Crypto Glossary Coming to Terms with Bitcoin Slang
The world of cryptocurrency can be overwhelming for newbies not just because of the tech aspects of algorithms and smart contracts but there is also a whole new set of slang words. Here is a quick guide to some easy crypto lingo.
This refers and differentiates other crypto coins apart from the well-known or ‘original’ coins. Altcoin means “alternative coin”, that is an alternative to Bitcoin. Some popular altcoins include 0x (ZRX), Golem (GNT), and Augur (REP). Even Ethereum was once considered an ‘alt’ coin, but nowadays the term is more fitting to less well-known coins such as Ark, Ethos, FUN, Neblio, Neo, Nexus and OMG.
A bag holder is someone who holds a large amount of a specific ‘crypto’. For example, if you owned 1000 bitcoins, then you would be considered a ‘bag holder’. Usually bag holders believe strongly in the real-world utility of the coin they are holding.
Traditionally, a bear market occurs when the economy is not doing well. If people are pessimistic, believing that stocks are going to drop, they are called “bears.” Bear markets can occur when there is fear of regulation or government restrictions on crypto trading.
Perhaps the most recognized name in cryptocurrency trading, Bitcoin refers to a digital currency created in 2009 by so-called Satoshi Nakamoto who wanted to create “a new electronic cash system”. The name Satoshi Nakamoto is the name of an unknown person or group of people who have kept his, her or their identity secret. The identity of Satoshi Nakamoto has never been publicly revealed. Satoshi Nakamoto who created the original Bitcoin white paper released in 2008 and mined the first block of the ledger.
A Bitcoin maximalist is someone who believes that it is better to invest solely on Bitcoin, rather than splitting your equity in other alt coins. In this sense, they rely on the network strength in numbers, and by having many active participants, the system can be supported.
Blocks are files in the block chain network that permanently store unalterable data.
This is the unique technology behind ‘crypto’ coins and their networks. Simply put, block chain refers to a distributed ledger containing a network of blocks containing information that are each linked and secured using cryptography i.e. a chain of blocks containing information that is open to anyone. Each block contains data, a unique hash and a hash of the previous block. The data that is stored in the block depends on the type of block chain. The information is decentralized so that it is managed and verified by everyone in the network called the “nodes”. A node gets a copy of the whole database rather than any particular group, body or central authority.
Block height refers to the number of blocks preceding the first block which is know as the “genesis block”. The genesis block has a height of zero because no blocks precede it.
This refers to the reward to miners for their effort in hashing or solving the mathematical equation relating to a block.
This is when the price of cryptocurrency nose dives or the market crashes caused by cashing out of the market, a chain reaction of panic and crypto sell off or market FUD.
Bollinger Bands are named after their creator, John Bollinger. They are commonly used in ‘crypto’ analysis to support and indicate market trends such as breakouts, support and resistance. However, there are many people who question the usefulness of traditional analysis methods as they apply to ‘crypto’ trading, considering the volatility and uncertainty in the market.
Traditionally a bull market occurs when the economy is doing well—unemployment is low, GDP is high, and stocks are rising. If people are optimistic, believing that stocks will rise, they are called “bulls”. Though in crypto markets, it is much harder to predict what drives a ‘bull’ market.
This refers to a method of storing your ‘crypto’ assets offline by setting up a “Cold Storage Wallet”. Your coins can’t be stolen by draining your wallet online because your “butter” is not connected to the Internet. Cold Storage is one of the safest methods to store your ‘crypto’ coins. However, it does have its drawbacks, such as the hassle of trading. Cold storage is usually recommended for people who intend to hold their coins in the long term and not trade or otherwise it involves storing some of your coin in cold storage and keeping some of your coin in the system for storage. Commonly used methods of cold storage are a ‘Paper Wallet’, ‘Sound Wallets’ and ‘Hardware Wallets”.
A method of storing and transmitting data or code so that it is unreadable except to those who are intended to read or process it.
DIGITAL LEDGER TECHNOLOGY (DLT)
A digital system for recording asset transactions across multiple sites or, otherwise, simply a database that is spread across several sites. There is no central administrator or centralized data storage. How the data is distributed, structured and agreed upon through a consensus will determine the type of DLT.
