Glossary

Every industry has its own vernacular. Lets deep dive into what’s truly important in the world of crypto. We’ve done that work for crypto traders.

A

A 51% Attack


When more than a half of a network’s computer power is run by a single individual or a group of individuals. A situation like this is often considered as a monopoly, where the one in control of the network’s power can negatively affect the mining, transactions or other processes.




Address


A unique identifier, secured by a long string of characters, that indicates the location from which you will receive, send or hold a specific cryptocurrency. Each company or individual that wants to get involved in blockchain-powered transactions, should have such unique address. It consists of approximately 30 alphanumeric characters that differ from each other depending on the type of the cryptocurrency (Bitcoin addresses begin with 1 or 3, while Ethereum’s begin with 0x).




Airdrop


A specific type of marketing campaign where a cryptocurrency is distributed to the wide audience for free. Such strategies allow cryptocurrency creators to raise awareness around their projects, thus building trust and increasing their popularity, usage, and marketability. It is usually associated with some kind of a referral program.




All-or-None (AON) Order


An order that cannot be executed partially. It is either executed entirely or not executed at all. It is similar to the FOK order with the main difference that AON does not have any time limits.




All Time High (ATH)


ATH is used to describe the record prices for a particular cryptocurrency. Bitcoin’s highest price, up until now, is almost $20 000. Being aware of the ATH of the coin that interests you is a good way to tailor your investing strategy as it provides a clear picture of the price’s growth potential. ATH is the best moment to sell a given cryptocurrency.




All Time Low (ATL)


Similar to ATH, ATL indicates the lowest price that a certain cryptocurrency has reached. It is also the perfect point at which you can invest in a specific instrument.




Alt Season


Indicates a market momentum where many altcoins increase their price both against fiat money (usually the US dollar) and Bitcoin.




Altcoin


This term is used to describe any digital currency or category of currencies that are not Bitcoin. Or in other words - each coin, be it Ripple, Monero, Dash, etc. that is not a Bitcoin, is its alternative, thus “altcoin”. The term was introduced by Bitcoin enthusiasts who wanted to highlight its superiority and distinguish it from all other, “secondary” digital coins, as an industry pioneer. Most altcoins can be traded for Bitcoins.




Application Specific Integrated Circuits (ASICs)


Stands for chipsets (an important component of computer hardware) that are built to execute specific tasks, for example – mining digital coins, solving mathematical codes, etc. ASICs are superior to normal computers’ graphics processing units (GPUs) in the regard of speed and power consumption. Currently, ASICs are the most efficient way to mine cryptocurrencies.




Arbitrage


A trading strategy that relies on one’s ability to take advantage of existing price inefficiencies. Arbitrage trading relies on buying assets from a location where the given coins are trading at a lower price and selling them on another exchange, where their price is higher. The existing market structure provides opportunities for arbitrage trading because of the momentum with gaps in the pricing of instruments that are often created on different exchanges. Traders take advantage of them by buying and selling before the price reaches equilibrium. The strategy is popular not only in the cryptocurrencyniche but also in the process of trading stocks, ETFs, futures, and other instruments.




Application Specific Integrated Circuits (ASICs)


Stands for chipsets (an important component of computer hardware) that are built to execute specific tasks, for example – mining digital coins, solving mathematical codes, etc. ASICs are superior to normal computers’ graphics processing units (GPUs) in the regard of speed and power consumption. Currently, ASICs are the most efficient way to mine cryptocurrencies.





B

Bagholder


A term, used to describe investors who persist on holding an asset with gloomy future projections or despite a recent pump and dump crash.




Bart


A chart pattern that is often used by technical analysts when trading cryptocurrency. It is named after the famous cartoon character and his hair.




Bearish and Bullish Trends


When an asset (in this case – a cryptocurrency) takes a steady upward movement, then it is called a “bullish trend”. On the other hand, when the asset’s price goes down, the trend is called “bearish”. The terms “bullish” and “bearish” are also used for describing one’s sentiments towards the market (positive and negative, respectively). Trends are described that way due to the way bulls and bears attack.




Bid-Ask Spread


The difference between the bid (the price at which someone is willing to buy an asset) and the ask (the price for which someone is willing to sell an asset). The bid-ask spread decreases when there is an increase in an asset’s liquidity and vice-versa.




Bitcoin


The most popular digital asset around the world, Bitcoin is the reason why nowadays people talk about cryptocurrencies. It was developed by Satoshi Nakamoto way back in 2009, and was the first to allow its users efficient peer-to-peer payments, alternative to fiat money. Bitcoins are created through the process of “mining” and have a limited amount. The decentralized cryptocurrency relies on a blockchain-based smart contract system to distribute and collect information. Today, Bitcoin remains the largest cryptocurrency by market cap.




Bitcoin ATMs


Similar to the way a traditional ATM works, the Bitcoin ATMs provide the opportunity to buy Bitcoins with cash. The cash is deposited in the machine and in exchange, the individual gets Bitcoins. The transaction happens thanks to specific ATMs features that scan the wallet’s QR code. Most Bitcoin ATMs charge fees in the range of 5% to 10%.




