If you’re dipping your toe into the world of cryptocurrency, you’re not alone. Loads of people are jumping on board the digital money movement, investing their coin all over the world with impressive results.
While crypto isn’t nearly as complicated as it seems (check out this handy guide) it does come with a new set of lingo for you to learn and master. To get you clued up fast, we caught up with crypto expert Mena Theodorou, co-founder of Australian cryptocurrency platform Coinstash—which aims to make crypto investments work harder for everyday Aussies—to get the lowdown on all the key crypto terminology you need to know about.
Also known as a wallet address, it is used to send and receive transactions on a blockchain network. An address is an alphanumeric character string, which can also be represented as a scannable QR code.
A token distribution method used to send cryptoassets to wallet addresses. Sometimes airdrops are used for marketing purposes in exchange for simple tasks like reshares, referrals, or app downloads.
A method for securing computers in which the device does not connect to the internet or any other open networks.
Any digital currency alternative to Bitcoin. Many altcoins are forks of Bitcoin with minor changes.
A consensus digital ledger composed of unchangeable, digitally recorded data in packages called blocks. Each block is ‘chained’ to the next block using a cryptographic signature. This allows blockchains to act like a ledger, which can be shared with and accessed by anyone with the appropriate permissions.
Many digital currencies make use of blocks, which contain transactions that have been confirmed and then combined together.
A system or process for which there is a singular source of authority, control and/or truth.
A coin or altcoin is a representation of digital asset value that is generated via their own independent blockchain.
A cryptocurrency is merely a currency that relies on cryptography. Bitcoin, for example, leverages cryptography in order to verify transactions.
Cryptography is the process of encoding and decoding information so that would-be observers are unable to understand the information being sent.
A distributed ledger is a system of recording information that is simply distributed, or spread across, many different devices. The blockchain, for example, is a distributed ledger that was originally created to keep track of all Bitcoin transactions.
The transfer of authority and responsibility from a centralised organisation, government, or party to a distributed network.
Decentralised Application (dApp):
An open source, software application with backend code running on a decentralised peer-to-peer network rather than a centralised server.
Decentralised Finance (DeFi):
Refers to the economic paradigm shift enabled by decentralised technologies, particularly blockchain networks.
Currencies that have value because they are minted by a central bank. Fiat means "by decree," and these currencies have value because some central authority has decreed that they have monetary value. Examples of fiat currencies include the British pound, euro and Japanese yen.
Marketplaces where traders can make digital currency transactions. If a person wants to buy Bitcoin, going to an exchange is the fastest way to accomplish this objective.
A change in a digital currency's rules or protocol. Developers update a cryptoasset's protocol from time to time. A fork can be either a hard fork or a soft fork. A hard fork is a change to a digital currency's protocol that makes blocks created using the old protocol incompatible with the new chain.
Cryptoasset investors developed the term "HODL," which stands for "hold on for dear life." The acronym originally came from a misspelling of the world "hold."
Initial Coin Offering (ICO):
Represents the first time that an organisation offers digital tokens to the public in an effort to raise money. Companies frequently hold these offerings so they can finance projects.
Long/ Long Position:
Going long, also known as taking a long position, means making a wager that an asset will rise in value. If a trader purchases a digital currency like Bitcoin, for example, they are making a bet that the cryptoasset will appreciate.
The process for creating new units of a digital currency. For example, the Bitcoin network releases new Bitcoins every time a block is mined. In this instance, mining involves confirming transactions and combining them into blocks.
When a digital currency moons, that means it rises sharply in value.
Any computer connected to the blockchain network is referred to as a node.
Non-Fungible Token (NFT):
Fungibility refers to an object’s ability to be exchanged for another. For example, an individual dollar is considered fungible as we can trade dollars with one another. Artwork is usually deemed non-fungible as paintings, sculptures, or masterpieces are likely to be unequal in quality or value. A non-fungible token is a type of token that is a unique digital asset and has no equal token. This is in contrast to cryptoassets like ether that are fungible in nature.
Proof of Work (POW):
A system of proving that a digital currency's transactions have been verified. Many digital currencies, including Bitcoin, use POW. Under such a system, miners must do "work" that is difficult for them to contribute, but easy for the broader network to verify.
Proof of Stake (POS):
Another method of confirming transactions. The digital currencies that use this approach to verification frequently provide all their digital tokens up front, and miners are selected based on how many units they have (their stake).
A piece of information—presented as a string of numbers and letters—that an investor can use to access their digital currency.
An address where an investor can receive digital currencies. This public key, like the private key, is a combination of numbers and letters.
Pump and Dump:
A type of investment scheme where a market participant—or several—work together to inflate the price of an asset so they can sell it when its value is artificially high.
Shorting an asset, also known as taking a short position, means making a bet that the asset will fall in value.
Programs whose terms are recorded in a computer language instead of legal language. Smart contracts are automated actions that can be coded and executed once a set of conditions is met.
Any cryptoasset pegged to a stable asset, like fiat or gold. It theoretically remains stable in price as it is measured against a known amount of an asset not subject to fluctuation.
A digital token is a unit of a digital currency, such as a Bitcoin. It is worth noting that some of these tokens are used for specific ecosystems, and those are frequently referred to as utility tokens. Other digital tokens are essentially securities.
The developers who create digital currencies usually provide white papers for these innovative assets. These documents generally offer comprehensive information on the digital token in question, as well as its underlying technology.
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