Cryptocurrency Glossary

An alphabetical listing of common cryptocurrency words, phrases and slang broken down into easy-to-understand definitions.

Altcoin -Alternate Coin.  A cryptocurrency that is an alternative to Bitcoin.  Because Bitcoin is the first, and primary, cryptocurrency, Altcoin refers to all other cryptocurrencies.

Blockchain – A digital ledger in which transactions made in bitcoin or another cryptocurrency are recorded chronologically and publicly.  Check out this video explanation of the blockchain.

Circulating Supply – Here is how the popular exchange Coinbase uses different supply terms:

  • Circulating Supply is the best approximation of the number of coins that are circulating in the market and in the general public’s hands.
  • Total Supply is the total amount of coins in existence right now (minus any coins that have been verifiably burned).
  • Max Supply the best approximation of the maximum amount of coins that will ever exist in the lifetime of the cryptocurrency

Cryptocurrency – a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.

DAPP (or DApp) – Distributed Application.  A DApp has its backend code (the program) running on a decentralized peer-to-peer network. Contrast this with an app where the backend code (the program) is running on centralized servers.  DAPPs are one of the elements that makes Ethereum, and platforms like it, so appealing.

Digital Scarcity – Shortage of supply in a digital environment.  When we think of a digital environment, we think of things that can be easily duplicated and made en mass .  Bitcoin and the blockchain introduced the concept of Digital Scarcity.  In order to duplicate a Bitcoin (and effectively cheat the system) you would need to duplicate the entire blockchain instantaneously – an impossible feat with modern computing.  Here’s a good article on Digital Scarcity.

Distributed NetworkDistributed networking is a distributed computing network system, said to be distributed when the computer programming and the data to be worked on are spread out across more than one computer. Usually, this is implemented over a computer network.

EVM – Ethereum Virtual Machine.  It is designed to serve as an environment for smart contracts based on Ethereum. This technology can be used to automatically conduct transactions or perform specific actions on the Ethereum blockchain.

Exchange – An exchange is a digital marketplace where traders can buy and sell cryptocurrencies using different fiat currencies or altcoins. An exchange is an online platform that acts as an intermediary between buyers and sellers of the cryptocurrency.  They work in a manner similar to banks. One first deposits amounts of money into their account in the currencies supported by the exchange. They then use these balances to trade with other users of the exchange.  You can then withdraw your money or move your cryptocurrencies to a wallet or computer off of the exchange.

FaucetA faucet is the name given to any website or app which gives away free cryptocurrency. There are many bitcoin faucets on the net, as well as many similar service for other coins. At most faucet sites a user may claim their free coins by providing a payment address and completing a Captcha puzzle to prove that they are human.  Their purpose is to introduce users to bitcoin, get traffic and make money using a variety of methods.

Fiat Currency – Fiat money has been defined variously as:

  • Any money declared by a government to be legal tender.
  • State-issued money which is neither convertible by law to any other thing, nor fixed in value in terms of any objective standard.
  • Intrinsically valueless money used as money because of government decree.

While gold-backed representative money entails the legal requirement that the bank of issue redeem it in fixed weights of gold, fiat money’s value is unrelated to the value of any physical quantity. A coin is fiat currency to the extent that its face value, value defined in law, is greater than its market value as metal.

Fork – Just like the popular phrase “a fork in the road”, when something splits into two alternative pathways it is called a fork. There are a few general types of forks, but the two that have been in the news recently with Bitcoin are the Hard Fork and the Soft Fork.  Here are some general ideas about the two:

  • Hard Fork – A hard fork is a software upgrade that introduces a new rule to the network that isn’t compatible with the older software. You can think of a hard fork as an expansion of the rules. Computers that continue running the old version of the software will see the new transactions as invalid. To switch over to the new chain and to continue to mine valid blocks, all of the nodes in the network need to upgrade to the new rules.  This creates a split and a whole new coin is created.  An example would be Ethereum versus Ethereum Classic.  One path keeps the original set of rules (Ethereum Classic) while the other path adopts the new rules and goes in a different direction.
  • Soft Fork – Occasionally upgrading to the latest version is optional.  Meaning you could keep running the old version and still be part of the same network as the users who do upgrade. This is known as a ‘soft fork’.  This would not create two branching chains.

FOMO – Widely used slang term on the web that means “Fear Of Missing Out”. In terms of trading cryptocurrency it is the sensation that you need to get on the train when the price of something starts to skyrocket.

FUD – Another slang term used in online trading forums that means “Fear, Uncertainty, Doubt”.  Baseless negativity spread intentionally by someone that wants the price of something to drop.

Hash or Hash RateThe hash rate measures how powerful a Bitcoin miner’s machine is. Specifically, it measures the number of times a hash function can be computed per second. The miner’s expected profit is directly proportional to the hash rate.

ICOInitial Coin Offering.  An unregulated means of crowdfunding via cryptocurrency. The term is often confused with ‘token sale’ or crowdsale, which refers to a method of selling participation in an economy, giving investors access to the features of a particular project starting at a later date. ICOs, on the other hand, sell a right of ownership or royalties to a project. The coin in an ICO is a symbol of ownership interest in an enterprise—a digital stock certificate.

Innovation Gap – A protocol or new technology that depends on some new thing that has never been done before.  There are a variety of ICOs that have launched with innovation gaps, meaning they do not work out of the gate.  They rely on some new innovation in order to actually go to market.   Innovation gaps explained by Cedric Dahl.

Market Cap – The value of a cryptocurrency that is traded on an exchange, calculated by multiplying the total number of coins in circulation by the current price.  Head to Coin Market Cap for a current listing of coin prices and market caps.

MiningBitcoin mining is the processing of transactions in the digital currency system, in which the records of current Bitcoin transactions, known as a blocks, are added to the record of past transactions, known as the block chain

Scarcity – The state of being scarce or in short supply.  See Digital Scarcity.

Segwit – SegWit is the process by which the block size limit on a blockchain is increased by removing signature data from Bitcoin transactions. When certain parts of a transaction are removed, this frees up space or capacity to add more transactions to the chain.  Here’s more info on SegWit from Ameer Rosic.

Smart Contract – Smart contracts help you exchange money, property, or anything of value in a transparent, conflict-free way while avoiding the services of a middleman. They are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code.  Smart contracts define the rules and penalties around an agreement in the same way that a traditional contract does.  In addition, they automatically enforce those obligations.

Wallet – A wallet is a collection of private keys used to make transactions on a cryptocurrency network.  May also refer to client software used to manage those keys.

Whale – Someone who owns a massive amount of cryptocurrency.

Whitepaper – An informational document issued by a company to promote or highlight the features of a solution, product or service. White papers are sales and marketing documents used to entice or persuade potential customers to learn more about or purchase a particular product, service, technology or methodology. White papers are designed to be used as a marketing tool before a sale, and not as a user manual or other technical document developed to provide support to the user after making a purchase. (via Investopedia)