Let’s start with the basics before we move onto an A to Z Crypto Lingo Cheat Sheet
Crypto-Currency:
Virtual currency exchanged on the blockchain. It can be coins (like Bitcoin, ETH, Doge) or tokens. Coins act like traditional money, while tokens resemble vouchers.
Blockchain:
A decentralized ledger that records transactions. After cryptocurrency is transferred between wallets, it becomes a “block” in an encrypted chain of transactions.
Bitcoin:
The first and most widely known decentralized cryptocurrency.
Ethereum:
An open-source, decentralized blockchain platform for smart contracts and decentralized apps (DApps).
Ether (ETH):
The native cryptocurrency of the Ethereum platform.
Wallets:
Digital tools to store, send, and receive cryptocurrencies. Wallets may be hardware (physical devices) or software (apps/online platforms). They generate two types of keys:
- Public keys: Like bank account numbers, used to receive crypto.
- Private keys: Like passwords, used to send crypto.
Cold Wallet:
A wallet not connected to the internet, offering enhanced security.
Wallet Seed Phrase:
A set of words used to recover a cryptocurrency wallet.
Smart Contracts:
Self-executing programs on a blockchain that automatically run when predefined conditions are met. For instance, in a house purchase, the smart contract could hold funds until inspection is completed, then release them to the seller.
Mining:
The process of using computational power to verify blockchain transactions and generate new Bitcoin. Miners are compensated with Bitcoin for their efforts.
Gas Fee:
The cryptocurrency payment required to execute a transaction or smart contract on a blockchain.
Liquidity Pools:
Smart contract-based pools containing two types of tokens (e.g., ETH and a new token). These pools enable token swapping, with liquidity providers earning fees based on their contributions.
Decentralized Finance (DeFi):
A financial system that eliminates third-party intermediaries like banks and brokers, allowing for direct peer-to-peer transactions using cryptocurrency and blockchain technology.
OK, you’ve got some of the basic terminology, so let’s give you an A to Z. Don’t panic, you don’t need to know all this right now. Work on letting the terms sink in and bookmark the page to come back when you need it.
A to Z Crypto Lingo Cheat Sheet
Accumulation Phase:
This refers to the period when institutional investors buy large amounts of undervalued cryptocurrencies over the mid-term. To avoid driving up the price, they place smaller orders gradually, often over months. Accumulation phases typically occur after market crashes and are marked by sideways price movements, preceding market rallies.
Admin Keys:
Admin keys introduce centralization to otherwise decentralized applications. These keys allow developers to access balances or modify platform rules. While intended for security, they can make users vulnerable to scams or cyber-attacks. The most secure protocols are those without admin keys.
Aggregator:
Similar to search engines, aggregators collect and display data from various DeFi platforms. They offer a comprehensive view of the crypto landscape, making them valuable for analysis. Examples include DEX aggregators like 1inch and NFT aggregators like NFTrade.
Accumulation Phase:
This refers to the period when institutional investors buy large amounts of undervalued cryptocurrencies over the mid-term. To avoid driving up the price, they place smaller orders gradually, often over months. Accumulation phases typically occur after market crashes and are marked by sideways price movements, preceding market rallies.
Admin Keys:
Admin keys introduce centralization to otherwise decentralized applications. These keys allow developers to access balances or modify platform rules. While intended for security, they can make users vulnerable to scams or cyber-attacks. The most secure protocols are those without admin keys.
Aggregator:
Similar to search engines, aggregators collect and display data from various DeFi platforms. They offer a comprehensive view of the crypto landscape, making them valuable for analysis. Examples include DEX aggregators like 1inch and NFT aggregators like NFTrade.
Airdrop:
An airdrop is a promotional campaign in which project founders distribute free tokens to certain users. Participants can qualify by signing up, joining a whitelist, or holding another token. Airdrops help build awareness, as recipients are not pressured to sell the free tokens, and trading volume may attract additional buyers.
BEP-20:
BEP-20 is the token standard for cryptocurrencies within the Binance Chain ecosystem. It enables seamless swapping of BEP-20 tokens and the use of decentralized applications on Binance. It is comparable to Ethereum’s ERC-20 standard.
Bid-Ask Spread:
In limit orders, the bid-ask spread refers to the gap between a buyer’s offer and a seller’s asking price. On larger centralized and decentralized exchanges, this spread is smaller due to higher trading activity. Bid-ask spreads vary across platforms based on liquidity and demand.