Bitcoin Cash (BCH)


A different type of cryptocurrency, created in 2017 with the main goal to decrease the fees associated with Bitcoin transactions. The development team behind BCH wanted to highlight the use cases of a cheap and convenient form of digital cash. It uses the same blockchain technology but relies on an 8 times increased block size capacity.




Bitcoin Improvement Proposal (BIP)


This term is used to describe a design document (BIP-0001, for example) that informs the wide audience about Bitcoin’s features, processes or environment. The information within the document is, most of the time, technical and presented in a concise way. Bitcoin Improvement Proposals are modelled after Python Enhancement Proposals (PEPs) which are used to discuss issues related to the protocol that runs the Bitcoin infrastructure.




Black Swan


Events that have huge impact on the markets, while at the same time are impossible to predict. The term was introduced by Nassim Nicholas Taleb in his book “Fooled by Randomness: The Hidden Role of Change in Life and in the Markets” from 2001 and then expanded in “The Black Swan: The Impact of the Highly Improbable”, published in 2007.




Block


A page in the ledger where a collection of data, related to cryptocurrency transactions, is stored. The block is cryptographically secured so that it can safely account as a proof for the execution of a given operation. Data that is entered in a block is impossible to be deleted or modified. Once a certain block reaches a predetermined size, it passes verification procedures and is then added to the blockchain.




Block Explorer


An online tool that allows investors to explore the blockchain of a given cryptocurrency. The block explorer helps tracking transactions in real time and often serves as a great tool for analysis of important metrics and crucial information such as the network hash rate, transaction growth, coin supply, etc.




Block Height


Indicates the number of blocks that are connected in the whole blockchain. The first block on the chain, also known as a “genesis block”, always has a height of 0 as nothing precedes it.




Block Reward


This term describes a sort of incentive that each user gets for solving a task (in most cases – a mathematical equation), related to a certain block. The miner gets his reward in the form of Bitcoins or another type of cryptocurrency. The amount of the reward is not fixed and keeps changing with the increase of the blocks’ mining difficulty. It has started at 50 BTC for the first block and since then, halves on every 210 000 blocks.




Block Size


Describes the amount of data that a certain block can store. Bigger blocks can store more information but also require more mining power.




Block Time


As its name suggests, the block time indicates the time needed for solving one block. For Bitcoins, for example, the block time is fixed at 10 minutes and does not change.




Blockchain


A technology, in the form of a decentralized, distributed ledger, that powers the whole cryptocurrency transactions infrastructure. The blockchain is split between all nodes (users) in the network, which allows it to store valuable transaction information in separate blocks, safely and in a transparent way. Each time a block’s capacity is reached, a new one is then added to the chain. Once a block is placed on the ledger, the data within cannot be modified. There is also no authority that runs or controls the blockchain and every user can access the stored information. The blockchain is cryptographically secured and has proved efficient for currency and data transfers. It is copied and saved on users’ computers all around the world on a regular basis, so that no bit of information is lost.




Bollinger Bands


A technical indicator in the form of lines that stand two standard deviations above and below the simple moving average. When an instrument is traded near the lower line, it is considered oversold and vice-versa. When the two bands are near, it is considered as a sign of expected high volatility in the asset’s price. When they are far from each other, traders expect a less volatile period.




Bot


A software that is designed to pick and execute trades autonomously, upon pre-defined rules. Most cryptocurrency exchanges allow traders to synchronize their bots through APIs. The complexity of a trading bot varies significantly – some are able to trade on their own (portfolio selection, allocation, backtesting, rebalancing, etc.), while others are limited only to triggering stop losses.




Bull/Bear Trap


Indicates false signals about expected changes in the price of a certain coin. A bull trap means the price will fall when it is expected to go up, while the bear trap means the price will go up, when it is expected to fall. Bull and bear traps are very common in situations when a cryptocurrency is about to break a given resistance or support level but then fails to do so. Bull and bear traps are sometimes set intentionally by traders to fake a significant buying or selling interest. For example, if a group of traders sets a bear trap, they are basically selling all their coins with the aim to bluff the market into thinking that there is plenty of selling interest and that a massive price drop should be expected. After other market participants follow them in selling their coins, the price drop is exacerbated. The traders who have triggered the trap can then buy the coins at lower prices and pocket the difference when the price bounces back.




Buy/Sell Wall


When the number of buy orders for a certain cryptocurrency are way higher than the number of sell orders, then this is called “a buy wall” and vice-versa. The bigger the buy wall is, the better for the value of the coin. A big buy wall indicates that investors have faith and positive expectations for the given cryptocurrency. A buy wall is formed when there are more people that are willing to buy, rather than sell. The first trades that are executed usually get the best prices. On the contrary – the bigger the sell wall is, the more pessimistic investors’ expectations towards a given cryptocurrency are. In cases of buy/sell walls, limit order is set in order to prevent a certain cryptocurrency from significant price changes. Buy and sell walls can be intentionally used by individuals with large portfolios to manipulate the market.




Buy the Dip


This phrase is used to describe the trading philosophy of buying a cryptocurrency when there is a significant drop in its price but also an expectation that it will bounce back. Traders perform such moves in bull or stagnant markets, as well as when they expect the end of a bear market. Buy the dip also helps to slow down or even stop a market’s nose dive.





