Crypto Terms Explained: 30+ Must-Know Buzzwords For Newbies
Learning the crypto vocabulary is one of the crucial steps you have to take before going deeper into this topic. Let's go through a list of the most common words you'll encounter in the crypto world.
Address, gas, moon, whales… Words whose meanings no one has ever questioned. Not until they’ve made it to the crypto vocabulary.
The interest in cryptocurrency has grown exponentially since Bitcoin was first introduced in 2009. Fast forward to today and not only has the technology evolved significantly, but thousands of new cryptocurrencies have also joined the squad.
Naturally, the crypto community took the liberty of naming the emerging trends, new processes, technical stuff, and everything else crypto-related. For a beginner, the terms that they’ve come up with might be pretty difficult to grasp, however, still inevitable to learn to continue the journey into the cryptocurrency world.
So without further ado, let’s go through the list of common crypto buzzwords and phrases that will help you get your head around this hot topic.
A quick intro to the crypto explosion
One might wonder – why on earth is the crypto market exploding at all? And how did it happen all of the sudden?
Well, technically, “all of the sudden” is not really how it happened since investors were aware and very positive about crypto in 2017 already. In fact, it was the year when crypto started to really surge for the first time (Bitcoin then hit the $20,000 mark), also known as the 2017 boom.
Unfortunately, in the beginning of 2018, the Bitcoin price fell by about 65%, followed by nearly all other cryptocurrencies. The result of this was a dramatic cryptocurrency crash, and the market fell silent.
Until 2021 hit.
According to Google trends, this is when everyone started to look for more information on this mysterious – crypto – term.
Experts name many reasons that could have impacted crypto going almost mainstream, including the need for operational efficiency and transparency in finance, increase in data security, lower fees, profit potential, rising cryptocurrency market cap, inflation, and… the global pandemic?
Therefore, though it’s still considered a risky investment, people urge to adopt cryptocurrency before it becomes more valuable, seeing it as the currency of the future.
35 simply explained crypto terms you should learn before starting
Decentralized Finance (DeFi)
Decentralized Finance, or DeFi, is a peer-to-peer financial service that, unlike traditional finance, doesn't require a third party (e.g., bank) to complete financial transactions.
In this case, you store your money in a secure digital wallet instead of a bank. DeFi works on public blockchains and allows you to transfer your funds to another person/merchant/business directly, without relying on intermediaries.
Decentralized exchanges (DEX)
Decentralized exchange is a peer-to-peer marketplace that enables direct and secure online transactions between crypto traders. Unlike CEX (Centralized exchanges), it does not store user funds and personal data on the server – instead, DEX performs all operations through smart contracts on the blockchain.
Cryptography is a technique that secures information in computer systems and is essential for cryptocurrencies. In crypto, it is mainly used to secure transactions and verify transfers.
Literally translated, it means “secret writing” and works by turning an original readable message, which is also called plaintext, into a secure format that only the intended receivers can understand.
Simply put, blockchain is a database. It records and stores information in groups, also known as blocks. Since blocks aren't limitless in terms of storage, they are closed when filled and connected to the previously filled block (via cryptography), forming a chain and creating an irreversible timeline of transactions.
Consensus is probably one of the most straightforward terms in the crypto vocabulary, meaning an agreement in a group. It allows systems or networks of computers to agree on the state of the network and stay secure. Cryptocurrencies use different consensus algorithms, like Proof-of-work (PoW) or Proof-of-stake (PoS) (more on them below).
Crypto mining is a process of creating new coins and verifying new transactions. It’s done by decentralized networks of computers globally (mostly by specialized companies or groups of people) that verify and secure blockchains. For contributing their processing power, miners on the network get rewarded with new coins, which keeps them motivated.
Crypto staking refers to a process of committing, or “locking up,” a portion of your crypto assets in order to contribute to the blockchain network and earn additional rewards. It can be helpful to think of it as along the lines of generating interest on cash savings, or earning dividends on stock holdings.
Proof-of-work is a consensus mechanism that enables network members to come to an agreement on who gets to add the next block to the blockchain by calculating alphanumeric codes (called hashes). Put simply, PoW is a set of rules used to securely confirm and record crypto transactions.
Proof-of-stake is another consensus mechanism; only with PoS, the transactions are verified through staking coins, and not by calculating a hash like when using PoW.
A node is simply a computer that is connected to other computers on the cryptocurrency network. Altogether, they follow the rules and continuously exchange information with each other, ensuring all nodes are always up-to-date. The purpose of a node and mining is the same – to verify transactions in a blockchain.
Bitcoin is the first widely adopted cryptocurrency that was introduced to the public in 2009 by an individual or a group of people behind the name of Satoshi Nakamoto. It was created to provide an alternative payment system that would operate free of central control but still be used just like traditional currencies.
Altcoin stands for alternative coin and refers to cryptocurrencies other than Bitcoin.
Ethereum is a blockchain-based software and crypto network best known for its native cryptocurrency Ether, or Ethereum (ETH). As of February 2022, ETH is second in market value only to Bitcoin.
Ethereum is also known for its smart contract functionality that is widely used on this blockchain.
Smart contracts are computer programs or transaction protocols stored on a blockchain (often Ethereum, not that much outside of it). They are intended to automatically execute once the specific pre-defined terms are met (“If X, then Y.”). A simple example of a smart contract on the cryptocurrency network would be releasing payment once someone confirms the delivery of goods.
