‘fear of missing out’. FOMO is an emotionally and fear-based factor that affects traders by swaying them to make a decision on whether to buy or sell for fear of missing out on potential gains.
A fork occurs when a group of participants (miners) run a different version of the software (protocol). If the new version is backwards compatible (if it can successfully use data from earlier versions of the blockchain) then it’s a soft fork, and all participants will remain on the same blockchain. If the new version does not work with the existing blockchain then it’s a hard fork and the blockchain will split into two separate chains.
Stands for ‘fear, uncertainty and doubt’. This is a term used when an individual is trying to stoke concern about the future of cryptocurrency.
A full node is a program that fully validates transactions and blocks. Almost all full nodes also help the network by accepting transactions and blocks from other full nodes, validating those transactions and blocks, and then relaying them to further full nodes.
Fungibility is the property of an asset whose individual units are essentially interchangeable, and each of its parts is indistinguishable from another part. For example, local currency is fungible as $1 has the exact same value as another $1 note.
A futures contract is a standardized legal agreement to buy or sell something at a predetermined price at a specified time in the future, between parties not known to each other. The asset transacted is usually a commodity or financial instrument.
A futures exchange or futures market is a central financial exchange where people can trade standardized futures contracts defined by the exchange.
The fee or pricing value required to successfully conduct a transaction or execute a contract on the Ethereum blockchain platform.
The first block of a blockchain.
GitHub is a web-based version-control and collaboration platform for software developers. GitHub, which is delivered through a software-as-a-service (SaaS) business model, was started in 2008 and was founded on Git, an open source code management system created by Linus Torvalds to make software builds faster.
A crypto token that interacts with a blockchain’s smart contract to grant an owner voting powers to accept or reject proposed changes to that blockchain’s programming.
Gwei is short for gigawei, or 1,000,000,000 wei. Wei, as the smallest (base) unit of ether, is like what cents are to the dollar and satoshi are to bitcoin. 1 ether = 1,000,000,000 gwei (109). 1 gwei = 0.000000001 ether. Just like 1 cent = 0.01 dollar.
A Bitcoin halving event happens every four years which sees the reward for mining Bitcoin transactions cut in half. This event also cuts in half Bitcoin’s inflation rate and the rate at which new Bitcoins enter circulation.
Approximately every four years, the reward received by a Bitcoin miner is halved in an attempt to ensure they are issued in such a way that is deflationary.
protocol that makes previously invalid blocks and transactions valid, or vice-versa. A hard fork requires all nodes or users to upgrade to the latest version of the protocol software.
An alternative to your normal cryptocurrency wallet, this is a dedicated physical device in which private keys are stored (usually offline for extra security).
The hash rate measures how powerful a (Bitcoin) miner’s machine is. Specifically, it measures the number of times a hash function can be computed per second. A miner’s expected profit is directly proportional to the hash rate. Hash rate is also used to measure how much computer power is securing a specific blockchain.
This means to hold (i.e. not sell) your Bitcoin. The term became popular in 2010 when a typo in a Bitcoin forum went viral. The typo was retrofitted as an acronym for “Hold on for dear life”.
Any cryptocurrency wallet that is connected to the internet.
Initial coin offering (or ICO) is the sale of tokens on a blockchain before they are issued. The public can pay for these tokens in an ICO and they are issued to participants later.
An initial exchange offering (IEO) is a token sale supervised by a cryptocurrency exchange. IEOs are available exclusively to the exchange’s users, although some IEOs may take place in several exchanges. Just like ICOs, IEOs allow investors to get new cryptocurrencies (or tokens) while raising funds for promising crypto projects.
Unchanging over time or unable to be changed.
Know-your-customer (KYC) is a compliance process employed to verify the identity of a business’ clients either before or during the time that they start doing business with them. Financial institutions are legally required to apply KYC processes when onboarding new clients.
A record of transactions.
