Approaching the world of cryptocurrencies you will find yourself faced with some terms that you have probably never heard of. Knowing what these terms mean is extremely important and will help you make more informed decisions later on.
This glossary contains a list of basic cryptocurrency terms you need to know.
Start learning some of them in this glossary now and, remember, the more you understand, the better your trades will be.
Crypto glossary
Basic cryptocurrency terms
Cryptocurrencies
Basic Glossary
Cryptocurrency
A form of money that exists as encrypted, digital information. Operating independently of any banks, a cryptocurrency uses sophisticated mathematics to regulate the creation and transfer of funds between entities.
Altcoins
Bitcoin was the first and is the most successful of all the cryptocurrencies. All the other coins are grouped together under the category of altcoins. Ethereum, for example, is an altcoin, as is Ripple.
Coin
A crypto coin is a crypto asset that has its own blockchain, as opposed to running on another crypto asset’s blockchain.
Token
A token is a crypto asset that runs on another blockchain. An example of this is the ERC20 token, which is any token that uses the Ethereum blockchain.
Coin vs. Token
The key distinction between coins and tokens is that crypto coins are the native asset of a blockchain (like Waves, Bitcoin or Ethereum), whereas crypto tokens are created by platforms or applications that are built on top of an existing blockchain. As cryptocurrencies, crypto tokens are assets with value and they can be transferred, traded, bought, sold and stored in crypto wallets.
ERC-20
The standard to which each Ethereum token complies. It defines the way that each token behaves so that transactions are predictable. Other cryptocurrencies also use the ERC-20 standard, piggybacking on the Ethereum network in the process.
Circulating Supply
The number of coins or tokens that are publicly available and circulating in the market.
Total Supply
The number of coins or tokens in existence, i.e., the number of coins/tokens that were already issued minus the coins/tokens that were burned.
Maximum Supply
The maximum amount of coins/tokens that will ever exist, including the coins/tokens that will be made available in the future, i.e., in the case of a reissuable asset.
CAP ( Market Capitalization)
Shorthand for Market Capitalization (aka Market Cap aka MCAP).
This is defined as the total number of coins in supply multiplied by the price.
Cap = supply x price
It is one of the ways to rank the relative size of a cryptocurrency.
Some websites, like CoinMarketCap, allow you to explore top cryptocurrency prices and charts, listed by market capitalization.
Fiat
Refers to money recognized as legal tender by governments, such as the US Dollar and Euro.
White Paper
An official document usually issued by a team before their ICO to inform investors about the new technology, product or service being launched, its vision, cryptocurrency use, technical information and a roadmap for how it plans to grow and succeed.
Pre-Sale
A period before an ICO goes public when private investors or community members are able to buy the cryptocurrency.
ICO (Initial Coin Offering)
Acronym for “initial coin offering”.
In order to raise funds, the creator of a cryptocurrency will put an initial batch of its coins up for purchase. This is an initial coin offering.
Burn
If a coin in any particular cryptocurrency has been destroyed or made unspendable because the private keys of such an address are unobtainable.
Storing
Basic Glossary
Wallet
A wallet is defined by a unique code that represents its “address” on the blockchain. The wallet address is public, but within it is a number of private keys determining ownership of the balance and the balance itself. It can exist in software, hardware, paper or other forms.
Cryptocurrency Address
Every cryptocurrency coin has a unique address that identifies where it sits on the blockchain. It’s this address, this location, at which the coin’s ownership data is stored and where any changes are registered when it is traded. These addresses differ in appearance between cryptocurrencies but are usually a string of more than 30 characters.
Public Key
This is your unique wallet address, which appears as a long string of numbers and letters. It is used to receive cryptocurrencies.
Private Key
A string of numbers and letters that are used to access your wallet. While your wallet is represented by a public key, the private key is the password you should protect (with your life). You need your private key when selling or withdrawing cryptocurrencies, as it acts as your digital signature.
Seed
The origin point from which you created your wallet ID. Usually, a seed is a phrase or a series of words that can be used to regenerate your wallet ID if you lose it. Something to keep very secret.
Cold Storage
Another term used for a paper wallet (see below).
Paper Wallet
Storing your wallet code (your private key) on a physical document makes it a paper wallet. It’s also sometimes referred to as cold storage.
Software Wallet
A common form of wallet where the private key for an individual is stored within software files on a computer. This is the system you are likely to use if you sign up for a wallet online that is not associated with an exchange.
