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When it comes to the world of cryptoassets, there is plenty of terminology and acronyms out there that read like an entirely new language.
From hodling to memecoins, you can be forgiven for having absolutely no idea what they mean.
However, getting your head around these commonly used terms can help you gain a better understanding of how the world of crypto works.
Below, we demystify the key terms you need to know – it’s never too late to learn. Crypto, demystified: This is your breakdown of the essential terminology and acronyms you need to know Alt-coins: These are alternative cryptoassets that emerged after the success of bitcoin and are often used to diversify a portfolio. Thousands of alt-coins exist but the most popular are cardano, ethereum, ripple and solana.
Bitcoin : Digital currency that allows for peer-to-peer transactions on the internet. It operates free of any central control or the oversight of banks or governments and instead relies on peer-to-peer software and cryptography.
Blockchain: This refers to the technology that many popular cryptoassets are based on. Blockchain groups transactions into ‘blocks’ that are chained together and uses cryptography to verify all transactions. All transaction data is public and available for everyone to see. This makes it virtually impossible for anyone to forge a transaction. Public transactions: With blockchain, all transaction data is available for all to see, making forgeries near impossible Cryptoassets: These are cryptographically-secured digital assets that can be transferred, stored, and traded electronically. You might wonder why this term is used rather than the more common ‘cryptocurrencies’. This is because not all crypto is a currency. Some cryptoassets are programmable assets that serve a very different purpose and functionality to currency.
Cryptography: This means secret writing, so the ability to exchange messages that can only be read by the intended recipient. It guarantees the security of transactions, the participants, and protects from double spending.
DAO: This stands for decentralised autonomous organisation. They are a bit like clubs for crypto fans but operate under a shared goal and give each member a say in making decisions. A DAO’s financial transactions and rules are recorded on the blockchain, removing the need to involve a third party in the transaction.
DeFi: This stands for decentralised finance and is an umbrella term for peer-to-peer financial services on public blockchains, primarily Ethereum. For example these could be lending and borrowing applications. DeFi aims to takes out the middle person which we would see in traditional finance/centralised finance, with the aim of making the process quicker and more efficient.
Double spending: This is when someone alters a blockchain network and allows modified blocks to enter the blockchain. This means the person that made the alteration can reclaim spent coins. The likelihood of this happening, however, is slim because of the nature of blockchain. Take out the middle person with decentralised finance, commonly known as DeFi Ethereum : The second largest cryptoasset by market cap, is a technology that lets you send cryptocurrency to anyone for a small fee. It also powers applications that everyone can use and no one can take down. It’s a marketplace of financial services, games and apps that can’t steal your data or censor you.
Fork: This is when someone makes a change to the blockchain. It creates a split in the chain which produces a second blockchain that shares its history with the original. Usually a fork happens to make a cryptoasset more secure or to add other features. A ‘soft fork’ is like a software upgrade to a blockchain. So long as it’s adopted by all users it becomes the asset’s new set of standards. A ‘hard fork’ is when it changes so much that the new version is no longer backward-compatible with earlier blocks. This is when the blockchain splits in two.
Halving: Bitcoin halving is the process of halving the rewards of mining the cryptoasset after each set of 210,000 blocks is mined. Reducing the rewards of mining means the amount of bitcoin in circulation doesn’t increase exponentially and puts pressure on its price. It tends to occur every four years, and the next halving is predicted to happen in 2024.
HODL: Commonly heard among the community of cryptoasset investors, this stands for ‘hold on for dear life’ even if the price is falling. It is a phrase often used by crypto investors to champion holding onto one’s crypto investment, even during a period of decline. Even during periods of decline, cryptoasset investors are sometimes advocates of HODL: Hold on for dear […]
source A-Z of crypto jargon: From alt-coins to hodling, we explain 24 key terms and what they mean
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