C

Candlesticks


Used in charting to describe an asset’s trading history. By analyzing the shape and the size of the candlestick, technical traders can find out more about the expected price movements of the instrument. Depending on the type of the chart, each candlestick can indicate a different time frame – for example, in 1-hour charts, one candlestick is equal to a trading period of sixty minutes.




Chain Linking


Describes the process of linking two blockchains of separate cryptocurrencies. When someone wants to transfer one coin to another, in order for the transaction to be executed and lodged on both blockchains, they are then linked.




Circulating Supply


The approximate number of coins that are currently available on the market.




Cold Storage


Used to describe any offline wallet, where users store their coins. For example – a flash drive, a disconnected computer, a hard disk, a paper wallet, etc. Due to the fact that cold storages cannot be hacked, they are considered the safest places to keep your digital coins. Some experts often compare them to what banking vaults are for cash.




Confluence


Describes a situation when multiple indicators point out to one and the same upcoming price movement for a certain cryptocurrency. By employing multiple indicators and analytical methods, traders mitigate the risk of being misled in their conclusions or missing a trading opportunity.




Consensus


When it comes to the cryptocurrency niche, a consensus is referred to the final approval of all nodes of the network for a certain block to be added to the blockchain.




Consortium Blockchain


A privately-owned type of blockchain intended for propriety usage. Banks and big companies use such blockchains to streamline their processes. Such privately-managed systems are also known as “centralized ledgers”. Unlike Bitcoin, some cryptocurrency’ centralized ledgers are owned and controlled by a single entity.




Contagion


When certain events taking place on one market (market shocks) have a significant effect on other markets as well. Situations like these can disrupt trading strategies that are based on market correlations.




Cryptocurrency


An alternative type of currency in a digital form (usually a token) that is decentralized, cryptographically secured and cares monetary value. Cryptocurrencies’ price is standard for all users across the world. The infrastructure behind this type of digital currency is usually based on Mathematics. Cryptocurrencies are created when their users solve equations or math problems by using powerful computing infrastructure.




Cryptocurrency Mining Malware


Aggressive software that infects users’ computers, in order to take advantage of their mining efforts and steal their coins. There are various types of malware – some can be installed as programs or apps, while others are just scripts that are run from the web.




Cryptographic Hash


Hashes are basically the cryptography part behind a cryptocurrency. They are the reason why a certain blockchain can be defined as secure, unhackable and verifiable. The length of hashes’ inputs can vary, while their outputs are fixed (usually at 256-bit strings).




Cryptography


Describes the art of writing (coding and decoding information) in a secret manner that when solved, results in some meaningful statements. It was used for the first time during the WWII for coding military messages and making them impossible to decrypt. Nowadays, cryptography is widely employed in the digital world and cryptocurrencies in particular, because of its high level of security.




Cypherphunk


A term used to describe the cryptography experts who started the cryptocurrency revolution. Their main goal was to figure out a way to apply cryptography in the digital world, in order to achieve certain social changes.





D

Day Trading


A trading strategy, focused on netting small profits by executing multiple trades per day. Day Trading’s main idea is to start each day with a few open positions and to close all of them at the end of the trading session. This allows traders to take advantage of intraday price movements, while at the same time, minimize the risk of their investments suffering from market shocks, taking place overnight.




Decentralized


Usually used to describe an independent system that has no central authority to control it. The biggest benefit of decentralization is the fact that it is resilient – there is no risk of data loss. All this is possible due to the fact that decentralized systems (and blockchains) are usually controlled by all their users which brings transparency, security, and sustainability. If one node (user) goes down, no data is lost, as it is stored all around the network.




Decentralized Applications (DApps)


Describes a type of software that runs on a decentralized peer-to-peer network. These applications are often stored on blockchains and are hosted on decentralized servers, instead of one computer or private server. DApps can have a various number of participants from different sides of the market. One of the most popular development platforms for DApps is Ethereum.




Decentralized Exchange (DEX)


An independent P2P exchange that has no middleman. There are various types of cryptocurrency exchanges, allowing you to buy and sell different cryptocurrencies at different rates. They also vary in terms of trading volumes and liquidity.




Depth


A term, used to describe market’s ability to sustain large orders for a certain asset, without resulting in massive price movements.




Deterministic Wallet


A specific type of cryptocurrency wallet that is based on producing multiple keys from a seed. If the owner loses the wallet, his key can be easily restored from the seed. When making transactions, this type of wallet allows you to use variations of your keys from the seed, instead of generating new ones for each and every deal.




Distributed Denial of Service Attack (DDoS)


This is a systematical approach to destabilize a system or prevent it from running a specific service, by flooding it with informational requests or malware. Cryptocurrency exchanges are subject to such attacks from individuals or groups who want to steal coins.




Distributed Ledger


A system that decentralizes data and shares processing work between different nodes around the network. In order to prevent data loss, multiple equal copies of the data are created with no single one of them to contain unique information.




Diversification


The process of managing risk by allocating your capital among a wide range of assets that aren’t perfectly correlated. Diversification is one of the main pillars of investing, no matter whether it is about stocks, ETFs, cryptocurrencies, commodities, etc. By diversifying a portfolio, the investor ensures better profits, while at the same time, significantly minimizes the risk of losses. Unfortunately, the cryptocurrency sector remains relatively young and undeveloped to provide investors with the chance to diversify efficiently.