Black Swan Event:
A black swan event is an unexpected negative occurrence that significantly impacts prices, such as war, changes in monetary policy, large-scale cyberattacks, stablecoin collapses, or housing market crashes. For value investors, these events can present attractive buying opportunities.
Block Reward:
A block reward is the cryptocurrency earned by users who validate transactions or contribute to blockchain security. The amount depends on factors like token supply and consensus mechanisms. In proof-of-work systems, these are mining rewards, while in proof-of-stake systems, they are staking rewards.
Bug Exploit:
A bug exploit is a vulnerability in a smart contract that allows unauthorized access to funds. Depending on the exploit’s severity, hackers could drain assets and cause permanent price crashes. To prevent this, platforms perform security audits, updates, and offer bug bounties.
Token Burn:
Burning tokens involves permanently removing them from circulation to control supply and reduce inflation. If tokens cannot be destroyed, they are sent to an inaccessible “burn” wallet. This process helps maintain sustainability for tokens with unlimited or flexible supply.
Confirmation:
When multiple validators propose versions of a blockchain, confirmations occur when enough validators include your transaction in their version, making it part of the official blockchain. Once your transaction has sufficient confirmations, it is finalized and added to the immutable ledger.
Consensus Mechanism:
A consensus mechanism is a set of rules used to verify and validate cryptocurrency transactions. Common models include proof-of-work (based on computing power) and proof-of-stake (based on token holdings). The goal of a consensus mechanism is to incentivize validators to secure the network, prevent centralization, improve efficiency, and minimize energy consumption.
dApp (Decentralized Application):
dApps are blockchain-based platforms that typically utilize smart contracts for financial services. To use a dApp, you need to connect a decentralized wallet on the appropriate network (usually Ethereum), select an action (such as staking or borrowing), pay the necessary network fees, and complete the transaction.
Decentralized:
In decentralized blockchain networks, control is distributed among many users, preventing dominance by any single entity. With no central authority, these platforms are often unregulated, autonomous, globally accessible, and operate on trustless systems. Consensus is achieved through fault-tolerant rules and immutable ledgers.
Degen:
“Degen” refers to traders who engage in highly speculative and risky investments, often driven by emotion or hype. These individuals are willing to lose significant amounts in pursuit of the next big win, such as meme coins, micro-cap tokens, or NFTs. They rely on the hope that someone else will pay a higher price.
DEX (Decentralized Exchange):
A decentralized exchange (DEX) like UniSwap v3 is a platform that enables cryptocurrency trading through smart contracts and liquidity pools. Unlike traditional exchanges, DEXs allow buyers to fulfil orders even when there are no matching sellers at their price. Liquidity providers earn passive income by lending assets to the platform.
Diamond Hands:
“Diamond hands” describes individuals who hold onto their assets through market volatility, refusing to sell despite price drops. They treat their assets, such as cryptocurrencies, like valuable commodities (diamonds or gold), aiming to profit long-term or protect against inflation. The opposite of “diamond hands” is “paper hands,” who sell under pressure.
ERC20:
ERC20 is the standard for tokens used within the Ethereum ecosystem. Most applications built on Ethereum that utilize utility tokens follow the ERC20 standard. As Ethereum is the largest decentralized application (dApp) blockchain, users can easily swap hundreds of ERC20 tokens on decentralized exchanges.
Fan Token:
Fan tokens are issued by popular sports teams to create membership-based models. By purchasing fan tokens, supporters gain access to exclusive perks such as game tickets, discounts, rewards, voting rights, and VIP experiences. The value of these tokens can fluctuate based on the team’s performance, similar to betting.
Flippening:
The term “Flippening” refers to the potential event where Ethereum surpasses Bitcoin in market capitalization. As Bitcoin’s dominance declines and Ethereum’s rises, some believe this shift could occur, marking the end of Bitcoin’s influence on cryptocurrency prices.
Fork:
A fork is a new version of a blockchain, often created by different teams. Forks may feature different consensus models, transaction fees, rules, and ecosystems. These new blockchains do not accept the previous version of the original blockchain, so users must update to the latest version to participate.
Futures:
In a futures contract, traders agree to exchange assets at a future date for a price set when the contract begins. The long-term nature of these contracts allows for price fluctuations and leverage, making futures a speculative form of trading. At the contract’s expiration, traders must buy or sell regardless of profit or loss. In contrast, options contracts do not require this obligation.
