16 Terms Every Crypto Trader Should Know
HODL, FUD, NFTs and the list of crypto jargon continues.
No, these are not words from a newly-discovered alien language. These are common key terms and phrases used within the cryptocurrency community. If you’re new to the world of cryptocurrency, you might be baffled by the new lingo — What is FOMO? What is a Whale? How do I pronounce HODL? To ensure that you are not left out in the cold, here is a beginner's guide to get you started on this revolutionary asset class.
Satoshi Nakamato
The pseudonymous creator of Bitcoin. Although the name, Satoshi Nakamoto, is frequently associated with Bitcoin, the actual person who bears the name has never been publicly identified. No one knows the true identity of Nakomoto. It might be a nickname for a person or group of people with a different identity.
Fear Of Missing Out (FOMO)
FOMO is the emotion we feel when we rush to buy an asset in fear of missing out on a golden profit opportunity. Our expectation is that the asset will rise in value and experience sharp gains. When emotions are rampant, we may jump into trading positions out of FOMO. Alternatively, you can experience FOMO while you drool over your friend’s new iPhone 13 during lunch.
Fiat Currency
A nationally adopted currency that is backed and issued by the government such as the U.S. Dollars. Fiat currency is desirable due to government support of its legal status. It is more widely recognised and accepted as compared to cryptocurrency. The common issue of fiat currency lies in its depreciating value. On the other hand, cryptocurrency is a strong contender in hedging against inflation.
Fear, Uncertainty and Doubt (FUD)
“Spreading FUD again” is a phrase we usually see on cryptocurrency forums and on Twitter. It refers to the act of influencing perception by spreading negative or false information about a cryptocurrency on different online channels. By discrediting a particular company, product or project, spreading FUD can be a competitive advantage to profit off a stock price decline. When we’re reading potentially damaging news, it is always good to consider all sides of the argument. It can be helpful to think about what incentives people can have by sharing certain opinions.
Gas
It is the fee you pay to make a cryptocurrency transaction. Gas is paid in ether (ETH), the native cryptocurrency of Ethereum. The fee covers the cost of paying a miner (the one who successfully solved the equation and earned a coin) to search and receive crypto for you. Simply put, think of it as a transaction fee.
Hold On for Dear Life (HODL)
At first glance, you may regard it as a spelling error of “hold”, but it is actually an acronym that stands for “Hold On for Dear Life”. A person who intends to keep a certain kind of cryptocurrency for a long time is known as a “HOLDer”. It has become the battle cry of diehard cryptocurrency investors who believe that their investment will be fruitful one day. The term “HODL” originally appeared on the BitcoinTalk forum in 2013. If you are curious, HODL is pronounced as Ho-ddle.
Decentralised Finance (DeFi)
DeFi is a blanket term for decentralized alternatives to traditional (centralized) finance. DeFi includes banking, lending, payment processing, insurance, and the list is growing as we speak. The potential of decentralized alternatives such as a decentralized exchange and decentralized apps (dApps) is huge. Given its nature of being decentralised, financial activities are conducted without the involvement of an intermediary, like a bank, government, or other financial institution. How does this work, you may ask? Welcome to the magic of smart contracts!
Smart Contracts
An algorithmic program that enacts the terms of a contract automatically based on its code. When a contract is written in computer code, this programmed contract is set up to execute and carry itself out automatically under specified conditions. A smart contract allows two parties to agree to complex terms without needed to trust each other, and without needing to involve any third parties. This functionality is the defining feature of the Ethereum blockchain.
Do Your Own Research (DYOR)
This is a term used to encourage potential investors to study, analyze and perform thorough due diligence on a project they are considering investing capital into. Investors should do their own research into their investments and not simply rely on others to do it for them. It is always healthy not to trust self-proclaimed experts and always verify the information with multiple sources. Failure to research or understand a project in its entirety can often lead to loss of capital and a negative investment result.
Non-Fungible Tokens (NFTs)
A non-fungible token is a unique digital asset that cannot be replicated. NFTs are used to represent proof of ownership and authenticity ranging from digital art, digital collectibles all the way to online gaming items. An example of a gaming NFT is an Axie in Axie Infinity.
Private Key
Your wallet’s password, which is similar to your bank account password. You should never share your private key with anyone. You could lose all of your cryptocurrency in a matter of seconds if someone gains access to your private key.
Public Key
Your wallet’s address, which is similar to your bank account number. You can share your wallet’s address so that others can send cryptocurrency to you. If someone does not know your wallet’s address, they are unable to direct the cryptocurrency to your account for you to receive the funds.
Cold Wallet
A cold wallet is like a physical USB stick. It is offline and usually on a device. A cold wallet is designed to store your cryptocurrency safely off your computer. This method of storing cryptocurrency away like an offline safe is often praised for its tight security.
Hot Wallet
A hot wallet is an online software-based wallet connected to the Internet. Even though it is more convenient for quickly accessing your cryptocurrency, these wallets are more susceptible to hacks and cybersecurity attacks as compared to cold wallets. It is similar to your files being stored on the cloud having a higher tendency to be hacked, as compared to your files being stored in your physical flash drive.
Whale
A whale is an entity (typically large hedge and investment funds) that holds a large number of coins and has the ability to influence the market single-handedly in one go. When they do this, it can have a big impact on the market. Let’s say a group of whales gets together and decides to sell their Bitcoin at the same time. Naturally, the price of Bitcoin would fall immediately, followed by a mass sell-off of Alt Coins too. The whales could then take their profits and buy up more coins at a bargain.
Alternative Coins (Alt Coins)
Altcoin is a mixture of two words — “Alternative” and “Coin”. It refers to any digital currency that isn’t Bitcoin. Altcoin can be anything from the second-most popular coin, Ethereum, to any of the thousands of coins with very minimal market value. Do you know there are over 6,000 alt coins right now with many more planned to release?
Reading this terminology guide is the first step to enter the world of cryptocurrency. Now, you no longer have to scratch your head on unfamiliar acronyms and experience a sense of FOMO.
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