Dust Transactions


When users intentionally try to slow down the whole network by flooding it with a large number of transactions for very small amounts of coins.





E

ERC-20


Used to describe a standard for tokens, typical for Ethereum. Most of the tokens that are issued through an ICO are in compliance with the ERC-20 standard. That makes it easier for them to be exchanged and applied within decentralized applications based on the same standard.




Ether (ETH)


One of the most popular cryptocurrencies. It operates on the Ethereum platform and can be traded as a cryptocurrency, stored in a wallet, used for paying transaction fees (by developers of applications on the Ethereum platform) or serve as a reward. Currently, ETH is the second largest cryptocurrency by market capitalization after BTC.




Ethereum


An open-source decentralized blockchain platform that runs smart contracts. It is a powerful environment where developers can create applications, other types of tokens, store registries, etc. The blockchain is intended to serve as some form of a mass, decentralized computer, based on a Turing-complete programming language.




Ethereum Virtual Machine


A cloud-based machine that services all users within the network during blockchain confirmations.





F

Fear of Missing Out (FOMO)


FOMO is a paradox, typical for the cryptocurrency world. It describes one’s desire to become a part of a popular trend or act similar to the masses – in this case, to not miss a good investment opportunity and regret it later. FOMO usually affects investors’ emotions and makes them take irrational decisions, costing tons of money.




Fear, Uncertainty, Doubt (FUD)


A way to influence others’ perception and expectations towards a certain topic (in this case – cryptocurrency) by spreading false or misleading information. FUD can be described also as a way to affect the emotions of those who have a hesitant vision.




Fees


They are an integral part of the cryptocurrency world. There are different fees that investors are obliged to pay when they get involved in a transaction. For example – fees for transferring coins to exchanges; fees for converting BTC to altcoins and vice-versa; fees for transferring coins from exchanges to wallets; fees for depositing and withdrawing currency to wallets; Bitcoin ATMs fees, etc.




Fiat Money/Currency


Usually referred to physical, government-issued money such as paper bills and coins. Fiat money is basically the form that we use on a daily basis (dollars, pounds, euros, etc.).




Fill-or-Kill (FOK) Order


This type of order should be filled immediately and entirely. Otherwise, it is canceled. Traders use the FOK order to test different exchanges simultaneously.




Flipping


A trading strategy where investors buy pre-ICO tokens and sell them as soon as they start trading on the open market. The idea is that tokens which are yet to be listed on exchanges are offered at lower prices. As soon as they start trading on the secondary market, their price goes up and investors are able to net a positive return.




Forks


Describes the process of splitting a blockchain into two or more parts in order for it to be updated. The two parts are run simultaneously, both on the same network. There are two types of forks – soft and hard ones. The soft ones are backward compatible (nodes which are running the old protocol are able to approve the validity of new transactions), while the hard ones are not (nods using the older version of the blockchain won’t be accepted by the new one).




Frontier, Homestead, Metropolis, Serenity


Different stages of Ethereum’s roadmap. In a nutshell, the Frontier phase was the first release of the network. The Homestead phase brought protocol improvements that helped speeding up transactions. Metropolis consists of two phases (Byzantium and Constantinople) – we are currently in the first one, with the second planned for October 2018. The Serenity phase is expected to bring PoS via an advanced consensus algorithm, called Casper.





G

Gas


A measuring unit to quantify the computational power required for the completion of a certain operation on the Ethereum network. It comes in the form of a fee that is offered to the miners, responsible for the processing of a given transaction. Simpler operations like transferring Ether do not require so much gas. On the other hand – more complex ones can cost the initiator of the transaction way more.




Gas Limit


When making a transaction, users set gas limits in order to indicate the total amount that they are willing to pay for the execution of their transaction. If the transaction costs less than the limit, the difference is refunded to the user. If it costs more, the transaction is not executed.




Gas Price


The amount that a user is willing to pay for his transaction to be executed. If one wants a faster execution, he is usually willing to pay a higher gas price. Gas prices are denominated in “Gwei”.




Genesis Block


A genesis block is usually the block that starts a new blockchain. It is the first block in the chain that is processed and validated and is also known as “block 0” or “block 1”. As it is the first mined block (in case of a new cryptocurrency), it does not carry any information about previous blocks.




Graphics Processing Unit (GPU)


The GPU is basically a chip on the graphics card that is used for mining cryptocurrencies. The bigger the number of GPUs and the more powerful they are, the more efficient the mining process will be. When two or more GPUs are combined to work together, it is called a “rig”.




Gwei


Gas prices and Ether are denominated in Gwei. 1 Ether, for example, equals 109 Gwei.





H

Halving


The process of reducing the size of the reward that miners receive when a block on the network is mined. For example – after the first 210 000 Bitcoin blocks were mined, the rewards were cut in half. After that, the size of the reward is halved after each 210 000 mined blocks.




Hard Cap


The maximum amount that an upcoming ICO can raise. The creator of the ICO can set a limit (a hard cap) and when it is reached, the coin offering will be stopped.




Hardware Wallet


A physical device for storing cryptocurrency. Hardware wallets are usually very similar to USB sticks and are considered as the safest way to store cryptocurrencies as they rely on complex encryption.




