Cryptocurrency Exchange Glossary
The shortened word to describe alternative cryptocurrencies that were launched following the success of Bitcoin and Ethereum. Altcoins are often designed as iterations of existing cryptocurrencies in a bid to overcome their perceived limitations.
If a cryptocurrency investor spots a digital asset with a falling price on a downtrend, this is known as a bearish market. A bearish opinion on a cryptocurrency is that the price of the asset will decline.
Said to be the brainchild of an individual that goes by the pseudonym Satoshi Nakamoto, Blockchain is an incorruptible digital ledger capable of recording anything of value and is used to underpin popular crypto coins such as Bitcoin.
A cryptocurrency broker pairs buyers and sellers of cryptocurrencies, providing a highly flexible and convenient platform for trading digital assets that’s generally faster than a cryptocurrency exchange.
A CFD or ‘contract for difference’ is a contract between two people, a buyer and a seller. The seller will pay the buyer the difference between the current value of the contract versus the value at which it was originally bought at. This basically gives speculators access to a wider range of markets because you do not need to own the underlying asset. Simply speculating on the price by buying a CFD allows you to take advantage of the price movement without owning the asset.
A term used to describe the way companies often throw the ‘blockchain’ buzzword into their conversations in a bid to get investor attention. It is inspired by cloudwashing, which used to describe the similar scenario regarding cloud computing.
Investors in high-value cryptocurrencies are urged to store their digital assets in cold storage. This means the use of cold cryptocurrency wallets, where the private keys to your assets are generated offline. These can be USB devices, hardware wallets or physical paper wallets.
These decentralised applications are open-source apps designed to operate on a blockchain network rather than a single device. All data and records of operation within the app are cryptographically stored to avoid central points of failure
As centralised systems rely on servers, decentralised systems depend on peer-to-peer networks based on a community of users. The blockchain protocol is a primary example: designed to process transactions across a distributed, decentralised network without the need for third-party brokers to oversee the transaction.
This is a consensus of replicated, shared and synchronised digital information, spread across multiple nodes (or devices) within a peer-to-peer network. A distributed ledger operates without a centralised administrator.
This stands for the Ethereum Virtual Machine. An EVM allows Ethereum-based developers to test new Ethereum-powered software in an Ethereum runtime environment before its mainstream adoption.
A cryptocurrency exchange is an online platform that allows individuals to exchange one digital asset for another, or for a specified fiat currency. It is like a traditional currency exchange at a bank or airport. Crypto exchanges normally charge a fee for each transaction.
Fiat money is currency that a national government has deemed to be legal tender. The value of fiat currencies is derived based on the level of supply and demand.
Due to fervent start-up activity based around blockchain technology, Flockchain – a full-service digital design consultancy in Scotland – was formed, aimed at helping public and private sector organisations to implement blockchain technology that enhances user experiences, customer security and their strategic goals.
Short for Fear Of Missing Out. It is a personal feeling that many financial and cryptocurrency investors experience. For example, when investors saw people make huge profits on Bitcoin in 2017, FOMO caused many to impulsively buy Bitcoin at the top of its price or hold their position during a decline after making large profits (only to lose some or all of their profits).
Forex is a term to describe the foreign exchange market, it is shorted to ‘For-Ex’, ‘Forex’ and can also be referred at as the FX market. It is essentially the market you can exchange any currency and the rate at which you can do so.
Cryptocurrency forks are improvements or deviations from a crypto’s original form and tend to be planned for or influenced by the core development team of a crypto project.
Short for Fear, Uncertainty and Doubt. These feelings are often evoked about cryptocurrencies through social media or mass media. Sometimes ‘fake news’ can create a sense of hysteria or unsubstantiated bluster about a cryptocurrency. Meanwhile an industry expert’s ‘opinion’ can also induce FUD, leading to the price of a digital asset falling.
A hard fork is a permanent deviation from an existing version of a blockchain. New nodes or transactions made on the new hard-forked blockchain are incompatible with those on the existing blockchain. Bitcoin Cash and Ethereum Classic are two prime examples of hard forks – aimed at improving scalability issues of both Bitcoin and Ethereum.
Hardware cryptocurrency wallets store the private keys to your digital assets securely within a handheld device. These are also known as cold wallets, as they allow cryptocurrency investors to protect their assets offline away from the prying eyes of cyber-criminals.
ICO stands for Initial Coin Offering, while ITO stands for Initial Token Offering. While ICOs offer genuine cryptocurrencies for purchase, ITOs offer tokens that aren’t new cryptocurrencies but more like tools that enable different functions on a blockchain e.g. revenue sharing or for use with crypto-based iGaming.
Short for market capitalisation, the market cap refers to the total fiat market value of a cryptocurrency’s supply of coins. You can calculate this by multiplying an asset’s available supply of coins with the current market price of a single coin.