Gas Fees:
Gas fees are small payments required to execute transactions and smart contracts on decentralized applications. These fees apply to any service involving cryptocurrency or NFTs on smart contract blockchains, with each blockchain having its own fee structure and processing speed.
Governance:
Governance refers to the decision-making processes within a blockchain community. Developers propose improvements, and node operators vote on them. If a proposal is widely supported, it becomes part of the blockchain’s scheduled updates.
Hash Rate:
In proof-of-work blockchains like Bitcoin, the hash rate represents the total computing power used to validate transactions. A higher hash rate indicates stronger network security but may reduce efficiency. A hash is a one-way encryption that converts block data into a fixed-length alphanumeric code.
HODL:
HODL (Hold On for Dear Life) is a long-term investment strategy. It suggests that holding onto investments over time, even through market fluctuations, generally leads to selling at a higher price. While effective for established projects, it carries higher risks with smaller projects that may not survive long term.
IDO (Initial DEX Offering):
An IDO is a project’s token launch on a decentralized exchange. For Ethereum-based tokens, buyers can use a custom contract address to purchase the token on any Ethereum exchange. Since many tokens take months to appear on regulated exchanges (if they ever do), IDOs offer early investment opportunities.
Interoperable:
By default, blockchains cannot communicate with each other. However, interoperable or cross-chain protocols enable different blockchains to interact and share infrastructure. This allows developers to use existing programs without building from scratch. Examples of interoperable technologies include oracles and Ethereum Virtual Machine (EVM)-compatible code.
KYC (Know Your Customer) & AML (Anti-Money Laundering):
KYC and AML procedures are mandated by governments and implemented by regulated companies to verify the identity of individuals and ensure they pose no legal risk. The process involves submitting identification, proof of address, and undergoing screening checks. While KYC approval is essential on custodial exchanges, it does not guarantee that your account won’t be suspended.
Launchpad:
Launchpads function like aggregators, helping users discover upcoming projects across various sectors such as cryptocurrencies, DeFi protocols, blockchain games, and NFT collections. Some launchpads issue utility tokens to control access to pre-sale participation.
Layer:
A layer refers to different levels within blockchain infrastructure. Foundational layers are based on Internet technology, while upper layers consist of applications. Most cryptocurrencies and blockchains are categorized as Layer 1.
Leverage:
Leverage amplifies potential returns by allowing users to borrow cryptocurrency for trading, similar to compound interest. However, higher yields come with increased liquidation risk, as small price changes can lead to significant losses. Leverage can help traders cover fees and profit from minor price fluctuations.
Liquid Staking:
To enhance token circulation, some DeFi dApps offer liquidity services. Liquid staking allows users to stake their tokens while receiving equivalent tokens that can be utilized in other DeFi applications. While it’s possible to cash out, those tokens are necessary to un-stake later.
Liquidity Mining:
Liquidity mining involves the tokenization of liquidity pools. Liquidity providers earn interest or fees along with Liquidity Provider (LP) tokens. Mining LP tokens enables lenders to redeem their funds at any time, transfer ownership of the pool, or stake these tokens for additional returns. It’s termed “mining” because LP tokens are initially scarce, have a fixed supply, and are often deflationary.
Liquidity Pool:
Liquidity pools are used for token swaps on decentralized exchanges (DEXs). They consist of shared funds from two tokens provided by lenders, which traders use to exchange with one another. Liquidity providers earn rewards in proportion to their contribution and can withdraw their funds at any time, unlike traditional lending.
Market Cap:
Market capitalization reflects the total market value of a token. It is calculated by multiplying the current price of the coin by the total number of tokens in circulation. Larger market caps tend to indicate more stable prices, while micro-cap coins are generally more volatile.
Market Maker:
A market maker is an algorithm used by exchanges to efficiently match buy and sell orders. This allows traders to purchase coins at competitive prices, as market makers connect them with sellers offering similar prices. When liquidity is low, exchanges utilize liquidity pools and automated market makers (AMMs) to fulfill orders.
Metaverse:
The metaverse encompasses a range of technologies, including blockchain, aimed at making the Internet more interactive, interconnected, decentralized, and user-focused. It integrates DeFi applications, virtual and augmented reality (VR & AR), artificial intelligence, the semantic web, and digital asset tokenization (NFTs). The metaverse offers innovative ways to play, learn, work, socialize, and explore.
Mint:
Minting an NFT involves creating a non-fungible token and putting it up for sale. The process includes finding an NFT marketplace, creating your NFT listing, and publishing it. After a small initialization fee, you can mint unlimited NFTs without further costs at any sale price.