Launched in 2015, Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built and run without any downtime, fraud, control or interference from a third party. Ethereum is not just a platform but also a programming language (Turing complete) running on a blockchain, helping developers to build and publish distributed applications. The potential applications of Ethereum are wide ranging.
A ‘crypto’ exchange is where trading takes place. People use exchanges to buy ‘crypto’ with fiat, such as AUD or USD, or they can trade with other existing ‘crypto’ coins. For example, I can trade on an exchange some Ethereum for Bitcoin, at a price governed by the exchange and based and based on supply vs demand.
Refers to real money, such as USD or AUD.
FIFTY ONE PERCENT ATTACK (51%)
This happens where more than half the computing power on a network is operated by one person or a core group of individuals which gives them majority or total control over the network so that they control the network’s mining hashrate and can also halt mining.
FOMO is an acronym for Fear Of Missing Out. This a huge factor to consider when swing trading in Cryptocurrency as most of the times, emotions drive crypto trading rather than valuation. This is the feeling when there is a coin that everyone is talking about and you don’t own that coin, so you sell of all your coins just to buy this coin because you are just so afraid of missing out. FOMO trading may sometimes work out but not most of the times.
A fork is literally a split in a ‘crypto’ network or system. This often means one network becomes 2 functioning networks, or the other network will become obsolete. A well-known example of a fork is Bitcoin and Bitcoin cash. By creating a fork in the network, holders of Bitcoin were also given the same amount of Bitcoin cash at the time of the fork, and it was even free!
FUD is an acronym for “Fear, Uncertainty and Doubt” and in the context of cryptocurrency means spreading fear, anxiety or doubt to persuade people from using Bitcoin or by users of some cryptocurrencies promoting their own preferred currency above that of others. People sometimes use FUD with the intention of creating a sense of doubt and insecurity about another competing coin. FUD is not based on reasoned grounds or healthy criticism but rather on a strategy of “attack” through spreading incorrect or misleading information.
A genesis block is the first block of a block chain. Modern versions of Bitcoin number it as block 0, though very early versions counted it as block 1.
A hardware wallet is a storage solution that uses technology to protect and safely store your coins. Coins are accessed through keys (addresses and codes) which are kept in a wallet. Therefore, the wallet itself that holds your keys needs to be stored in a safe place. Popular hardware wallets are the Trezor or Nano Ledger S. However, you should be careful when using a hardware wallet that it is has not been tampered with and resold.
A hash takes data and through a mathematical process or algorithm returns a fixed-size alphanumeric string. The value produced or fixed string of digits is then used as a cryptographic checksum. A hash procedure must be deterministic—meaning that for a given input value it must always generate the same hash value. In other words, it must be a function of the data to be hashed, in the mathematical sense of the term.
One of the most common terms used in the Crypto community is HODL. It is an intentional misspelling of the word “hold” and refers to holding your coins rather than selling these off in the belief that the coins will be more profitable in the future. The backstory on the word HODL is that it first appeared on a bitcoin talk forum in 2013 under the thread “I AM HODLING”. The writer seemed to have enjoyed a few whiskeys too many! The legendary message board post is now part of crypto lore and the expression was quickly adopted by other users.
An ICO is an acronym for Initial Coin Offering. This is where a ‘new’ coin gets offered to the public, or selected members. ICO’s are very popular for ‘crypto’ enthusiasts as they offer a chance to buy up a significant amount of coins for a relatively cheap price.
For encryption algorithms, a cryptographic key is a string of bits or a piece of information known as a parameter that are used to encrypt messages.
LARGE CAP COINS
The large cap cryptocurrencies are coins with a large market cap such as (Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), Litecoin (LTC), Bitcoin Cash (BCH), and EOS.
Market Cap is used as a method to rank the relative size of a cryptocurrency against other coins in the market. Market cap is calculated by multiplying the number of coins or tokens in circulation against the current price of a single coin.