Hash


An algorithm that transforms large chunks of data into fixed-length strings of characters, also known as hashes. In cryptography, data is, most of the time, encrypted with hash algorithms. These algorithms are at the core of blockchain infrastructures and cryptocurrency tokens.




Hash Rate


A unit that measures a computer’s performance and efficiency when solving mathematical problems and mining coins. The rate is measured in hashes per second.




Hedging


A strategy intended to mitigate the trading risk.




HODL


One of the most popular cryptocurrency trading strategies, named after a typo in an internet post. The essence of this passive strategy is to buy a certain coin and hold it for the long-term. It is similar to the “Buy & Hold” strategy where the investor holds the asset regardless of the market environment, hoping that it will steadily increase in price.




Hot Storage


On the contrary of the cold storage, hot storage describes cryptocurrency wallets that are connected to the internet. Web and mobile wallets are considered the least safe as they can be subject to hacker attacks.





I

Iceberg Order


A very big order that, in order to avoid moving the market or just to hide the order details, is divided into small chunks and processed that way.




Immediate-or-Cancel (IOC) Order


This type of order is filled immediately, even if it cannot be fulfilled entirely. If a portion of the order cannot be executed, it is canceled. This is a good way to save your assets (or a part of them) if you think the market is about to go in the opposite direction.




Initial Coin Offering (ICO)


Similar to an IPO (Initial Public Offering), the ICO indicates the process of raising money for a given cryptocurrency project. Ventures that are launching ICOs offer digital assets in the form of tokens that can be purchased by their early-stage investors. ICOs are usually processed via smart contracts on the Ethereum network. ICOs are different from IPOs in the regard that they do not provide backers with ownership. Investors in ICOs basically back the idea that, when offered to the wide public, the given coin will be a subject to a significant interest, thus its price will go up.




IOTA


A new type of cryptocurrency that is based on an open-source distributed ledger that does not employ blockchain. IOTA is focused on the Internet of Things and offers different features such as fast transactions, secure infrastructure, zero fees, etc.





J


K

Know Your Customer (KYC)


KYC describes the obligation of a financial institution or a cryptocurrency issuer to verify the identity of their investors.





L

Ledger


This term describes a record of financial transactions. New transactions can be added to the ledger on a regular basis, while previous ones cannot be modified. Ledgers are cryptographically encrypted and any additions should, first of all, be validated with a group consensus.




Leverage


Describes the process of borrowing additional funds to trade on margin. Or in other words – to borrow someone else’s money to execute a trade that the individual does not have the resources for. Leverage is usually represented as a ratio between the borrowed and the possessed funds.




Lightning Network


A P2P cryptocurrency system for microtransactions that offers lower latency and instant payment processing. Lightning networks are scalable and low-cost solutions that work across all blockchains.




Limit Order


Provides traders with the opportunity to make a simple automation of the trading process by setting a requirement to execute trades only when they meet certain conditions – either price levels or deadlines. If the trade does not meet the certain price or isn’t executed until the time limit passes, it won’t be executed at all.




Liquidity


A term describing how easy it is to convert a given asset into cash. Highly-liquid markets and assets are the most preferred ones.




Litecoin


An altcoin launched in 2011, Litecoin is identical to Bitcoin with the main differences being a higher number of coins that can be mined and the shorter time needed for the generation of one block.





M

Maker/Taker Model


A specific market model, employed by some exchanges, that applies fees to either the market or the limit orders, or in some cases – to both.




Margin Trading


A strategy that allows traders to borrow funds to buy more coins than they initially can afford. By using leverage, traders can magnify the effect of their trades. This strategy is applied exclusively by experienced traders who can manage their risk carefully. When it comes to cryptocurrencies, margin trading is even riskier, due to the market’s high volatility. If one ends up on the losing side or the value of his assets drops, when trading on margin, he can wipe out all of his portfolio, as well as everything that he has borrowed, resulting in owing a significant debt.




Market capitalization


Indicates the value of a given company or a whole sector used primarily as a measure of size. When it comes to cryptocurrencies, the market capitalization can be calculated in two ways – the first is to multiply the price by the number of coins in circulation (this is called “free float market capitalization”), while the second requires to multiply the price by the total coin supply (a “fully diluted market capitalization”).




Masternode


This term is used to differentiate the nodes within a network. A node with voting rights is called a “masternode”.




Maximum Supply


This term describes the maximum number of coins that can exist for a certain crypto asset.




mBTC


One-thousandth of a BTC (0.001 BTC). The need of having such a unit of measure is the fact that Bitcoin’s price is very high and small investors cannot always afford to buy 1 BTC. Instead, they can buy smaller amounts, measured in mBTC.




Mining


The process of creating new coins by employing raw computer power to solve mathematical problems and complex algorithms. Mining is also referred to as the process of verifying and adding transactions to the blockchain.




Mining Incentive


The reward miners earn for their mining activity and confirmation of transactions. In order to verify a transaction on the Bitcoin network, one has to use sophisticated hardware and a significant amount of electricity. That is why, in reward, these users get a certain amount of the given cryptocurrency, for which they are verifying transactions.




Mining Pool


A group of cryptocurrency miners can combine their processing power in order to achieve better results. When a block is mined, the rewards are then distributed proportionally between each and every individual, according to the overall contribution of their hardware’s processing power. By joining forces, miners can increase their chances of successful hashing.