You can mint NFTs without owning the collection by visiting the project’s website, clicking “Mint,” paying the network fees, and allowing smart contracts to mint the NFT directly to your wallet. If purchasing from an NFT marketplace, the tokens are usually pre-minted.
Multisig (Multi-Signature):
Multi-signature (multisig) platforms enable multiple users or devices to manage a wallet according to predefined policies. For instance, a multisig setup with five users might require three approvals for transactions and all five to add new users. Although each participant has admin rights, actions are executed only when there’s sufficient consensus.
NFT (Non-Fungible Token):
NFTs are unique tokens represented by contract addresses, known as ERC-721 on Ethereum. They are associated with digital collectibles that hold real value in cryptocurrency. While NFTs can represent various media, each exists on a single blockchain, meaning each network serves as a separate NFT marketplace.
Node:
A node refers to any computer participating in a blockchain network. You become a node by creating a crypto wallet and using it for transactions. There are full nodes, which store complete copies of the blockchain, and validator nodes, which help maintain network integrity.
Not Your Keys, Not Your Coins:
The phrase “Not Your Keys, Not Your Coins” highlights that security cannot be guaranteed without access to your wallet’s private keys. Sharing these keys allows others to control your balance as if it were theirs. This is why custodial wallets from third-party exchanges can be risky.
Off-Ramp (and On-Ramp):
Crypto on-ramps and off-ramps are payment methods facilitating the conversion between cryptocurrencies and fiat money. On-ramps allow users to purchase cryptocurrencies with fiat, while off-ramps enable exchanges back to fiat for withdrawal. Currently, decentralized on- and off-ramps are not yet available.
Off-Chain (and On-Chain):
Blockchains utilize on-chain data, which is verified by validators through consensus mechanisms. Off-chain data refers to external variables that cannot be verified by the network, such as weather conditions, sports results, or data from other blockchains. Integrating both on-chain and off-chain data could significantly expand use cases.
Oracle:
Oracles provide off-chain data to blockchains. Platforms that aggregate data from multiple oracles are called decentralized oracles, which determine the most accurate results based on trust indices, averages, and majority rules. Examples include Fetch and Tellor.
Over-Collateralized:
Over-collateralized protocols require collateral that exceeds the value of the loan. In yield farming, this approach safeguards investors from risks such as liquidation, stablecoin de-pegging, or loan defaults. Over-collateralized stablecoins operate differently from fractional reserve banking.
P2E (Play-to-Earn):
P2E (Play-to-Earn) allows players to earn rewards of real-world value, such as NFTs and utility tokens. Many P2E games follow a pay-to-win model, where one player’s earnings can come at another’s expense. For long-term success, P2E games must be engaging and foster economies that incentivize reinvestment rather than withdrawal.
Pegged:
Pegged cryptocurrencies have values linked to another currency, typically fiat. Traders often purchase these during market volatility to sell crypto without cashing out. De-pegging can be detrimental for holders, prompting protocols to explore various price stabilization methods.
Private Key:
A private key is a confidential code that enables access to cryptocurrencies associated with a wallet address (public key). This system eliminates the need for registration and verification, simplifying crypto usage globally. Private keys are typically a 256-bit alphanumeric string and often accompanied by a QR code. Since they grant full control over the wallet, they should never be shared.
Protocol:
In blockchain contexts, protocols refer to the foundational code that dictates how applications function. A DeFi protocol facilitates consensus between parties on financial agreements through autonomous programs. Protocols consist of decentralized applications (dApps), utility tokens, and community governance structures.
Pump (and Dump):
Cryptocurrency pumps refer to temporary price manipulations orchestrated by large investors. This strategy often involves illiquid tokens kept secret from a community seeking quick profits. Once large investors reveal the token, buyers rush in, driving up the price, which the initial investors then exploit by selling at a high point, resulting in a rapid price drop.
Rekt:
To get “rekt” means to incur significant financial losses from a poor trade.
Rug Pull:
A rug pull occurs when a project capitalizes on initial public enthusiasm without the intention of creating a sustainable product. Teams profit from presales and initial offerings, creating a facade of promise before abandoning the project and taking the funds, as seen with certain cryptocurrencies and NFT collections.
