Top 30 Crypto Terms You Should Familiarize Yourself With
- By Localcoin
- June 26, 2023
If you’re looking to dive deeper into the world of cryptocurrency, you’re bound to come across some crypto jargon you’re unfamiliar with. Cryptocurrency and the technologies it relies on are relatively new and rapidly evolving.
Whether you’re getting into cryptocurrency for the first time or you’re just looking to refresh your knowledge, we’ve got you covered. Read on and we’ll cover the top 30 crypto terms that you are sure to encounter as you delve into cryptocurrency!
Here are the Top 30 Cryptocurrency Terms
- Application Specific Integrated Circuit (ASIC)
- Bear Market
- Bull Market
- Cold Storage
- Crypto Wallet
- Decentralized Autonomous Organization (DAO)
- DeFi & Dapps
- Distributed Ledger Technology (DLT)
- Initial Coin Offering (ICO)
- Limit Order
- Market Cap
- Non-Fungible Token (NFT)
- Ponzi Scheme
- Proof-of-Work & Proof-of-Stake
- Public Addresses & Private Keys
- P2P (Peer to Peer)
- Smart Contract
An Altcoin describes any coin besides Bitcoin. Because Bitcoin was the original cryptocurrency, any other crypto coin is considered an alternative to the original. Some popular altcoins include Ethereum, Litecoin and Dogecoin.
2. Application Specific Integrated Circuit (ASIC)
A specialized hardware device designed for efficient and high-speed processing of specific tasks, such as mining cryptocurrencies like Bitcoin. ASICs are optimized to perform their designated functions, resulting in increased processing power and reduced energy consumption compared to general-purpose computers.
3. Bear Market
It is a market condition characterized by a prolonged decline in asset prices, such as cryptocurrencies. During a bear market, investor sentiment is pessimistic, and prices continue to fall due to selling pressure. It often signifies a downturn in the market and can lead to decreased trading activity.
That's the next crypto terminology to know. A blockchain is a type of secure database where data is grouped into blocks and chained together in chronological order hence the name “blockchain.” In the context of cryptocurrency, blockchains are used as public, digital ledgers (records) of all transactions made pertaining to their respective coins.
This network is decentralized because no one owns the ledger. Instead, miners play a large role in upholding blockchains. They work to verify the legitimacy of crypto transactions which allows blockchains to work without one, centralized authority.
Click, and find out how does blockchain work.
5. Bull Market
A market phase marked by rising asset prices and positive investor sentiment. In a bull market, prices generally experience sustained upward momentum, leading to increased trading activity and optimism among investors. Bull markets often accompany periods of economic growth and positive market trends.
6. Cold Storage
A secure method of storing cryptocurrencies offline, typically on hardware devices or paper wallets. Cold storage ensures that digital assets are isolated from internet connectivity and potential hacking risks, providing enhanced security against online threats and unauthorized access.
7. Crypto Wallet
A Crypto Wallet is a necessary part of holding and transacting crypto coins. They exist to keep track of coin ownership and to generate the public addresses you’ll need to make transactions. To clarify, they don’t literally hold your coins like a traditional wallet does!
Your Bitcoin, Ether, Litecoin, etc. all exist on the blockchain, and your crypto wallet simply gives you access to them via private keys.
Decentralization is the founding principle of cryptocurrency. Most cryptocurrencies including Bitcoin are decentralized, in that they operate on peer-to-peer networks without a central authority such as a bank or a government.
This means they work without the need for intermediaries who know your personal information and have access to your funds. The ability to make financial transactions without a middleman is one of many reasons why people use cryptocurrency.
9. Decentralized Autonomous Organization (DAO)
DAO is an organization that operates based on predetermined rules and smart contracts on a blockchain. DAOs aim to eliminate traditional hierarchical structures and enable decentralized decision-making by allowing token holders to participate in governance and vote on proposals.
10. DeFi & Dapps
“DeFi” is short for Decentralized Finance. It describes financial systems that use decentralized blockchain technology. Crypto coins like Bitcoin, Litecoin and even Dogecoin are decentralized finance systems. Some Dapps on the Ethereum network also make use of DeFi systems.
“Dapps” or Decentralized Apps are software applications, popularized by the Ethereum network. Dapps are resistant to censorship; instead of being hosted on one server controlled by an entity, they are powered by blockchain technology. Examples of dapps in existence today include ones for gaming, insurance, crowdfunding, trading and more.
11. Distributed Ledger Technology (DLT)
DLT refers to a decentralized and transparent system that records transactions across multiple locations or participants. Blockchain is a prominent example of DLT, where transactions are recorded in a chronological and immutable manner.
DLT offers enhanced security, accountability, and efficiency by eliminating the need for intermediaries.
A fork can occur to a crypto coin when the community wants to make a change to the blockchain’s protocol, whether that be changing a rule, adding a feature or new functionality. A real-life example of a fork is Ethereum’s move to a proof-of-stake model. A fork may even result in an entirely new coin being created in some situations.
A slang term associated with Ethereum and other blockchain platforms that employ smart contracts. Gas refers to the fee required to perform actions or execute transactions on the network. It helps allocate resources and prevents network abuse while compensating miners for their computational efforts.