The Lightning Network is a “Layer 2” payment protocol that operates on top of a blockchain-based cryptocurrency. It enables fast transactions among participating nodes and has been touted as a solution to the Bitcoin scalability problem.
An order placed by specifying both the amount and price at which you wish to trade. Depending on the price specified, the limit order might trade immediately against existing orders in the order book (in that case it is a taker order), or it might itself be inserted into the orderbook waiting for other orders to trade against it (in that case it is a maker order).
Liquidity refers to the ease with which an asset, or security, can be converted into ready cash without affecting its market price.
A peer-to-peer cryptocurrency and open-source software project. The creation and transfer of coins is based on an open-source cryptographic protocol and is not managed by any central authority.
This is either a limit buy order below the market price or a limit sell order above the market price. The order waits in the order book and is therefore said to ‘make’ the market.
Malware is any software intentionally designed to cause damage to a computer, server, client, or computer network. A wide variety of types of malware exist, including computer viruses, worms, Trojan horses, ransomware, spyware, adware, rogue software, and scareware
A method of trading assets using funds provided by a third-party.
Market capitalisation, or market cap, is the market value of a publicly traded company’s outstanding shares. Market capitalization is equal to the share price multiplied by the number of shares outstanding.
An order placed by only specifying the amount you wish to trade. The order executes immediately at the best available rate in the market. In other words, the market order matches with existing orders waiting in the orderbook. A market order is always a taker order.
Market sentiment refers to the subjective feeling about the state of a market. It’s the overall emotion that traders and investors have in regards to the price action of a particular asset.
The maximum supply of a cryptocurrency refers to the maximum number of coins or tokens that will ever be created. Once the maximum supply is reached, there won’t be any new coins mined, minted or produced in any other way.
Data that provides information about other data. For example, a photo on your phone has metadata, including the time and date it was taken, its file size, and maybe its location. The photo itself is the data, and the photo’s metadata is all the information about the photo.
Miners earn block rewards when solving blocks. Over and above this miners also earn voluntary fees paid by people who wish to send coins. This incentivises miners to include transactions with the highest fees into blocks when the network is congested.
The committing of computer hardware to process transactions on a blockchain (Bitcoin or otherwise). Miners do this to receive mining rewards and profit.
A Mining farm is a data center, technically equipped to mine Bitcoins or other cryptocurrencies. Mining farms emerged as a result of the constant complication of the mining process, which requires more technical, energy and financial resources.
An expression used in the Bitcoin community to predict Bitcoin’s future price and its new all-time high – “to the moon”.
In wallets, multiple signature (or MultiSig) refers to the requirement of multiple authorisations (usually from different people) to successfully send a transaction on a blockchain. For example, you have 5 people authorised to send Bitcoin from a MultiSig wallet but at least 3 of these 5 must approve a transaction before it is authorised.
A device with a copy of the blockchain on it that shares information with other nodes across the network. The node does not necessarily mine cryptocurrency but it does contribute to decentralisation and therefore security of the blockchain. All miners are nodes but not all nodes are miners.
A non-fungible token is a special type of cryptographics token which represents something unique. This means NFTs are not mutually interchangeable by their individual specification. For example, collectables, digital art, and game items could be NFTs.
In cryptography, a nonce is an arbitrary number that can be used just once in a cryptographic communication. It’s often a random or pseudo-random number issued in an authentication protocol to ensure that old communications cannot be reused in replay attacks. They can also be useful as initialization vectors and in cryptographic hash functions.
Off-chain transactions refer to those transactions occurring on a cryptocurrency network which move the value outside of the blockchain.
On-chain transactions refer to those cryptocurrency transactions which occur on the blockchain – that is, on the records of the blockchain – and remain dependent on the state of the blockchain for their validity.
Open-source software is a type of computer software in which source code is released under a license in which the copyright holder grants users the rights to study, change, and distribute the software to anyone and for any purpose.