Mining is the term used to describe the validation of transactions on a network. People literally ‘mine’ transactions on the network for a small fee. This ensures the validity and protection of transactions on the block chain network. However, some coins do not require mining to be done over their networks, and as such offer an inexpensive means to transfer across the network.
Refers to a powerful computer used to carry out the mining process. It is not uncommon for a business to have 1000’s of mining rigs set-up in a factory to be highly profitable.
A node is central to the operation of a decentralized ledger, which contains a list of all transactions completed on the network. Importantly, the node connects with other nodes on the network to share and update changes made on the decentralized ledger.
A paper wallet is a document containing all the data necessary to access your coins. A paper wallet should contain the address and the private key required to access the coins held at the address.
A ‘Proof of Stake (PoS)’ Proof concept states that a person can mine or validate block transactions according to how many coins he or she holds. This means that the more Bitcoin or altcoin owned by a miner, the more mining power he or she has.
The security of a blockchain comes from its hashing, proof of work mechanism and decentralized peer-to-peer network of consensus. Tampered blocks will be rejected by other nodes in the network.
PUMP N DUMP
A ‘pump n dump’ usually relates to a Ponzi-style scheme whereby early investors ‘pump’ the price of a coin artificially be creating high demand, and usually under a false pretense that the coin is extremely undervalued. This is then followed by a ‘dump’, where early investors sell-off their assets at a higher price, and consequently creating a panic sell by other later investors, often at an amount lower than their initial buy-in price. ‘Pump n dump’ schemes are often coordinated in secret groups, and generally should be avoided.
Ripple is a technology that acts as both a cryptocurrency and a digital payment network for financial transactions. Ripple was released in 2012 and co-founded by Chris Larsen and Jed McCaleb. The coin for the cryptocurrency is premined and labeled XRP.
Shilling is the act of unsolicited endorsing of something in public, in other words, creating “hype”, including by shill teams and fake news writers who seek to promote a coin. However, in crypto circles, shilling is often related to ‘pump n dump’ schemes. Buyers should always do their own research and be diligent when investing in ‘crypto’, or any other asset for that matter.
A digital signature is a mathematical scheme (algorithms) to allow someone to prove their ownership over a currency, wallet or data or to authenticate messages and transactions.
A smart contract is an agreement that is stored on the blockchain to automatically exchange coins or carry out a specific function on the basis of certain conditions being met.
A stable coin usually refers to a safe coin, which is not volatile to market movement. Stable coins are pegged to another ‘stable’ asset like gold or the US dollar. Traders usually use stable coins as a safety net when the market is uncertain or is in a downturn. Common ‘stable coins’ include Tether and Digix DAO. However, there is speculation between crypto traders and enthusiasts as to whether such coins are in fact stable and pegged to stable assets.
Staking is the mining of POS coins. You mine with your computer and get coins as a reward though Proof of Work (POW). The Staking reward is usually deducted from the block reward.
The term “whale” is used for a huge player who has a substantial stash of cryptocurrency. Whales are known to manipulate market prices through various tactics including “rinse and repeat”. A whale will start the “rinse cycle” by selling large coin volumes at less than the market rate to cause panic, resulting in smaller players selling. The whale will then buy the coin up at a lower rate and repeat the cycle.
Those with weak hands cannot be patient and sell at loss when the market is down. Weak hands are bad at ‘hodling’, panic and sell all Cryptocurrency they own in a downturn. It is often the ‘weak hands’ that are blamed for the volatility in the crypto market.
Take Away Points:
- Online traders of cryptocurrencies use slang terms, hashtags and are heavy on acronyms when communicating ideas, descriptions or concepts.
- It is important to stay current with the latest trends and crypto lingo so you are familiar with “Crypto news” and common terms in the field.
- There are several more useful terms which can help you survive in the Crypto community. It is always best to do your own research and understand this terminology, so you won’t be left behind!
Sam Gilbert, IP and Technology Consultant, B.A., LL.B University of Technology, Sydney
If you would like to know more about this article or the laws that regulate cryptocurrency providers, please do not hesitate to get in contact with the team at W3IP Law on 1300 776 614 or 0451 951 528.
Disclaimer. The material in this post represents general information only and should not be taken to be legal advice.
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