Cryptocurrency Glossary: Common Terms Every Beginner Should Know

With all the terms and jargon that comes with the world of cryptocurrency, it can be tough knowing what is what. Whether you are just starting to explore the world of cryptocurrency or summarizing your understanding of the subject, this common cryptocurrency term glossary will help you speak with the language of crypto space.

1. Blockchain

Electronic ledger that records each transaction using computer networking via a decentralized system. It is the basis of the technology for conducting ethereum and bitcoin.

2. Bitcoin (BTC)

Bitcoin was the first cryptocurrency, created in 2009 under the pseudonym Satoshi Nakamoto by an anonymous individual or group of individuals. It is also referred to as "digital gold."

3. Altcoin

Any cryptocurrency other than Bitcoin is called Altcoin. Examples include Ethereum, Litecoin, and Ripple.

4. Wallet

Tech devices like those mentioned in the title of this post that you can use to send, receive, and store cryptocurrency or you can have software wallets (online & mobile) and hardware wallets (physical devices).

5. Private Key

Access to your cryptocurrency holdings via a secret code. It needs to be kept secret and private at all times.

6. Public Key

A string of letters and numbers that other people can use to write money to your wallet. It is culled from the private key but cannot access into the wallet itself.

7. Exchange

A cryptocurrency exchange for trading, buying, and selling. Such organizations include Binance, Coinbase, and Kraken.

8. Fiat Currency

State currencies like US dollars (USD), euros (EUR) and Japanese yen (JPY).

9. Decentralization

Decentralization of power In a cryptocurrency context, this means that there are no central banks or other entities through which the transactions are mediated (a decentralized network).

10. Mining

The process by which transactions are verified and added to the blockchain is called Proof of Work. When miners create a new cryptocurrency

11. Proof of Work (PoW)

A consensus mechanism in which validators on a network are chosen to produce blocks based on their stake in a system; proof-of- work. Its miners must solve computational puzzles.

12. Proof of Stake (PoS)

A consensus mechanism that confirms transactions by the number of coins the validator holds. It is widely regarded as more energy-efficient than Proof of Work.

13. ICO (Initial Coin Offering)

An ICO (Initial Coin Offering) is a modern way of fundraising in which new generation cryptocurrencies sell a portion of their digital coins (tokens) to those early adopters and enthusiasts who are willing to risk their money in very early stages of new projects in return for future profits in thousands and millions of dollars.

14. Token

A digital asset backed by a blockchain, which grants consumers ownership or use of property. Tokens can be used to consume services, vote or represent assets.

15. Stablecoin

A cryptocurrency that is built to maintain a stable value by tying it to a fiat currency or another asset. This includes Tether (USDT) and USD Coin (USDC) among others.

16. Smart Contract

Decentralized, trustless contracts with self-executing properties, implemented directly into the code base. They respond automatically to specific conditions.

17. DeFi (Decentralized Finance)

A payment system on a blockchain which does not have central intermediaries. This covers a wide range of financial services such as lending, borrowing, trading and others thus referred to as DeFi.

18. NFT (Non-Fungible Token)

A special digital item that represents a rare digital item such as art, music or virtual property. They cannot be exchanged on a one for one basis because they are inseparable.

19. Fork

A split in a blockchain network resulting from changes to the protocol. Forks can be challenging (creating a new blockchain) or soft (updating the existing blockchain).

20. Gas

A payment to miners for processing transactions on the Ethereum network. Gas fees depend upon network congestion as well as upon the data / code that the transactions are executing.

21. HODL

A belief in having been "had" by an altcoin, implying that one should keep the coin and not sell it no matter what happens in the market. It is usually advocated as medium-to-long-term investing.

22. Whale

A term they use to label people or entities that hold a lot of bitcoins. Due to the amount of the trades they make, whales are capable of influencing the market in a significant way.

23. Satoshi

It is the smallest fraction of a Bitcoin currency (named after Satoshi Nakamoto, its creator) That means one Bitcoin = 100 million satoshis.

24. FOMO (Fear of Missing Out)

The feeling of unease that investors get when they believe others are benefiting from an investment and they may miss out on future profits.