A predetermined event in certain cryptocurrencies, like Bitcoin, where the reward given to miners for validating transactions is reduced by half. Halvings occur at specific intervals and are programmed into the cryptocurrency's protocol, leading to a reduction in the rate of new coin issuance.
15. Initial Coin Offering (ICO)
ICO refers to a fundraising method used by cryptocurrency projects to raise capital by selling tokens to investors in exchange for cryptocurrencies like Bitcoin or Ethereum. ICOs are used to fund the development of new blockchain-based projects and platforms.
16. Limit Order
An instruction is given to a cryptocurrency exchange to execute a trade at a specific price or better. A limit order allows traders to control the price at which their trade is executed, ensuring they buy or sell at a predetermined level.
Refers to the ease of buying or selling an asset without causing significant price fluctuations. High liquidity implies a large volume of trade activity and a narrow bid-ask spread, providing traders with efficient execution of orders.
18. Market Cap
Short for market capitalization, it's the total value of a cryptocurrency or asset in circulation, calculated by multiplying its current price by the total number of coins or tokens in existence. Market cap is used to assess the relative size and value of different cryptocurrencies.
The process of validating and adding new transactions to a blockchain, often involving complex computational puzzles. Miners contribute computational power to secure the network and are rewarded with newly minted cryptocurrencies for their efforts.
A participant in a blockchain network that helps maintain the network's security and integrity by validating transactions and contributing to consensus mechanisms. Nodes store a copy of the blockchain and communicate with other nodes to ensure the consistency of the ledger.
21. Non-Fungible Token (NFT)
Non-Fungible Tokens (NFTs) are largely being used as digital assets that represent pieces of art, whether that be an illustration, a song, a video, etc. “Non-fungible” means unique, as every NFT is a distinctive token representing a different piece of art.
Many believe that NFTs are shaping the future of fine art collections. On the Ethereum network, the ownership and transferring of NFTs is managed via Smart Contracts.
22. Ponzi Scheme
A fraudulent investment scheme where returns are paid to earlier investors using the capital of newer investors, rather than from actual profit. Ponzi schemes rely on a continuous influx of new investors to sustain returns, ultimately collapsing when the flow of new investments diminishes.
23. Proof-of-Work & Proof-of-Stake
Proof-of-Work or PoW is the original method for mining cryptocurrency. Crypto mining is a necessary part of maintaining decentralization and circulating new coins. Here’s how it works:
- Using large amounts of energy, miners verify the legitimacy of crypto transactions.
- Once these problems are solved, blocks of transactions are considered verified and added to the blockchain.
- In return, miners receive newly minted coins as rewards.
Proof-of-Stake (PoS) or “staking” is an alternative to mining that aims to address the energy concerns surrounding PoW mining. Instead of rewarding large energy use, PoS incentivizes validators to hold large amounts of the coin, and the validator with the largest holding will “win” the ability to verify transactions and earn rewards.
Learn more about crypto staking.
24. Public Addresses & Private Keys
A Public Address is created by your crypto wallet. It tells a crypto exchange or Bitcoin ATM where to send your crypto coins.
This is public information that will also be seen on a blockchain. But not to worry — your coins are protected by encryption, and are kept away safely via private keys that only you know.
Private Keys are long sequences of letters and numbers generated by your wallet that are unique to you. They act as your personal password for accessing your coins. It is the crypto wallet owner’s responsibility to keep their private keys private.
Learn about the difference between Ethereum and Bitcoin.
25. P2P (Peer to Peer)
A decentralized approach to sharing resources or information directly between participants without the need for intermediaries. In the context of cryptocurrencies, P2P refers to transactions and exchanges occurring directly between users without involving centralized exchanges.
26. Smart Contract
Smart Contracts are written agreements between parties just like any other contract, but they automatically execute on their own without the need for an intermediary, such as a lawyer or mortgage advisor.
Smart contracts are especially beneficial for developers who create apps that facilitate trades, such as a crypto trading Dapp.
A programming language used for creating smart contracts on the Ethereum blockchain. Solidity enables developers to define the rules and logic of decentralized applications, facilitating the automation of agreements and transactions.
A type of cryptocurrency designed to maintain a stable value by pegging it to an external asset, often a fiat currency like the US Dollar. Stablecoins aim to minimize the price volatility associated with other cryptocurrencies, making them suitable for various use cases, including trading and payments.
The process of holding and "staking" a cryptocurrency in a wallet to support the operations of a blockchain network. Stakers are rewarded with additional coins for validating transactions and maintaining network security.
A document typically published by cryptocurrency projects that outlines the technical details, objectives, and methodology of the project. Whitepapers provide readers with a comprehensive understanding of the project's purpose, technology, and potential benefits.
In the dynamic world of cryptocurrencies, knowledge is power, and understanding the terminology is your key to unlocking the full potential of this transformative technology.
We've explored the top 30 crypto terms that will not only help you navigate the crypto landscape with confidence but also enable you to engage in informed discussions, make wise investment decisions, and explore the exciting possibilities that blockchain and cryptocurrencies offer. As the crypto space continues to evolve, staying informed and keeping up with new terms and concepts will be your passport to success.
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