In the new and exciting world of crypto investing, you may hear new words and terms used to describe this asset class. Let’s cover some of the most important terms so you can be an “in the know” crypto investor:
Bitcoin: The first decentralized cryptocurrency. Bitcoin was created in 2008 by anonymous person(s) Satoshi Nakamoto. Bitcoin lets you send and receive money without intermediaries such as banks.
Altcoin: Any cryptocurrency that is not Bitcoin (e.g. Ethereum, Litecoin, Bitcoin Cash, ZCash, etc).
Ethereum (ETH): The second largest market cap cryptocurrency. Created by Vitalik Buterin at age 19, Ethereum was the first cryptocurrency to introduce the concept of smart contracts. Ethereum in its current form is a hard fork from the original Ethereum blockchain. Ethereum trades under the symbol ETH.
Smart contracts: Programmable self-executing computer code that makes decisions based on pre-set rules. A smart contract can run without third-party interference, fraud, or downtime. The most well-known implementation of smart contracts is the Ethereum blockchain.
Satoshi: Named after the Bitcoin creator, a Satoshi is the smallest unit of Bitcoin (.00000001 BTC). Proponents of Bitcoin mass adoption believe the Satoshi unit will allow a greater volume of transactions.
Blockchain: A decentralized, immutable ledger of all transactions that have ever occurred for a cryptocurrency. Transactions records are stored permanently. Blockchain bundles transactions in order on blocks and stores them permanently.
Genesis Block: the first block in the Bitcoin blockchain, completed on January 3, 2009.
Cryptography: the act of writing or solving codes. Cryptography is used in cryptocurrency to secure financial transactions and verify the transfer of units from one party to another.
Cryptocurrency/cryptoassets: a decentralized form of digital assets where encryption is used to regulate the generation of new units, and verify transactions. Cryptocurrencies operate independently of central banking systems.
Mining: the mathematical process by which transactions are verified and added to a public ledger, known as the blockchain. Mining is also the means by which some new cryptocurrencies are released into the circulating supply.
Exchange: Platform that allows retail investors to buy and sell cryptocurrencies. Crypto exchanges can have vastly different pricing from one exchange to another. Additionally, crypto exchanges may be attractive to hackers because of the large quantity of cryptocurrencies sitting in their digital “wallets”.
OTC: Over The Counter, a typo of cryptocurrency market used by institutional investors. OTC providers can offer more transaction volume because of the larger transaction amounts by institutional investors.
ICO: Initial Coin Offering – a method of capital raising for new cryptocurrency projects. Similar to an IPO (Initial Public Offering), “tokenholders” (aka shareholders) put in capital to launch the business. While there are some ICO’s of merit, many will fail before gaining traction or fail to launch.
Token: the unit of exchange in an ICO.
Stable Coin: a type of cryptocurrency network that keeps its value stable. As more people adopt and use the cryptocurrency, the value of the coin is offloaded to another coin of value.
Bitcoin Cash: A hard fork “clone” of the Bitcoin network that went live in August 2017. Bitcoin Cash hopes to process higher volumes of transactions with lower fees than Bitcoin. Bitcoin Cash trades under the symbol BCH.
BTC: the trading symbol for Bitcoin. The Bitcoin blockchain and network revolutionized privacy and cryptographic transactions online. BTC is the token of Bitcoin Blockchain that is often traded or held as a store of value and is often called “Digital Gold”.
Litecoin: a cryptocurrency based on a fork of the Bitcoin blockchain. Created by Charlie Lee in 2011, Litecoin has a total supply of 84 million coins and an average block time of 2.5 minutes. Litecoin trades under the symbol LTC.
FUD: Fear – Uncertainty – Doubt. One of the sentiments that may affect crypto markets and cause price movements.
FOMO: Fear Of Missing Out. Another sentiment in the market that may affect the price of cryptocurrency.
Market Cap: the asset value of a cryptocurrency, determined by multiplying the total number of circulating coins and the price per coin. The market cap may also reflect popularity and total size.
ROI: Return On Investment, used to determine the efficiency of an investment and the potential profit expected and returned.
Proof of Work: a series of complex mathematical algorithms completed by miners verifying transactions before they are added to a block in a blockchain. Miners are paid for their work with transaction fees and newly mined coins for a cryptocurrency.
Node: a participant in a cryptocurrency network that delivers a copy of the entire blockchain to the network. All cryptocurrency miners host a node, but not all nodes must mine cryptocurrency.
Wallet: a storage device for cryptocurrencies. Wallets can be “hot”/“hosted”(online) or “cold” (offline). Both hot and cold storage wallets use encryption technology to protect assets.
Cold storage: the process of moving cryptocurrency holdings offline through the use of private keys.
Address: secure identifier marked by a unique string of alphanumeric characters that enables payments to an individual or entity via blockchain transactions.
Block: a series of transactions that occur during a certain amount of time. A Bitcoin block is typically about 10 minutes, a Litecoin block is generally about 2.5 minutes. Once a block is completed, the transactions are bundled in a block and added to the Blockchain.
Circulating supply: the total amount of a cryptocurrency currently circulating in the market. This number may be different or smaller than the total supply. For example, Bitcoin will capped at a total supply of 21 million coins. As of July 2017, about 16.4 million Bitcoin were in spendable circulation.
Total supply: the total amount of cryptocurrency that will be released into the market.
Decentralization: the distribution from a central authority to several localized authorities. In the case of Bitcoin and cryptocurrencies, the blockchains are decentralized. This means the ledger/accounting of all cryptocurrency transactions is distributed among all the computers running the Bitcoin computer network. This avoids a central point of failure or exposure to hacking. It also makes the accounting ledger unable to be altered by any malicious third party.
Ethereum Classic (ETC): The original fork of the Ethereum blockchain.
ZCash (ZEC): Zcash is a cryptocurrency similar to Bitcoin but with a major focus on high levels of privacy. Zcash trades under the symbol ZEC.
Stellar Lumens (XLM): Stellar is a decentralized cryptocurrency focused on cross-border payments between any pair of currencies. Many crypto economists believe Stellar has promise because of the ability to provide cheaper transactions to countries that may have previously been unbanked. The Stellar Lumens protocol is supported by the Stellar Development Foundation, a nonprofit. Stellar Lumens trades under the symbol XLM.
Ripple (XRP): Ripple is a blockchain protocol that aims to be both a cryptocurrency and digital payment network for financial transactions. Some banks and larger financial institutions have expressed interest in Ripple and it’s currency, XRP. However, many blockchain purists criticize XRP for being pre-mined, with an extremely high fixed supply. Critics claim this can allow the currency to be diluted/inflated by the original creators flooding the market with more XRP thus devaluing the supply already in circulation.
Fiat money: traditional government-issued currencies such as dollars, Euros, and Pounds. Fiat money is not backed by physical commodities.
Whitepaper: A formal informational document, typically scientific in nature, that informs readers on the theory, objectives, practical application, and technology of a cryptocurrency. Whitepapers are often provided before the launch of a new coin or token. The Bitcoin Whitepaper was released on October 31, 2008.