Crypto Phrases You Need To Know
The following is a list of the most common phrases in the crypto space that might look misleading or strange at first.
Introduction
In the world of cryptocurrencies, where Twitter is one of the main medium of information, you may stumble upon a variety of different words and phrases that might look misleading or strange. I have prepared a list of the most common words and phrases you may encounter along your way into the crypto space.
Let’s get into them straight away.
The list of words
Blockchain — a type of shared database that stores data in blocks which are then linked together via cryptography. Imagine a book with revenues and expenses that everyone can check in order to verify transparency. However, the actors’ identity is not publicly known; just their public address is widely known. What is more, data on most decentralized blockchains is irreversible; once processed, cannot be reversed.
Seed phrase — a phrase consisting of 12/24 randomly generated words that serve the purpose of a password that lets you access your account and all the private keys in it. Seed phrase should be safely stored off-line, on a piece of paper or items specifically designed to store it. Remember that the seed phrase/passphrase is the password that lets you access the wallet and not the platform itself. For example, Patrick sets up his MetaMask account and creates his password “SafuPass”. Then Patrick is given a 24-word seed phrase; he writes down the words on a piece of paper. The password he established allows him to open the MetaMask account on the other device. However, he cannot access his funds or even see them without the seed phrase.
Cold wallet — Wallet that has no constant Internet connection
Hot wallet — Wallet that has a constant Internet connection
KYC / AML — Know Your Customer/Anti-Money Laundering — KYC is a part of the broader scope of banks and institutions’ policy of Anit-Money Laundering (AML) which is a set of laws, regulations, and procedures that are aimed at discovering illicit funds used as a legal income. Know Your Customer (KYC) policy is aimed at verifying the customer with the use of documents like ID, bank account information or the place of residence, along with the visual identification through photography or a video chat.
DEX / CEX — Decentralized Exchange / Centralized Exchange — DEX is an exchange that has to know only your public address to perform the swap, so exchange one token for another. It is just the dApp (Decentralized Application) hence no Third Party is involved in your transaction. CEX, on the other hand, is more like a Third Party that takes care of your order and maintains it in its order book. Imagine CEX being a used cars dealer who sells other people’s cars, while DEX is like selling your car on eBay on your own.
2FA — Two-Factor Authentication — is a type of multi-factor authentication (MFA) that strengthens access security by requiring two methods (also referred to as authentication factors) to verify your identity. An example of such protection might be the combination of password and Google Authenticator code.
AMM — Automated Market Maker — is an algorithm used, e.g. on a DEX, that allows you to have the closest/best price of an asset.
Private Key / Public Key — Private key is your Seed Phrase, allowing you to access your funds on the wallet, whereas a Public key is the same as Public Address, like a bank account number that people have to know in order to send you the funds. A public key is too long in its original form and is compressed into the Public Address instead.
Custodial / Non-Custodial Wallet — in a custodial wallet, the private key is held by a third party, like an exchange, and in non-custodial, users are themselves responsible and in full control of their assets.
Hash rate — is a measure of the total computational power being used by a proof-of-work cryptocurrency network to process transactions in the given blockchain. In other words, it is a measure of how fast a cryptocurrency miner’s machines complete computations in the network.
NFT — Non-Fungible Token — NFTs are unique cryptographic tokens that exist on a blockchain and cannot be replicated. Nowadays, most of you associate NFTs with pixilated images; however, the real-life possibilities of usage are vast, from cinema tickets to digital ID cards. The time has not yet come to fully embrace the technology.
PoW / PoS — Proof of Work/Proof of Stake — PoW is proof of the network you make by securing it with the use of the work of your computational power. The power you have to pay for with fiat money and cover the maintenance costs like electricity or device purchases and repairs. On the other hand, PoS is proof of the funds you hold in the coins you have delegated to secure the network via staking.
Okay… Do you want to take a short break?
No break? Okay, great! Let’s go
No break? Okay, great! Let’s go!
Slippage — is the difference between the expected price of an order you make and the price when the order executes. The higher the slippage, the bigger the difference might be. Remember that oftentimes you might set the slippage manually.
Swap — the exchange you are making from one coin into the other with the use of a DEX, e.g. swapping ETH into AAVE or USDC into ETH.