25. FUD (Fear, Uncertainty, Doubt)

A tactic of changing people's perception of a public figure using poor or twisted facts. It creates panic selling and market uncertainty.

26. Ledger

Blockchain is a digital ledger in which transactions are recorded chronologically and publicly. This is what they describe as the blockchain, a distributed database for recording transactions.

27. Node

A computer that is continually connected with the blockchain network to validate and communicate transaction A full node is a node that stores all parts of the blockchain, and a light node is a node that stores only a few parts of the blockchain.

28. DAO (Decentralized Autonomous Organization)

A decentralized organization built on smart contracts, without leadership. DAOs are meant to be transparent and run on code and blockchain networks.

29. dApp (Decentralized Application)

An application that uses a blockchain network and smart contracts for backend functionality. dApps are also decentralized and open-source and can work without a central authority

30. Block

A group of transactions that get added together and go on the blockchain because it never makes sense to add them individually; Every block references the one before it, so we get a chain of blocks.

31. Block Reward

This is the reward miners receive when they add a new block to the blockchain. This, in its simplest form, comprises mainly of created cryptocurrency and transaction fees.

32. Consensus Mechanism

A consensus protocol employed by blockchain networks to agree to the actuality of transactions. Some common mechanisms are Proof of Stake (PoS) and Proof of Work (PoW).

33. Decentralized Exchange (DEX)

A platform that enables cryptocurrencies to be directly traded with one another, without the need for a centralized authority. Such as Uniswap, SushiSwap.

34. Hot Wallet

A good cryptocurrency wallet for the web that need to be kept online to enable transactions but at the cost of being less secure(shows more exposure to hacking).

35. Cold Wallet

An offline wallet, which prevents hacking and other online threats. Paper wallets and cold storage wallets are a few examples.

36. Hash

A function that takes data and returns a fixed-length string of characters, whose purpose, in its simplest form is to make to it difficult to reverse engineer the original data. Hashes - secure data and verify transactions in the blockchain.

37. Initial Exchange Offering (IEO)

A way of fundraising where a cryptocurrency exchange does the actual token sale on behalf of the project.

38. Market Cap (Market Capitalization)

The combined value of all the coins currently in existence, time the current price of the coin.

39. Liquidity

The degree to which an asset's price remains unaffected when bought or sold. High liquidity means more market participants and less price volatility.

40. Rug Pull

It is a type of scam where developers withdraw all funds from a project, leaving investors with worthless tokens. It often occurs in DeFi and ICO projects.

41. Yield Farming

A DeFi practice where users lend or stake their cryptocurrency to earn rewards in the form of additional tokens. It aims to maximize returns on investment.

42. Cross-Chain

Specifically, it is the functionality to carry out asset and data transactions across more than one blockchain network.

43. Multi-Signature (Multi-Sig)

A security feature requiring multiple signatures to authorize a transaction. It enhances security by requiring consensus among multiple parties.

44. 51% Attack

In which the majority of control over a blockchain network - stemming from ownership of more than 50% of mining power - is held by a single entity or a group of entities, which could manipulate the transactions, and reverse the coins for their own interest.

45. AirDrop

A form of giveaway (as promotional strategy, reward for community participate, etc.), in which free cryptocurrency tokens are being distributed to users.

46. Dust

Few remaining cryptocurrencies, often the residue of past trades It spends/ trades worth the transaction fees because the size of the dust is very small.

47. Hash Rate

Computational power used to mine and secure a blockchain network. We would want the network to be more secure with higher hash rates.

48. Sharding

A solution to improve the scalability of a blockchain network by dividing the network into smaller, more manageable pieces - called shards. It makes total sense because each shard processes different transactions which makes the operation more efficient.

49. Staking

This is the process of locking up cryptocurrency used to participate in a Proof of Steak (PoS) network to validate blocks and receive rewards.

50. Token Burn

Cryptocurrency tokens are burned in order to remove them out of circulation, thus reducing its supply and increasing scarcity. This is often attempted to increase value to the rest of the tokens.

As you become accustomed to these common cryptocurrency terms you will be more equipped to navigate the crypto market and make sensible decisions. The terminology is the most basic exercise to understand digital assets.