Scalability (Solution)
Scalability refers to a network’s ability to maintain efficiency as its size increases. When user numbers rise, issues like network congestion, high fees, and decreased application usability can arise. Scalability solutions, often known as Layer 2s, are complementary, high-performance blockchains that operate independently (e.g., Polygon and Ethereum).
Seed Phrase
A seed phrase is a randomly generated set of 12-24 words drawn from a list of 2048 terms, also referred to as a recovery phrase. It enables users to regain access to a wallet and all associated private keys. By importing your seed phrase onto another device, you can access the same wallet and its balances across different networks. It’s crucial to keep your seed phrase confidential, as it acts as the master password to all your keys.
Shill
Shilling refers to promoting a project not for its inherent value but for personal profit, often linked to pump-and-dump schemes and Ponzi tactics. Those who shill typically lack genuine interest in the project but make exaggerated claims to entice others to invest.
Slippage
Slippage is the difference between the expected price of a trade and the actual price when the order is executed. While a slippage rate below 0.5% is ideal, it can soar to 30% during low liquidity or high volatility. On decentralized exchanges, users can set slippage tolerance to cancel trades if the price variation exceeds their specified limit. It’s important to set a tolerance level that avoids transaction failures while still considering network fees.
Smart Contract
Smart contracts are self-executing programs that run on the blockchain and incur gas fees for execution. Once the user pays the required fee with a Web3 wallet, the contract executes automatically without the need for third-party intervention. They are commonly utilized in decentralized finance (DeFi) applications.
Stablecoin (and Wrapped Tokens)
Stablecoins are cryptocurrencies designed to maintain price stability by pegging their value to stable fiat currencies, such as the USD. This enables users to protect their crypto from market volatility without converting to fiat. The most reliable stablecoins are typically over-collateralized. Wrapped tokens, on the other hand, peg their value to another cryptocurrency and are used when the original tokens aren’t supported on a particular blockchain.
Staking
Crypto staking is a security feature in proof-of-stake blockchains that rewards users for holding tokens. The premise is that those who stake the most tokens have the greatest incentive to act in the network’s best interest, as they would lose money otherwise. Due to high entry barriers, users often delegate staking responsibilities to validators, who earn interest rewards and share a portion with the delegators.
Tokenization
Tokenization involves converting real and digital assets into blockchain-compatible formats, such as utility tokens and NFTs. This process enables the trading of previously illiquid assets and allows for fractional ownership. For instance, internet service providers can use utility tokens to offer pay-as-you-go models for bandwidth access.
Tokenomics
Tokenomics encompasses the management of token supply and demand within a project. It outlines the mechanisms for creating, distributing, or removing tokens among users, founders, and programs. In addition to functionality, tokenomics provide insights into the project’s market value and potential price trends.
Total Value Locked (TVL)
TVL represents the total amount of user funds deposited or staked within a DeFi protocol. A high TVL indicates strong token utility, liquidity, and demand. To calculate TVL, multiply the current token price by the total number of tokens deposited.
Trustless
Decentralized finance is often described as trustless because it eliminates the need to rely on external parties. Trustless technologies, such as smart contracts and autonomous governance, facilitate peer-to-peer (P2P) interactions without intermediaries, creating services that were previously unattainable.
Validator
Validators are participants responsible for ensuring the blockchain operates smoothly. They are incentivized through rewards such as fees and interest for maintaining the security and efficiency of transactions. Each blockchain has unique criteria for selecting validators, including randomness, minimum holdings, and technical expertise.
Web3
Web3, or Web 3.0, represents the third iteration of the internet, emphasizing user ownership of digital assets. Users can interact with and own the resources they utilize, moving away from reliance on private tech companies. DeFi dApps, like Web3 wallets, enable users to manage utility tokens and NFTs linked to virtual assets.
Whitepaper
Every cryptocurrency and blockchain project publishes a whitepaper outlining its product-market fit, technology, competitive landscape, and objectives. Similar to a business plan, a whitepaper serves as a comprehensive resource for analysts and investors seeking technical details about a project. They are often regarded as the most trustworthy source of information on upcoming initiatives.
Yield Farming
Yield farming encompasses various strategies aimed at generating passive income from idle cryptocurrencies. Investors can achieve profitability without selling their assets, even when token prices remain stable. This is made possible through activities like lending, liquidity providing, and staking within the DeFi ecosystem.
51% Attack
A 51% attack occurs when a single entity controls more than half of a blockchain’s network, whether through computing power or holdings. This control can centralize the blockchain, enabling the attacker to manipulate transactions and exploit the network financially.
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