Monero


An alternative coin, created in 2014, focused entirely on owners’ anonymity. Monero runs on various types of platforms such as Windows, Android, Mac, Linux, etc. Transactions of this altcoin cannot be traced to any user or identity. The cryptocurrency is preferred due to its privacy and scalability.




Moving Average (MA)


A technical indicator that smooths out the performance of a certain asset’s price over time. MA helps traders to differentiate noise from real price data in periods of frequent price fluctuations. What it does is take all ups and downs and average them to extract the noise from the real trend. There are different types of Moving Averages. The Exponential Moving Average, for example, determines an asset’s average price by giving more weight to recent performance. On the other hand – the Simple Moving Average determines an asset’s price without taking time into consideration.




Multisignature (Multisig)


Some companies require to have more than one signature, authorized to approve a certain cryptocurrency transaction. By having a multisignature, companies can distribute the access and rights to more than one employee. That way, before a transaction is verified, it should pass through two or more separate individuals.





N

NEM


A separate cryptocurrency and, at the same time, a platform for asset management. The assets that are managed through NEM include ownership records, currencies, etc. NEM offers different features, when compared to blockchain, such as encrypted messaging, multisignature accounts, etc.




NEO


An altcoin and the first open source blockchain in China. The features of the blockchain are very similar to those of Ethereum as it can successfully execute DAPPs and smart contracts.




Network


A system of all nodes that are aimed to support the operation of a certain blockchain.




Node


Each computer that is connected to a given blockchain is considered a separate node. Each node possesses a separate copy of the blockchain.




Nonce


The random number generated for each initiated transaction. Depending on the difficulty of the given transaction, the parameters of the number can be changed.





O

One Cancels the Other Order (OCO)


Some traders intentionally place two orders simultaneously with the condition that if one of them is executed, the other is immediately canceled. The OCO works through a combination of a stop and a limit order.




Oracle


Some smart contracts that are stored on a certain blockchain are publicly accessible only through a program called “Oracle”. It is widely employed on the Ethereum network and is responsible for processing the data to and from the smart contract.




Over-the-Counter (OTC) Trades


OTC refers to trades of institutional investors or whales that are made on a non-public dealer network or by using a broker to establish a direct connection to a particular entity that can match the order’s characteristics.




Overbought and Oversold Market Areas


When a certain cryptocurrency is subject to a continuous upward or downward pressure and the market is expected to make a correction in the short-term.





P

Panic Selling


Similar to other markets, the panic selling of cryptocurrencies is referred to a situation when a number of traders simultaneously try to sell due to a fall in the price of certain instruments in their portfolios. This mass effect results in an increased selling pressure that further exacerbates the price fall. Most of the time, panic selling is caused by novice traders who are afraid to stick with their instruments when small fluctuations occur.




Paper Wallet


This term is used to describe the physical document/tool that cryptocurrency investors use to store their wallet codes and private keys. The paper wallet is also known as “cold storage”.




Peer-to-peer (P2P)


A type of direct connection between two or more computers that interact with each other without any third-party intermediaries. The biggest advantage of P2P systems is their decentralization.




Pre-Sale


Before an ICO goes public, there is a pre-sale period when some investors (insiders or a community) are allowed to buy coins.




Private Key


A type of password, consisting of a long string of letters and numbers that investors use to access their wallets. The private key is some sort of a digital signature that is needed each time when the investor sells or withdraws cryptocurrencies. The private key is a very important element as it can be used to derive the public key. Once you derive the public key, you can then use it to derive the address.




Proof of Authority (PoA)


A specific type of private key that allows its holder to create blocks in a private blockchain. Unlike the Proof of Work (PoW), where a group of random nodes is responsible for transactions’ approval, the PoA model specifies a few nodes and provides them with the authority to approve.




Proof of Stake (PoS)


A newer consensus algorithm that indicates the total limit of a reward that miners can get for providing their computational power to the network. The reward cannot exceed the number of coins that the given miner holds (for example – if he has 10 coins, the maximum reward that he can get is 10 coins).




Proof of Work (PoW)


The traditional consensus algorithm that proves the verification of a certain user’s contribution to work executed on the network. PoW adds a variable to the process of hashing a transaction. When a certain block is hashed, it serves as a proof that the given miner deserves an award.




Public Key


The public key is a long string of characters that serves as a wallet’s unique address and is intended for receiving cryptocurrencies. The public key is usually revealed only when the user spends money, as it is necessary to prove that the digital signature for the transaction came from his own private key. Public keys are hashes of private keys.




Pump and Dump


Considered more as a fraud (SEC issued an investors’ alert on pump and dump practices), rather than a trading strategy, this manipulative methodology is used by traders who want to affect a certain instrument’s price. By buying a lot of a given cryptocurrency, they simulate interest in it, which results in an artificial price increase. This attracts other investors, thus exacerbating the overall effect. When the price reaches certain levels, the traders, applying the strategy, sell their coins and profit from the margin. A practice like this is very common on the cryptocurrency markets as traders can easily connect with each other through channels like Telegram, to organize such fraudulent trading moves.





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Rekt


A jargon word, referring to “wrecked”, used for traders who have lost substantial amounts.




