Every industry has its unique terminology, definitions, and acronyms that only those within the industry truly understand. For those on the outside, however, following all those industry-specific acronyms can be a real challenge and a significant barrier to entry.
The world of cryptocurrency and blockchain is no exception, and you will encounter lots of mysterious terms and strange acronyms as you go down the learning curve (especially if you frequent Reddit!) Here are some of the most commonly used terms in the cryptocurrency market, along with their everyday English translations.
Let’s start with the most basic definition – cryptocurrency. The term cryptocurrency refers to 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.
In cryptocurrency terms, an address is a code used to send, receive, or store cryptocurrency. These addresses consist of 26-35 characters, a combination of letters and numbers. The address can also refer to the public key, a pair of keys needed to sign their digital transactions.
The term altcoin refers to any digital cryptocurrency other than Bitcoin (and to some extent, Ethereum). Bitcoin is the most popular cryptocurrency, but there are also more than 1,000 others. Each one of those more than 1,000 cryptocurrencies is known as an altcoin, short for alternative coin.
The blockchain is what makes cryptocurrencies like Bitcoin possible. It is a list of every block that has been mined since the creation of the cryptocurrency.
Cryptocurrencies are not printed – they are mined. Every time a miner successfully hashes a transaction block, they receive a blockchain reward.
You may hear the U.S. dollar and other traditional currencies referred to as fiat currencies, but what does that mean? A fiat currency is used to describe any physical paper currency. Governments and central banks typically issue fiat currencies, and they are fully regulated and centralized.
When an investor is holding on to a cryptocurrency that has dropped in price, they are known to be a “bagholder” or “bag holding.”
Hard forks are typical in the world of cryptocurrencies, and this term refers to the alteration of the underlying block structure of the cryptocurrency.
The hash is a term for the mathematical process that transforms a variable amount of data into a shorter fixed-length output. This term is used in cryptocurrency mining.
Cryptocurrencies are mined, not in underground structures but with computer hardware. Mining involves using sophisticated computer hardware to solve complicated mathematical problems.
Proof of Work
Proof of work is used to tie mining capability to the computational power of the computers involved.
Cryptocurrency can be shorted in much the same way that stocks are. When a trader or investor goes short on a cryptocurrency, he or she hopes to profit from a price decrease. Shorting can be risky since a rising price could produce a huge loss.
Taking a long position is the opposite of a short. When a trader or investor goes long, they hope to profit from a price increase.
Volatility is a measure of the price movement of an investment over time. The cryptocurrency markets are well known for their high levels of volatility.
You’ll come across many acronyms in the blockchain space, many of which you won’t find anywhere else. These may be confusing at first but look no further, because here are the most common ones.
Dollar Cost Averaging. Used to reduce the volatility of market portfolios by spreading out buys and sells over a more extended period.
FOMO stands for Fear of Missing Out, and it is a common sight in a rising market. As the price of Bitcoin and other cryptocurrencies continue to rise, more and more newcomers enter the market. This feeling of FOMO can cause the demand to rise even higher.
FUD stands for Fear, Uncertainty, and Doubt, and it too is a common sight in the cryptocurrency market. There is always fear that newcomers will get into the market at the highs and that the price will plummet once they are invested. Uncertainty and doubt are also commonplace in volatile markets, and new investors should be prepared for this.
An ICO is an Initial Coin Offering, similar to an Initial Public Offering (IPO) in the stock market. An ICO is used to raise money for a new cryptocurrency project by offering a set amount of coins to the public. This initial set of coins is available at a base price, after which the price will fluctuate based on supply and demand.
TA is short for Technical Analysis. It is used by analysts to predict the price action and direction of a coin in the near future. Some people believe it is nothing short of quackery, but many analysts think they can generate handsome profits with the typical volatility that occurs in crypto markets.
Understanding the terminology surrounding the cryptocurrency market is very important, especially if you are ready to jump in. Every industry has its unique vocabulary, and the understanding these terms can vastly increase your comfort level.
Bitcoin Specific TerminologyH2 Heading Here
We’ve explored some terminology from the general cryptocurrency and blockchain space, now let’s look specifically at the leading digital asset, Bitcoin.
A block is an aggregated section of Bitcoin transactions on the Bitcoin network which have taken place during a set period. Each ‘block’ typically takes around 10 minutes to complete. Bitcoin miners must validate blocks in order to receive their block reward.
Send a transaction from your wallet to an exchange and wait a few minutes. After a while, you may see your funds in your exchange address, but next to them it will say something like “Confirmations (12/20)”. A Bitcoin transaction will be unconfirmed until it has been completely included in a block, and confirmed by full nodes on the Bitcoin network, as we’ve described above. Once it is, your funds will be available.
Multi-Signature (Multi-sig) Wallet
Wallets are essential for keeping your cryptocurrency funds safe. Multi-signature wallets also referred to as ‘multi-sig,’ are as the name suggests, wallets which require an electronic signature from multiple parties. Without multiple parties signing off on a transaction, funds cannot be moved. Multi-sig wallets are particularly prevalent in enterprise and exchange use.
Private keys are a randomized string of letters and/or numbers which are used to send bitcoins to and from a wallet. Private keys are the way that wallets are accessed and must be kept securely to keep funds safe.
A Satoshi, named after Bitcoin’s anonymous creator Satoshi Nakamoto, is the smallest unit of exchange in the Bitcoin network. Bitcoin is divisible to eight decimal places, and one Satoshi (0.00000001), is the smallest unit possible.
SHA-256 refers to the hash function, which is used during the mining process when miners are validating blocks within the Bitcoin network.
If we’ve left something out, please comment below, and we’ll get it added!