When people ask me about Bitcoin they are usually very confused on what it is, how it works, and why it’s important. In this newsletter, with Lily’s help, you will finally understand and be able to impress your friends with such a profound explanation.
Crypto Lingo
Below you’ll find some of the most common acronyms and cyberpunk lingo that liters Twitter and many other news outlets today. If you can understand this lingo, you can fool anyone into thinking you know what you’re talking about!
Address
In digital currency, an address is basically a destination where a user sends and receives digital currency. In a way, it is similar to a bank account.[1] These addresses usually include a long series of letters and numbers.
Altcoin
An altcoin is a digital currency other than bitcoin. There were more than 1,000 altcoins listed on data source CoinMarketCap at the time of this writing.[2] Another way of describing the term "altcoin" is referring to it as an alternative protocol asset, meaning that it follows a protocol (set of rules) that's different than that of bitcoin.
ATH
"ATH" is an abbreviation of "all-time high." This term can be quite helpful to know for tracking the digital currency markets. These assets are so volatile, so keeping their ATH in mind can prove valuable. A digital currency could potentially hit several local highs before rising to a new all-time high.
Bear/Bearish
"Bears" believe that an asset, for example a digital currency, will decline in value. Another way of putting this is that if a trader thinks a cryptocurrency will depreciate, their sentiment surrounding the digital asset is "bearish." In many situations, traders will make use of this expectation by taking a short position on an asset, meaning that they will make a wager that will pay off should the asset in question fall in value.
Blocks
Many digital currencies make use of blocks, which contain transactions that have been confirmed and then combined together.
Blockchain
The blockchain, which is a distributed ledger system, consists of a series of blocks. These blocks contain verified transactions. The blockchain was designed to be not only decentralized, but also immutable, meaning that entries could not be erased once placed on this distributed ledger. The idea of the blockchain was first introduced when the bitcoin white paper was released in late 2008.[3]
Bull/Bullish
If a trader believes that an asset will rise in value, he or she is a "bull." When an investor has this optimistic expectation of an asset's future bull, this frame of mind is described as "bullish."
Cryptocurrency
A cryptocurrency is merely a currency that relies on cryptography. Bitcoin, for example, leverages cryptography in order to verify transactions.
DeFi
Simply stated this stands for Decentralized Finance as opposed to CeFi, which is Centralized Finance such as your bank account or the NYSE/NASDAQ.
Fiat Currencies
Fiat currencies are currencies that have value because they are minted by a central bank. Fiat means "by decree," and these currencies have value because some central authority has decreed that they have monetary value. Examples of fiat currencies include the Euro, US Dollar, and Japanese Yen.
Exchanges
Exchanges are basically just marketplaces where traders can make digital currency transactions. If a person wants to buy bitcoin, going to an exchange is the fastest way to accomplish this objective.
FOMO
The term "FOMO" stands for the phrase "fear of missing out." This occurs when investors start buying up a particular asset based on their expectations that it will rise in value. Market participants can easily flock to an asset should that asset experience sharp gains.
Getting caught up in FOMO can be dangerous. More specifically, buying up an asset because it has recently enjoyed some notable upside can cause one to fall victim to market manipulation.
Fork
A fork is a change in a digital currency's rules or protocol. Developers update a cryptocurrency's protocol from time to time. A fork can be either a hard fork or a soft fork. A hard fork is a change to a digital currency's protocol that makes blocks created using the old protocol incompatible with the new chain.
FUD
Fear, uncertainty and doubt can be summed up using the term "FUD." The idea behind this is that market participants may spread misleading or inaccurate information in order to cause an asset's price to decline. A trader may want an asset's price to fall so they can either short it successfully or buy in at a lower price and increase their chance of generating a gain.
Hard Fork
A hard fork is a type of fork that creates a permanent change to a digital currency's protocol, or rules.[7] When one of these forks takes place, it results in a whole new blockchain, which will not accept any blocks mined using the old rules.
The old chain can survive, however, leading to a scenario where both the old and the new blockchains can continue.[8]
HODL
Cryptocurrency investors developed the term "HODL," which stands for "hold on for dear life." The acronym originally came from a misspelling of the world "hold."[9] Digital currencies can be highly volatile, so when they start experiencing significant price fluctuations, some market participants state that they should simply "HODL."