The mining of cryptocurrencies involves competing with other cryptocurrency miners to solve complex puzzles using cryptographic hash functions that are linked to blocks containing transaction data. Once these puzzles are solved, the new blocks are formed, verified and added to the digital ledger on the respective blockchain.
Mooning relates to an extreme spike in the value of a cryptocurrency. You’ll more than likely hear this term more when investing in new altcoins that have significant volatility in the cryptocurrency markets.
Over the Counter (OTC)
A private key is arguably the most important aspect of a cryptocurrency wallet. It is a highly complex form of cryptography that permits users access to their digital assets. Put simply, without access to a private key, digital assets stored on a hardware wallet cannot be compromised by cyber-hackers.
In the cryptocurrency sector, peer-to-peer relates to the exchange or transfer of data or assets between parties without the need for a central authority.
Proof of Stake
Proof of Stake (PoS) is a concept that states that the number of new blocks an individual can mine or validate should be aligned with the number of coins he or she owns. In simple terms, the more of a crypto coin owned by a miner, the greater mining power they have. Peercoin was the first cryptocurrency to adhere to the PoS concept.
Proof of Work
Proof of Work (PoW) is the original consensus algorithm in a blockchain network. It is used to authorise and generate new blocks to the blockchain.
Pump and Dump
A pump and dump cryptocurrency scheme is a scam designed to drive up the price of a digital asset in the crypto marketplace. Digital con-artists use social media to drive up the hype surrounding a cryptocurrency and will often seek the help of a whale to ramp up volume, catching the eye of naïve, impulsive investors with the FOMO mentality.
A satoshi is the smallest unit of the Bitcoin cryptocurrency to be recorded on the blockchain. One satoshi equates to one hundred millionth of one Bitcoin (0.00000001 BTC).
The issuance of a security token is an innovative form of financing that allows companies to raise funds from investors by selling a digital share of its equity, assets or revenue that is wholly regulated. Put simply, security tokens offer crypto communities access to low-cost capital whilst remaining compliant with securities legislation.
Sharding has been utilised for many years to partition data linearly within a single database. As nodes on blockchain networks grow, resulting in longer transaction confirmation times, sharding alleviates these scalability issues by creating subsets of nodes within a network that only process transactions specific to that shard. This has greatly enhanced throughput on popular blockchains such as Ethereum.
Smart contracts are designed to help users exchange money, shares, property or anything else of value without having to avail themselves of a third-party or middleman. These contracts are defined with the rules and conditions that must be met for an exchange to take place.
A soft fork is designed to improve an element of an existing cryptocurrency that many are dissatisfied with. It is often described as “backwards compatible”, as old transactions can be recognised by new nodes.
A software cryptocurrency wallet is one that is designed to operate on desktop, laptop and smartphone devices. They are computer programs that are installed locally on devices. The benefits are that they offer easy access to your digital assets, but they also pose security risks with many reports of software wallets being compromised by cyber-hackers.
Short for Technical Analysis. Just as financial traders in the stock and forex markets use technical analysis to understand and isolate market trends, cryptocurrency traders use TA to understand support and resistance points and establish whether a digital asset is over-valued or under-valued.
If a cryptocurrency ‘tanks’, that simply means the market value of the digital asset in question is falling sharply.
Trade volume is the amount of trades being taken and at what size they are. If you have 10 traders all buying one bitcoin versus 1 buyer who is buying 100 bitcoins, the single trader would have the higher trade volume.
A crypto token is a specific fungible and tradable asset or utility that is located within a blockchain. An investor can have a crypto token that represents so many utility points on a blockchain e.g. the number of chips available for play on a crypto-based iGaming site or the number of hours of streaming content available on a content-sharing blockchain.
The total supply of a cryptocurrency is the number of coins already in circulation and any newly-mined coins that are not yet in the marketplace. The figure is normally the same or higher than a cryptocurrency’s circulating supply.
A cryptocurrency wallet is a digital wallet designed to receive, transfer and store cryptocurrencies such as Bitcoin and Ethereum. If you wish to use any form of cryptocurrency, a crypto wallet is essential as it provides you with an address from which to send and receive your digital assets.
The term ‘whale’ is often used in the cryptocurrency industry to refer to investors or funds that own high volumes of high-value cryptocurrencies such as Bitcoin and Ethereum.
Cryptocurrencies with impending ICOs are increasingly opting for whitelist registrations ahead of launch. This is to help them get an idea of the appetite for the ICO among investors and provide investors with updates on the activities of the ICO in question.
Cryptocurrency whitepapers are documents shared by start-up cryptocurrencies. They are written to outline the intentions of their new digital asset and encourage crypto investors to participate when their start-up launches its ICO.