Guide to Cryptocurrency Terminology
Published on: 11 Apr 02:12
Half the battle of understanding cryptocurrency is in the verbiage. Understanding what the terms are will go a long way in promoting your knowledge of what cryptocurrency is. cDuel is a cryptocurrency trading simulator game that allows you to practice trading cryptocurrency in a risk-free environment. You can play against others and track your progress. Visit us online today!
Cryptocurrency is a digital or virtual currency that uses cryptography (basically encryption for security). This regulates the units of currency and verifies transactions, all while operating independent of a traditional bank.
Cryptography is a security method that makes ordinary information unreadable. This promotes confidentiality, protects the sender of the message, and prevents theft and alterations to blockchains.
Altcoin is the general term for any cryptocurrency except Bitcoin.
Bitcoin is a type of cryptocurrency that has been around for 10 years. Like any form of cryptocurrency, it is a decentralized digital currency that uses a peer-to-peer network to perform transactions. It is also the most valuable of the cryptocurrencies today.
Bitcoin cash, different from Bitcoin, was invented to make Bitcoin a bit more spendable. It’s a hard fork (half a block) of Bitcoin that helps to decrease fees with Bitcoin transactions by increasing block size.
Block is a sequence of transactions. It points to the block that came after it and cannot be modified once verified.
Blockchain is a peer-to-peer network that maintains a shared state (which is the sequence of transactions for bitcoin and other cryptocurrencies) and is secured by cryptography. A blockchain is what allows cryptocurrency to exist.
A ledger is a record of transactions (both in the fiat currency world and the cryptocurrency world). In the cryptocurrency world, a ledger is another name for a blockchain. They are the digital lists of cryptographically hashed data validated through the group consensus.
Hashing guarantees the integrity of the data stored in the blocks and catches any tampering because the hashing would have to change if the data were to be changed, which shouldn’t happen once the data has been added to the blockchain. Hashing is a mesh of letters and numbers that makes storing and finding information quicker and easier.
A hash rate is the rate at which cryptocurrency mining rigs are operating and is measured in hashes per second.
Census protocol is the rules for generating a new block, and usually regards the rewards to the miner for creating it. This gives the miners incentive for creating it.
Proof of work (PoW) is the name for the census protocol for cryptocurrencies that rewards the miners based on their contribution to the created block.
Proof of stake (PoS) is almost the same as PoW, except it’s based on the amount of cryptocurrency a miner holds. The more cryptocurrency a miner owns, the larger payout he or she receives for the solved block.
Mining is when new blocks are generated by solving a complex math problem, reviewing it, and verifying the information, thus generating a new blockchain.
Miners are those who generate the new blocks are rewarded bitcoins for creating the blocks. This is the only way new bitcoins can be created. Anyone can be a miner, and a new block is generated about every 10 minutes.
A mining rig is the name for the computing system that is processing proof of works for blockchains. These require an incredible amount of processing power.
A node is a computer that has a copy of the blockchain and is working to maintain the copy.
A fork in the cryptocurrency world is where a blockchain is split into two separate chains. This happens when two computers created a block for the same recording at the same time. One group of users receives the first block and then a second group of users receives the second block. The longer block is identified as the correct one, so the shorter one will be abandoned. This can occur when new rules are put into a blockchain’s code.
Tokens are what cryptocurrency companies issue for their currency of their projects. They typically represent a certain amount of cryptocurrency (similar to poker chips) and are usually issued on top of a blockchain.
Shilling or pumping is essentially marketing. It’s when someone advertises cryptocurrency.
Stable coin is a cryptocurrency with low volatility that can be used to trade against in the overall market.
FOMO stands for “fear of missing out.”
FUD stands for “fear, uncertainty, and doubt.” This is usually made-up talk to make you question your decisions or the market so the price of the cryptocurrency will drop. The person doing this is called a FUDster.
ICO (Initial Coin Offering) is what an IPO (Initial Public Offering) is to the tangible world. Startups issue their own tokens in exchange for ether. This is essentially crowdfunding just on a digital platform.
Pump and Dump is when an altcoin is popular, its price goes up, and then it crashes.
A bagholder is someone who is left holding the pump and dump. It is also used for someone holding a coin that is low in value.
A software wallet (often just called your wallet) is where you store your cryptocurrency, which exists simply as a software file on your computer.
A hardware wallet is where you can store your cryptocurrency safely and securely.
Cold storage is another security measure for cryptocurrency where you store your cryptocurrency offline, safe from hackers.
HODL stands for “hold on for dear life.” However, it began as a misspelling of hold. Cryptocurrency users use this term to refer to when a cryptocurrency is held onto no matter what the price does.
These cryptocurrency terms are a bit easier to understand since many are used currently when referring to trading tangible monies, such as the US dollar or the Euro.
Exchange is where you buy and sell cryptocurrencies. However, there is no physical location; all of the cryptocurrencies are traded online.
Fiat money is not necessarily an exclusive cryptocurrency term. Fiat money has been around since the 11th century when China introduced it. Fiat money is money that only has value because the government says it does. It’s not tied to any precious metal. The US dollar is a fiat currency. Cryptocurrencies are not fiat currencies because they have no value by a central authority.
Whale is a slang term for someone who owns an insane amount of cryptocurrency.
Limit orders (either limit buy or limit sell) are orders placed by traders to either buy or sell a cryptocurrency when the price reaches a certain amount.
Sell wall or a buy wall shows the trader the current limit points for buying and selling.
Market order (either market buy or market sell) is the actual purchase of the cryptocurrency on the exchanges at the current price.
Margin trading uses borrowed funds to trade. You can borrow money against your current funds to trade cryptocurrency on margin. This is the same with fiat money as well.
Going long or going short is in reference to trading on the margin. Going long is a margin trade that turns a profit if the price goes up. Going short is turning a profit if the margin price goes down.
Bullish market is when you think the market is going to increase.
Bearish market is when you think the market is going to decrease.
ATH stands for All-Time-High for the price of your cryptocurrency.
Arbitrage is when a cryptocurrency is priced differently on two different markets and you then take advantage of this. This is used in the real stock market as well.
ROI stands for return on investment, which is how we measure our trading success.
The key is to think of cryptocurrency like you do normal currency. We are so used to the terms, deposit, withdrawal, loans, accounts, etc., that we don’t even think about them. Once you are accustomed to this new language, it will be easy to understand. It just takes time and practice, which is what cDuel is here for. We offer you the time to practice on cryptocurrency so you can have a thorough knowledge before you invest. You can track your performance over time as you trade using real cryptocurrency exchange values. And the best part is — it’s free! When you register with cDuel, you’ll get $100,000 of starting capital to use, more than enough to safely grow your knowledge base of trading cryptocurrency. And with our cryptocurrency trading simulator, you’ll have fun! Track your progress as you try to maximize your ROI on a global leaderboard. What you waiting for? Sign up with cDuel today!