Relative Strength Index (RSI)


A momentum indicator that compares recent gains and losses to measure the speed of a given instrument’s price change. The RSI helps traders find out when the market is oversold (when RSI is less than 30) and overbought (when RSI is above 70). Traders usually invest in a certain coin when it has a low RSI.




Resistance


A technical analysis term that describes a certain price level where the selling pressure is bigger than the buying one. Resistance acts as a barrier for an instrument’s price, but once it is broken, it is transformed into a “Support”.




Return on Investment (ROI)


The amount that a trader has gained in return, compared to his initial investment. Or in other words – ROI measures the efficiency of one’s investment. It is calculated as a percentage – for example, a 100% ROI indicates that the investor has doubled his money.




Ring Signature


This term describes a type of encryption that allows users to retain their anonymity. When a transaction is initiated, the nodes within the network should decide whether to approve it without knowing which exact node has sent the requested for it. This makes transactions and their initiators untraceable.




Ripple


A centralized cryptocurrency and, at the same time, the name of the open-source platform where it can be transferred. The main idea behind Ripple is to eliminate exchange rates and provide its users easily-accessible real-time global payments at any time.




Risk On, Risk Off (RoRo)


This type of trading style is focused on tailoring the investor’s risk tolerance to the current market environment. For example – when the market is risky, the investor aims to make less risky moves (HODL strategy). On the contrary, when the market is calm, investors can take riskier decisions like trading some exotic cryptocurrencies, for example.





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Satoshi


Equal to 0.00000001 Bitcoins (one hundred millionths of a Bitcoin), a Satoshi (SATS) is the smallest divisible unit of the coin. It is named after Satoshi Nakamoto, the creator of the Bitcoin cryptocurrency.




Satoshi Nakamoto


A pseudonym used for the individual or the group of individuals, who have created the Bitcoin. Over the years, numerous people have claimed to be the real person behind that fake identity. Today, the cryptocurrency community still don’t know who is Satoshi Nakamoto and whether he/she is still alive.




Scrypt


A complex cryptographic algorithm that is used by some cryptocurrencies for high-level encryption as an alternative to SHA-256. It is preferred due to the fact that it requires significant computational power for hashing which makes the system, that is using it, very resistant to hacker attacks. The algorithm creates multiple random numbers that are stored in the computer’s RAM. In order to return a result, Scrypt should then access these numbers a few times which results in a very computationally-intensive process.




Seed


Indicates the starting point from which a user creates his wallet ID. Cryptocurrency investors can use the seeds to regenerate their wallet IDs if they are lost.




Segregated Witness


Describes the process of splitting transactions into two segments - signature data and transactional data, intended to optimize the speed at which transactions are executed. The speed optimization is achieved by fitting more transactions in one block.




SHA-256


The cryptographic hashing algorithm that Bitcoin and some altcoins use.




Sharding


A very popular scaling solution for splitting the blockchain’s history so that it becomes easier for each node to store it. The process of sharding allows each node to keep a portion of the blockchain, instead of the whole copy. With the course of time, blockchains can become very big, which usually slows down the network’s performance. By splitting the history, the overall execution and consensus speeds of the blockchain get significantly faster.




Shilling


A term describing the process of advertising the benefits a certain cryptocurrency by spreading fake news, thus creating unnecessary hype around it.




Signature


A mathematical operation that authorizes one’s sole ownership over a wallet, data, etc.




Slippage


The difference between the expected and the real price at which a trade is executed. Slippage can have a negative effect on traders’ profit expectations which can significantly differ from the returns that are netted in the end. Slippage often occurs when trading in volatile markets or when placing larger trades that cannot be fulfilled at a certain price and result in the coin’s upward movement.




Smart Contract


Smart contracts are basically the computer version of a traditional contract that allows two parties to agree to certain terms, without the need for a legal or other types of intermediaries. The programmed document can be executed automatically under pre-defined rules. The benefit of smart contracts is that, when they are uploaded to the blockchain, each of the involved parties can check them before agreeing. Smart contracts provide transparency as they cannot be modified after being agreed to. In the recent years, they were popularized mostly by the Ethereum platform.




Soft Cap


Indicates the minimum amount of money that an ICO needs to raise. If the ICO is unable to fulfill its soft cap, it is considered unsuccessful and the raised funds are returned to investors.




Software Wallet


Cryptocurrency investors who are using online wallet services, that are not associated with exchanges, have to store their private key as some type of software on their computers.




Stable Coin


Used for cryptocurrencies that maintain their stable value over time. Stable coins are usually pegged to fiat currencies which helps in the process of keeping their volatility levels relatively low.




Solidity


A programming language used predominantly for the development of smart contracts.




Stop-Loss Order


A trade that is automatically executed if the coin reaches a certain price level. The idea of this order is to limit one’s losses should the market goes against him and the price drops below a pre-defined point.




Supply


There are three types of coin supply – maximum, total and circulating supply. The maximum supply indicates the maximum number of coins that can ever be mined for the given cryptocurrency. The total supply is used to describe the number of all mined coins in the given moment, while the circulating supply indicates how much coins are used by the public or are available on the market.