Hardware Wallet
A physical device, similar to a USB stick, that stores cryptocurrency in its encrypted form. It’s considered the most secure way to hold cryptocurrency.
Earning
Basic Glossary
Staking
Staking simply stands for holding a cryptocurrency in a wallet for a fixed period, then earning interest on it. The reward you earn from staking varies depending on the length of time you hold it. The longer the stake duration, the higher your returns.
APY (Annual Percentage Yield)
The annual percentage yield (APY) is the real rate of return earned on a savings deposit or investment taking into account the effect of compounding interest.
Unlike simple interest, compounding interest is calculated periodically and the amount is immediately added to the balance.
With each period going forward, the account balance gets a little bigger, so the interest paid on the balance gets bigger as well.
Compounding
Compounding is the process in which an asset’s earnings are reinvested to generate additional earnings over time.
This growth, calculated using exponential functions, occurs because the investment will generate earnings from both its initial principal and the accumulated earnings from preceding periods.
Compounding, therefore, differs from linear growth, where only the principal earns interest each period.
Bounty
Compensation – in the form of cryptocurrencies – granted to persons who have provided advertising or information services for an ICO (Initial Coin Offering). Different services can be provided for an ICO advertising campaign: retweeting links and information and other campaign-related options on social media, participating in a signature campaign, traslating textes, placing data on an internet forum, etc. For all these supports one is rewarded or paid with cryptocurrencies.
Airdrop
This is a marketing campaign that refers to the expedited distribution of a cryptocurrency through a population of people.
It usually occurs when the creator of a cryptocurrency provides its coin to low-ranked traders or existing community members in order to build their use and popularity.
They are usually given away for free or in exchange for simple tasks like sharing news of the coin with friends.
Faucet
A website or app that distributes tiny amounts of crypto as a reward for completing simple tasks.
Exchange / Trading
Basic Glossary
Exchange
The platform through which cryptocurrencies are exchanged with each other, with fiat currencies and between entities. Exchanges can vary widely in the currency conversions they enable and their fee structures.
Transaction fee
Usually very small fees given to the miners involved in successfully approving a transaction on the blockchain. This fee can vary depending on the difficulty involved in a transaction and overall network capabilities at that moment in time. If an exchange is involved in facilitating that transaction, it could also take a cut of the overall transaction fee.
Atomic Swap
A way of letting people directly and cost-effectively exchange one type of cryptocurrency for another on a different blockchain or off-chain without a centralized intermediary such as an exchange.
PND (Pump and Dump)
The frowned-upon practice of buying a lot of one cryptocurrency to drive up its price and encourage others to invest, then selling the lot when there is a suitable margin.
KYC (Know Your Customer)
Acronym for “know your customer”, which refers to a financial institution’s obligation to verify the identity of a customer in line with AML laws.
AML (Anti-Money Laundering)
These are a set of international laws that hope to prevent criminal organizations or individuals from laundering money through cryptocurrencies into real-world cash.
Blockchain
Basic Glossary
Blockchain
The blockchain is a digital ledger of all the transactions ever made in a particular cryptocurrency. It’s comprised of individual blocks that are chained to each other through a cryptographic signature. Each time a block’s capacity is reached, a new block is added to the chain. The blockchain is repeatedly copied and saved onto thousands of computers all around the world, and it must always match each copy. As there is no master copy stored in one location, it’s considered decentralized.
Node
Any computer that is connected to a blockchain’s network is referred to as a node.
Full Node
Some nodes download a blockchain’s entire history in order to enforce its rules completely. As they fully enforce the rules, they are considered a full node.
PoS (Proof Of Stake)
Another alternative to proof of work, this caps the reward given to miners for providing their computational power to the network at that miner’s investment in the cryptocurrency. So if a miner holds three coins, they can only earn three coins. The system encourages miners to stick with a certain blockchain rather than converting their rewards to an alternate cryptocurrency.
Transaction
The value of cryptocurrency moved from one entity to another on a blockchain network.
Block Explorer
An online tool for exploring the blockchain of a cryptocurrency, where you can watch and follow, live, all the transactions happening on the blockchain. Block explorers can serve as blockchain analysis and provide information such as total network hash rate, coin supply, transaction growth, etc.
dApp
Shorthand for “decentralized application”.
Decentralized Application
A computer program that utilizes a blockchain for data storage, runs autonomously, is not controlled or operated from a single entity, is open source and has its use incentivized by the reward of fees or tokens.
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