An instruction to trade (buy or sell) via an exchange (e.g. the stock market). More specifically, we exchange Bitcoin for local currencies, as on the Luno Exchange.
OTC refers to the process of how securities are traded for companies that are not listed on a formal exchange such as the New York Stock Exchange (NYSE). Securities that are traded over-the-counter are traded via a broker-dealer network as opposed to on a centralised exchange.
Peer-to-peer. In a P2P network, “peers” are computer systems which are connected to each other via the internet. Files can be shared directly between systems on the network without the need for a central server.
A relatively obsolete and unsafe type of wallet in which private key and Bitcoin address information is printed onto a piece of paper.
Phishing is the fraudulent attempt to obtain sensitive information such as usernames, passwords and credit card details by disguising oneself as a trustworthy entity in an electronic communication.
A form of fraud in which belief in the success of a non-existent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.
A private key is a digital code, like a password, that is used to authorise cryptocurrency transactions on a blockchain. This code, which should be kept secret, authorises the owner to send coins from a specific wallet.
A Proof of History protocol is a sequence of steps where a timestamp is added to the block’s signature, creating a record that verifies a transaction has occurred at a specific time. This means through public verification miners are able to continue mining without delays.
A Proof-of-Stake protocol is a consensus mechanism whereby a person can mine or validate block transactions according to how many coins he or she holds. This means that the more Bitcoin or altcoin owned by a miner, the more mining power he or she has.
A Proof-of-Work system (or protocol, or function) is a consensus mechanism. It deters denial of service attacks and other service abuses such as spam on a network by requiring some work from the service requester, usually meaning processing time by a computer.
A public key is a digital code that uniquely identifies a wallet on a blockchain; ie. the wallet address. This is the address you give to somebody who wants to send you cryptocurrency.
A fraudulent investment scheme that pays profits to earlier investors with funds from recent investors and requires members to recruit new investors.
A slang term for “wrecked” which is used when a trader has lost substantial amounts of money.
Resistance, or a resistance level, is the price at which the price of an asset meets pressure on its way up by the emergence of a growing number of sellers who wish to sell at that price.
Ripple is a digital payment network for financial transactions that uses the XRP cryptocurrency as means of settlement.
A runaway gap occurs when trading activity skips sequential price points, usually driven by intense investor interest. Essentially, there was no trading, defined as an exchange of ownership in a security, between the price point where the runaway gap began and where it ended.
(person) Satoshi Nakamoto is the person credited with inventing Bitcoin. It’s a pseudonym. The identity of the inventor of Bitcoin is unknown.
(unit) A satoshi is also the smallest unit into which a Bitcoin is divisible. 1 Satoshi = 0.00000001 Bitcoin.
Similar to an initial coin offering (ICO), an investor is issued with a crypto coin or token representing their investment.
A seed phrase, seed recovery phrase or backup seed phrase is a list of words which store all the information needed to recover Bitcoin funds on-chain. Wallet software will typically generate a seed phrase and instruct the user to write it down on paper.
SegWit is feature of some blockchain protocols (including Bitcoin and Litecoin), that moves a part of the transaction data out of the main block thereby reducing the effective size of transaction. It therefore allows more transactions to fit into into a single block without having to increase the size of the block
The SHA (Secure Hash Algorithm) that Bitcoin uses. See hash.
The act of using propaganda to promote something for a financial incentive. It’s often viewed as a negative term for when someone promotes something so they can earn money.
The difference between the expected price of an order and the price when the order actually executes.
A software program that is created on a blockchain and identified by an address. Transactions on the blockchain can execute the contract in various ways, for example, by sending some cryptocurrency or data to the contract’s address. If executed, a smart contract can, in turn, send more transactions or execute other smart contracts.
A “human hacking” scam that uses psychological manipulation to trick unsuspecting individuals into exposing data, spreading malware, and giving access to restricted information or valuables.
This is the difference (or gap) between the price of the highest buy order (see bid) and the price of the lowest sell order (see ask). Lower spreads are a sign of a healthy or stable market.