Initial Coin Offering
An initial coin offering (ICO) represents the first time that an organization offers digital tokens to the public in an effort to raise money. Companies frequently hold these offerings so they can finance projects.
These digital token sales have often been likened to initial public offerings (IPOs), where companies sell more traditional assets such as stocks and bonds in order to raise money.
KYC
KYC stands for "know your customer." Many jurisdictions have KYC regulations, which have come to affect startups holding ICOs. These regulations require companies holding these digital token sales to verify the identity of their investors.[10]
Long/Long Position
Going long, also known as taking a long position, means making a wager that an asset will rise in value. If a trader purchases a digital currency like bitcoin, for example, they are making a bet that the cryptocurrency will appreciate.
While simply buying digital currency is one example of taking a long position, there are other methods available. For instance, traders can leverage options and futures.
Market Cap
Market cap is short for market capitalization, which is a term for total market value. The market cap of bitcoin, for example, is the number of BTC outstanding multiplied by the digital currency's price. The term can also be used to refer to a group of digital currencies.
Mining
Mining is the process for creating new units of a digital currency. For example, the bitcoin network releases new bitcoins every time a block is mined. In this instance, mining involves confirming transactions and combining them in to blocks.
This verification requires hardware and electricity, and miners are rewarded with digital tokens for contributing these needed resources.
Moon/Mooning
When a digital currency moons, that means it rises sharply in value. For example, a crypto trader could talk about how an altcoin is going "to the moon!"
NFT
A non-fungible token (NFT) is a cryptocurrency token that is indivisible and unique. NFTs offer myriad options for creating and trading digital assets — such as original artwork and blockchain-integrated collectible.
Noob
Newcomers are frequently described as "noobs" by industry insiders. If you are this person, you may want to sit back and observe before "jumping in with both feet." Digital currencies are highly volatile, so those who are newer to these assets should keep their risky nature in mind.
POW
POW is an acronym for "proof of work," which is a system of proving that a digital currency's transactions have been verified. Many digital currencies, including bitcoin, use POW. Under such a system, miners must do "work" that is difficult for them to contribute, but easy for the broader network to verify.[12]
Miners are usually rewarded for verifying transactions by receiving units of a digital currency.
POS
POS stands for "proof of stake," which is another method of confirming transactions. The digital currencies that use this approach to verification frequently provide all their digital tokens up front, and miners are selected based on how many units they have (their stake).[12] In these cases, users who confirm transactions, sometimes referred to as "forgers," receive transaction fees for their contributions.
Private Key
A private key is a piece of information—presented as a string of numbers and letters—that an investor can use to access their digital currency.[13]
Pump and Dump
A "pump and dump" is a type of investment scheme where a market participant—or several—work together to inflate the price of an asset so they can sell it when its value is artificially high. This practice may be particularly pervasive when it comes to digital currencies, as traders can easily get together using Telegram groups with the goal of causing specific cryptocurrencies to rise sharply in value.[14]
Rekt
The term "rekt" is crypto trader slang for "wrecked." Basically, it means that a trader lost substantial amounts of money.[15]
Satoshi Nakamoto
Satoshi Nakamoto is the pseudonym for the creator of bitcoin, and more than one individual has claimed to be Nakamoto. However, none of these claimants have managed to convince the broader cryptocurrency community that they are, in fact, the creator of bitcoin.
Short/Shorting
Shorting an asset, also known as taking a short position, means making a bet that the asset will fall in value. There are several methods that traders can use to short digital currencies, including futures, options and margin trading.[16]
Investors considering this method should keep in mind it involves a lot of risk, especially with cryptocurrencies because of their volatile nature.
Whale
The term "whale" is used to describe a trader who makes sizable bets. This term is a good one to know because market participants with the ability to execute very large transactions can potentially manipulate the market—or "make waves in the ocean."
White Paper
The developers who create digital currencies usually provide white papers for these innovative assets. These documents generally offer comprehensive information on the digital token in question, as well as its underlying technology.
For example, the bitcoin white paper provided information on a "peer-to-peer electronic cash system."[17] Investors who are considering taking part in ICOs can benefit greatly from reviewing any available white papers on the subject.