Support Level


When a certain instrument’s price tries to dip lower than a level at which the historical buying pressure is higher than the selling one, it faces “support”. Once the instrument’s price breaks the support level, it becomes a point of resistance.




Swing Trading


A strategy that consists of buying an asset at a lower price and selling it at a higher one on a regular basis (once daily or every couple of days, depending on the market condition). Swing trading is popular in the cryptocurrency industry because of the high volatility and the associated profit opportunities that it creates.





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Take-Profit Order


Similar to the way a stop-loss order works, the take-profit order is intended to capture one’s profits. When the asset’s price reaches a certain level, the take-profit order is executed and the instrument is automatically sold. Traders who do not want to shoot for the stars, but instead to secure smaller, steady profits, usually trade with this type of order.




Test Net


As its name suggests a test net is a new version of a network that its developers use to test new features and functionalities. It runs as a secondary blockchain, without having any impact on the primary one. When the tests are completed and the new network can take the role of the active blockchain, they are then replaced without losing any data.




The Flippening


Used to describe a potential future moment, when Ethereum’s market capitalization surpasses the one of Bitcoin.




Ticker Symbol


Just like stocks, ETFs and other instruments, cryptocurrencies also have their own trading symbols (tickers) – Bitcoin (BTC), Ether (ETH), Ripple (XRP), etc.




Token


A unit (the coin) that represents a particular cryptocurrency. Digital tokens are key for ICOs as they are the main reward investors get for backing the project. Just like the chips in a game of poker represent a pre-defined amount of a fiat currency, tokens represent a certain value of a cryptocurrency.




Tokenization


The process of encrypting information and turning it into a string of data which can later be sent or stored.




Tokenless Ledger


A distributed ledger technology that doesn’t have a currency. In this type of ledgers, miners do not receive any rewards.




Total Supply


Indicates the total number of coins or tokens that are currently in existence, both – the locked ones and those in circulation.




Transaction Block


Users’ transactions are stored in transaction blocks. After a transaction block is completed, it is then added to the blockchain.




Transaction Fee


A fee that the initiator of a transaction has to pay, no matter whether he sells, buys or transfers cryptocurrencies. The fee often serves as a reward for miners and their efforts to add the transaction to a block and then add the completed block to the blockchain.




Turing Completeness


A machine is said to be Turing complete or Turing universal if it can perform all programming calculations and process all types of computable functions (and simulate any Turing machine).




Two-Factor Authentication (2FA)


In order for one to authorize himself, he will need not only a key or a password but another bit of information as well. That way, the level of security is increased as the identity confirmation requires for the user to pass two stages of authentication. 2FA solutions can be both – software and hardware.




TX


A transactional number that allows users to track the state of their transactions. Due to some cryptocurrency transactions taking more time to be processed, users often use the TX to check their progress.





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uBTC


Even smaller than mBTC, the uBTC is equal to 0.000001 BTC or one microbitcoin (one-millionth of a Bitcoin).




Unconfirmed


Proposed transactions that are yet to be approved are referred to as “unconfirmed”. When a transaction is initiated, the network has to examine the blockchain and check whether there are other pending transactions that involve the same coin. In the meantime, the transaction remains unconfirmed. After it is confirmed by the network, it is then added to a block.




Universal 2-Factor (U2F)


A special type of an open authentication standard that uses USB drives or NFC devices to simplify the 2-factor authentication process.





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Value-at-Risk (VAR)


A metric that measures the risk of a given portfolio. The result shows the maximum amount that the investor can lose over a certain period of time. For example – a portfolio with a 95% 1-month VAR of $10 000 means that there is a 95% chance that the portfolio will lose up to $10 000 in the next month.




Virgin Bitcoins


A term that describes the newly-mined bitcoins that are yet to be used.




Vitalik Buterin


One of the main figures in the cryptocurrency world, co-founder of the Ethereum platform.




Volatility


The fluctuations in an instrument’s price. Or in other words – how quick and how much can the price of an asset change. Cryptocurrencies, for example, are known for their high volatility. Instruments with higher volatility are considered riskier.





W

Wallet


A storage for digital assets. Cryptocurrency wallets are divided into two main types – cold-storage wallets and hosted wallets. The cold-storage ones are hardware, paper or desktop solutions, while the hosted wallets are stored on third-party servers or exchanges. Similar to a bank account, wallets allow their users to create multiple accounts to store their assets. If a wallet or the private key for it are stolen, anyone can get access to the stored assets.




Weak Hands


A term used to describe novice traders’ investments in a certain asset. It is said that the particular cryptocurrency is in “weak hands” because inexperienced traders tend to get scared and sell immediately (prone to panic selling) when small fluctuations occur.




Wei


The smallest denominator of Ether. 1 Ether = 1 000 000 000 000 000 000 Wei (1018)




Whale


Just extremely wealthy investors with enough funds to cause market movements with their orders. Whales can usually drive the market up, stop it from moving down or exacerbate a market nose-dive. Whales are, most of the time, responsible for the formation of buy and sell walls.




Whitelist


Used to describe a list of approved participants with exclusive access to an ICO’s pre-sale.




Whitepaper


An informational document containing everything that potential investors need to know about a certain project. Whitepapers are basically the “spine” of the business. They inform readers of everything related to the project – from the underlying technology, through the objectives and goals, to the team and the roadmap.





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