A stablecoin is a new class of cryptocurrencies that attempts to offer price stability and are backed by a reserve asset. For example, a stablecoin may be pegged to a currency like the US Dollar or to a commodity’s price, such as gold.
The act of locking up one’s coins or tokens to help verify transactions for cryptocurrencies with Proof-of-Stake (PoS) consensus mechanisms. Stakers earn staking rewards for providing this service.
A crypto’s support level is the value at which it’s currently believed that a cryptocurrency will not fall beneath. This level is normally supported by a large amount of demand and buying activity because traders believe the asset is undervalued.
This is either a buy order at / above the market price or a sell order at / below the market price. This order executes immediately, without waiting in the order book. Because it matches with maker order and takes them out of the market, it is said to be a ‘taker’ order.
The testnet is an alternative Bitcoin blockchain to be used specifically for testing. Testnet coins are separate and distinct from actual Bitcoin, and are never supposed to have any value. This allows application developers or Bitcoin testers to experiment, without having to use real Bitcoins or worrying about breaking the main Bitcoin blockchain.
Trusted Timestamping is the process of securely keeping track of the creation and modification time of a document. It allows interested parties to know, without a doubt, that a document in question existed at a particular date and time. By design a Bitcoin transaction includes a date and time, held on the Blockchain.
Generally, a token is a cryptocurrency that is not backed by its own blockchain, and instead is provided by functionality of another currency’s blockchain. For example, ERC20 tokens provided by smart contracts on the Ethereum blockchain.
Roughly every ten minutes (in Bitcoin, that is – other blockchains block times may vary), a new block is created and added to the blockchain through the mining process. This block verifies and records any new transactions. Since subsequent blocks are linked to previous blocks, each subsequent block acts as a confirmation of its predecessors. For example, if a transaction was included in block 101, and the latest block is 110, the transaction is said to have 10 confirmations. In this way, transactions are said to have been confirmed by the (Bitcoin) network.
An identifier used to uniquely identify a particular transaction
TPS refers to the number of transactions that a network is capable of processing each second.
Sometimes referred to as “2FA”. An extra layer of security, usually in addition to a password. Two-factor typically uses a second device (e.g your mobile phone) to provide an extra once-off code. Both your usual password and this unique code are needed to authorise sign-in access or a transaction.
In cryptocurrencies, an unspent transaction output is an abstraction of electronic money. Each UTXO represents a chain of ownership implemented as a chain of Digital Signatures where the owner signs a message transferring ownership of their UTXO to the receiver’s Public Key
A non-mineable crypto token that allows users to perform specific actions on a certain network.
People who are responsible for verifying transactions on a blockchain.
In finance, volatility is the degree of variation of a trading price series over time, usually measured by the standard deviation of logarithmic returns. Historic volatility measures a time series of past market price.
Volume is the total amount of anything swapped around in a certain period of time. An exchange usually shows it’s own volume for each crypto, that is the amount traded on that particular exchange, normally in the last 24hr unless it says otherwise.
Software with which you send and receive cryptocurrency. Remember, the coins are stored on the blockchain. The wallet contains the private keys that authorise the owner to send these coins to another wallet.
A conceptual new iteration of the World Wide Web, based on blockchain technology, which incorporates concepts such as decentralisation and token-based economics.
An individual or entity that holds large amounts of digital currencies.
The term whitelist refers to a list of identified and authorised individuals, institutions, computer programs or cryptocurrency addresses.
In crypto terms, an official document usually issued by new blockchain projects before an ICO, informing readers about the new technology, methodology, product or service being launched.
The Ripple network’s xRapid payment service uses the cryptocurrency, XRP which is based on the XRP ledger. XRP is used to facilitate transactions on the Ripple network. Ripple and XRP are often used interchangeably, but technically speaking, Ripple is the payments platform and XRP is a digital asset that operates independently of Ripple.