Bridge — is a centralized or decentralized service that allows you to create a connection between two blockchains that normally cannot communicate with each other. With the use of the bridge, you can send the funds/value of tokens/tokens from one chain onto the other. Remember that you are not always sending tokens per se. Quite often you are just sending their equivalent to mint the tokens on the other chain while locking them on the base one.
Etherscan — is an Ethereum blockchain explorer which you can use to analyze a variety of things like token holders, transaction history or to monitor your pending transactions.
MetaMask — software cryptocurrency wallet designed and used with the Ethereum blockchain that can be used to interact with dApps (Decentralized Applications). MetaMask also offers storing funds from other blockchains, like Binance Chain.
DeFi — Decentralized Finance — the idea of DeFi is to create a system of financial transactions removing the Third Party and/or institutions.
Stablecoin — a cryptocurrency that resembles the price of a given currency, most commonly the US Dollar; hence the name as it is worth 1$ (with minor alternations due to rapid market movements).
Staking — locking up your tokens in a given blockchain, for a given period of time, in order to help secure the blockchain itself by increasing the performance of block validation. Staking often, if not always, offers a reward of a percentage of tokens you have locked up. You can think of it as a bank deposit that allows you to earn some interest. The interest itself might vary greatly and is connected with the token release schedule.
Tokenomics — the characteristic of the economy of a given token, i.e. what is the way and ratio of token distribution, allocation, the usage, the mechanisms baked in, like burning, etc.
Liquidity — is the ability of a coin to be easily converted into cash or other coins. In other words, the higher the liquidity, the better. Imagine a situation in which you have the coins, but due to low or no liquidity, you cannot sell them or convert them to other currency.
Scam — in short, the activity/project where the malicious actor deceives people, e.g. to buy the token and then runs away with the stolen funds.
Shill — promoting cryptocurrency or a project through aggressive advertising; oftentimes refers to scam projects.
Gas — is a fee that developers have to pay to the Ethereum network to use the blockchain. Gas is paid in Ether, the native cryptocurrency of Ethereum. Note that the name Ethereum is the name of the blockchain while Ether is the name of the currency.
FUD — Fear, Uncertainty, Doubt — the phenomenon of spreading misinformation or exaggerating information causing FUD in market participants in order to manipulate their behaviour leading to price manipulation
FOMO — Fear Of Missing Out — the feeling that you are missing the gains made by others. It is the feeling that makes people lose their money more often than you can imagine. Restrain your emotions.
HODL — the phenomenon of buying tokens and holding them for a long term profit instead of trading, even in dire market conditions like a bear market.
ATH — All-Time High — The highest price the token has reached in a given time (month/year / ever)
ATL — All Time Low — The lowest price the token has reached in a given time (month/year / ever)
DYOR — Do Your Own Research — the idea of not believing other people’s advice to buy or sell the token, but otherwise doing your own research in order to confirm the thesis.
DD — Due diligence — doing the research and making a decision based on the best information you can find.
ROI — Return on Investment — financial measure of how profitable the investment might be, often expressed in percentage
APY — Annual Percentage Yield — the APY takes into account the value of compounding
APR — Annual Percentage Rate — the APR does not take into account the value of compounding
DCA — Dollar Cost Averaging — the technique used to buy or sell tokens at a given period of time for a given amount of money. Both time and money flexibility, or its lack, should be established prior to investment. DCA is highly recommended for new and long-term investors as it teaches how to be a participant in the market and shows its volatility.
The example might be as follows.
Patrick wants to buy Bitcoin for 1200$. Instead of buying it all at once, he decides to use the DCA approach as he does not know much about the market and investing. Patrick decides to average the price by buying Bitcoin for 100$ on every 10th day of the month without taking the price at a given time into account, i.e. it does not matter if Bitcoin’s price is 30k or 60k, Partick buys Bitcoin for 100$.
Congratulations on reaching the end of the list
In the end, I’d like to add three additional acronyms that you may see as those are very common. I guess there is no need to explain the meaning of the following.
GM — Good Morning
GMI — Gonna Make It
NGMI — Not Gonna Make it
Now you will not be deceived or misled by some strange-looking acronyms in the crypto world. One more things I’d like to ask you, as it would mean a world to me if you followed me on Twitter and Subscribed.
Till next time!
~ M.E.