Stablecoins are cryptocurrencies that are pegged to some external reference, like fiat money (Euro, US dollar, or the GBP), exchange-traded commodities (e.g., gold), and even other cryptocurrencies. The purpose of stablecoins is to maintain a stable value, which is often close to USD.
You might also wonder what does ATH mean in crypto, as it's one of the most commonly seen crypto acronyms. It stands for All-Time-High and is mainly used when talking about the highest price reached by assets.
ATL, or All-Time-Low, is the opposite of ATH – it indicates the lowest point that an asset has been through its entire existence (price/market cap).
Moon/Going to the moon
Moon is another cryptocurrency term used to describe the positive changes of an asset, to be more specific, indicate a significant spike in price and volume. For instance, if some particular coin is “going to the moon,” it means that its price is rising off the charts.
These two crypto terms are used to describe the market changes. Bearish refers to a stagnant or downward price trend, while a bull market is a rising market.
What does shill mean in crypto? Crypto shilling is basically creating hype for a particular coin that a person or a group of people have a personal interest in.
Mostly, this crypto term has negative connotations since shilling often involves the use of propaganda in order to promote something for a financial incentive.
In simple terms, a liquidity pool is a collection of funds (cryptocurrencies or tokens) that people lock in a smart contract on decentralized exchanges (DEX). Liquidity pools can facilitate different transactions, like lending or trading digital assets using automated market makers; meanwhile, liquidity providers can benefit from the fees from the transactions happening in the pool.
Initial Coin Offerings (ICO)
Initial coin offering is a type of funding used in the cryptocurrency market. It can be launched to help a company raise money for a new coin, app, or service.
The term token might be a bit difficult to grasp at first as it can refer to both coins and some other digital assets. However, even though a coin technically can be a token, there is a difference between these two.
Cryptocurrencies have their native blockchains, while tokens can operate on any blockchain since they’re not built for any of them specifically. A token is a unit of value that represents a digital asset that you own, and when you "spend" it – it's psychically moved from one place to another. A coin, on the other hand, is a medium of exchange, represents what you can own, and doesn't move around – you can only see your account balance change.
Non-Fungible Token (NFT)
NFT – three letters building both excitement and lots of confusion online. Put simply, NFT (non-fungible token) is a one-of-a-kind digital object. Blockchain technology allows turning those digital objects into authentic assets that someone can own, preventing duplicates.
NFTs can be basically anything – a digital art piece, music video, GIF, even a meme. The key thing is that NFTs are not fungible – while you can trade a bitcoin for another bitcoin and have exactly the same thing, you can't do the same with a music video since you'll just exchange it for a different one.
A crypto wallet is equivalent to a regular wallet in a digital world – you use it to access your cryptocurrency. It doesn’t technically store it – your funds are stored on a blockchain, yet you can use a private key to prove your ownership and access what you own. Losing the private key to your wallet means losing access to your money.
A wallet address is a virtual location on a blockchain where you can send and receive cryptocurrency. Usually, it consists of 26-35 numbers and letters. Think of it this way – like your “virtual inbox” has an email address, your cryptocurrency should have a wallet address so that you can own it.
Metamask is a crypto wallet available as a smartphone app or a browser extension used to interact with the Ethereum blockchain.
If you've been wondering what does FUD mean in crypto, it's not really different from its original meaning: fear, uncertainty, and doubt. This acronym is used to describe a mindset of spreading misinformation about a specific coin, trying to negatively impact investors' decisions, lower the price and hedge funds. This way, the big whales (description below) can buy large amounts of that coin and change the perception of it, saying it has now reversed and shows bullish signals.
The acronym HODL stands for a person who refuses to sell their coins regardless of the price change. It’s a slang word that had originated in one of the internet forums when a crypto enthusiast tried to encourage others not to sell and accidentally mistyped the word hold. The mistake went viral, and the community quickly turned it into a meme.
Similar to someone who hodls, a bagholder is an investor who refuses to sell their assets and continues to hold large amounts of specific coin or token, regardless of how poorly they perform.
An airdrop can be described as a promotional event or marketing stunt when a new cryptocurrency/token is distributed to users’ wallets free of charge in order to promote it and encourage adoption.
Gas is a fee (in ETH) required to successfully interact with a network (complete a transaction or smart contract) on the Ethereum blockchain.
A whitepaper is a document prepared for crypto projects that helps investors determine whether a project has any merit. It mainly contains technical information about the project and the purpose behind it, and also provides a roadmap for growth and success.
Fear of missing out (FOMO)
Fear of missing out, or FOMO, means exactly what it says – it’s the feeling of anxiety that inspires spontaneous purchases when the asset moves to the upside. Often, not being able to wait for a perfect setup leads to losing trade.
Whales in crypto are individuals/institutions/exchanges that hold large amounts of a specific cryptocurrency – usually enough to manipulate currency valuations.
You’ve got this!
The bad news – you've just gone through a tiny part of the crypto vocabulary, and there's still so much to learn. The good news? That's a great start!
Undoubtedly, learning about crypto and seeing all those new words and confusing acronyms can make it challenging and scary, but it isn't impossible. Once you get familiar with the cryptocurrency terminology, you will feel more comfortable talking about it and making your own decisions.