Glossary of cryptocurrencies and DeFi
A
Altcoin
Bitcoin is the leading cryptocurrency by market cap; any digital currency that isn’t Bitcoin is considered an altcoin(from alternative + Bitcoin).
Airdrop
A free distribution of a certain crypto token to help build their community and adoption of their token.
Assets
By holding assets, we can receive a passive income, as opposed to liabilities, which drain our income. Acquiring good assets is a key cornerstone in building true wealth, with cash (crypto) flow. We must have both to create financial freedom. Now that we have the blockchain and DeFi (decentralised finance), we can acquire potentially great assets at a huge discount, as we are at the beginning of a huge mass adoption of crypto and tokenisation of the economy.
B
Block
A block is a set of data that makes up a blockchain.
Blockchain
Blockchain is a form of distributed ledger technology (DLT), a public, decentralized method of keeping records of transactions between users. High-level security makes blockchain-based technology valuable, giving each coin’s value. Each cryptocurrency has its own blockchain system that records all the transactions of that type of currency.
C
Confirmation / Block
ConfirmationA confirmation means that the network has verified the blockchain transaction. This happens through a process known as mining in a Proof of Work system (e.g., Bitcoin).
Cryptocurrency
Cryptocurrency is a medium of exchange, created and stored electronically in the blockchain, using encryption techniques to control the creation of monetary units to verify the transfer of funds. This ability to trace each transaction makes cryptocurrency networks so trustworthy by preventing issues like double-spending.
Cryptoasset
Sometimes called a security asset or STO. (Secured Token Offering). This is like a digitised shareholding in a blockchain based company or project.
Consensus based algorithm
A type of code on the blockchain that ensures agreement is achieved amongst a distributed decentralised network. This prevents fraudsters and achieves reliability in the network.
Crowd Investing
With the blockchain, we now have the opportunity for anyone to become crowd investors or seed investors in your favourite crypto and token based projects. By buying their token, we can acquire a digital shareholding, and/or, the rights to receive profit share. This means we can get in on the ground floor of a project we like because of shared values, and we get to profit in a decentralised, passive way. This is what will create a new economic system based on a level playing field.
Custody
It is important we take ‘self-custody’ of our cryptos and tokens through holding our funds in our own possession, via our wallets. Up to now, we have allowed the banks to take possession of our money, thus giving our money, and energy away to 3rd parties with questionable ethics.
CBDC
Central Bank Digital Currency. The central banks of many countries around the world are preparing to issue their own digital currency instead of cash. NOTE: this is different to crypto currency as we deem it here, it is not decentralised or encrypted with proper security we need. China already has theirs, called the Digital Yuan. I believe when these CBDCs are issued, we will create a tier economy, one that is still centralised and another based on decentralisation and better transparency and proper privacy, as is our human right.
D
Decentralized Finance (DeFi)
DeFi is a blockchain- and cryptocurrency-based economy. Building a secure, decentralized “alternative” economy has been a central goal for many cryptocurrency users dating back to the founding days of Bitcoin. Such an economy would bring much-needed accountability to the global economy and offer more economic opportunities to disadvantaged people across the globe.
Dapp
Rather than a traditional app, which is centralised to either Google, or Apple, we now have decentralised apps in keeping with decentralised finance. They work much like an ordinary app, but execute automated functions similar to smart contracts. They require no KYC (ID) requirements and are very secure.
Double Spend
Double spend is when someone in the Bitcoin network tries to send a specific bitcoin transaction to two different recipients at once. Unlike physical cash, a digital token consists of a digital file that can be duplicated or falsified.
DCO
Decentralised Coin Offering. Like an ICO, except a DCO is a token based on a Decentralised Finance project.
Diversification
Due to the volatility and early stages of crypto, this is a key strategy to creating a robust portfolio of assets and currencies. If one project fails to deliver, then we still have others in which to fall back on.
E
Ethereum
A public blockchain network and decentralized software platform upon which developers build and run applications.
Exchange
Can mean few different things. A place to buy, sell and trade your crypto tokens. Such as Binance. A public exchange is a place where all crypto currencies are ranked, such as CoinMarketCap.com. You can also exchange your crypto, for other cryptos on an exchange like Binance, or in many wallets.
Early adopter
In any new trend, there are always people who want to try it first, like the people who queued up for the release of the iPhone. We are the DeFi early adopters.
F
Fork
A fork implements a fundamental change to how a blockchain functions. In a “hard fork,” the changed blockchain can’t work with older versions, meaning it splits off from the old version; typically, a new token is created for the new fork while the original continues on its own. In a “soft fork,” the new and old versions work together, and no new coin is created; this is usually used to implement relatively cosmetic changes and stricter protocols.
H
Halving
Many cryptocurrencies, like Bitcoin, have a finite supply, which makes them a scarce digital commodity. The total amount of Bitcoin that will ever be issued is 21 million. The number of bitcoins generated per block is decreased by 50% every four years. This is called halving.
Hodler
A person who holds their crypto currency for the long term and is not interested in selling.
Hash
A hash, short for “cryptographic hash,” is the output when a set of data (like the amount and time of Bitcoin transactions contained in a block) is processed through an algorithm. Regardless of the input length, this output is a fixed-length set of numbers that cannot be reverse-engineered to find out the original data. These characteristics contribute to the security of cryptocurrencies and prevent tampering with the data in the network.
I
Initial Coin Offering (ICO)
An Initial Coin Offering (also called ICO) occurs when a new cryptocurrency sells advance tokens in exchange for upfront capital.
K
Know Your Customer (KYC)
A process in which a business must verify the identity and background information (address, financials, etc.) of their customers.
L
Liquidity
The amount of money that a project or company has on tap. The level of Liquidity lies at the heart of an proper functioning company, and financial system. ODL means On Demand Liquidity, a system whereby money can be moved quickly around the world, without the slowness of the existing Swift system which is now almost redundant for being slow and expensive.
Liquidity pools are often referred to DeFi projects where people can “lend” their crypto tokens to a public “pool” of funds, (called staking) in order to receive a reward.
M
Mining
The process by which “blocks” or transactions are verified and added to a blockchain. To verify a block, a miner must use a computer to solve a cryptographic problem. Once the computer has solved the problem, the block is considered “mined” or verified.
P
Peer-to-peer
Peer-to-peer (P2P) is a way of creating a decentralized network; in other words, each participant can interact directly with any or all of the other participants, without any middlemen.
Private Currency
A currency or token issued by a private individual or firm. Typically, the token or coin is limited to use within that particular firm or individual network.
Proof of stake
Proof of stake (“PoS”) is how some blockchain systems reach consensus and thus verify transactions. This method requires “validators” who deposit a certain amount of crypto as collateral (a “stake”) for the right to validate transactions on that network; the more crypto locked up for longer, the greater the validator’s standing in the community.
Private Key
A private key is an alphanumeric string of data corresponding to a single specific wallet or “public address.” Private keys can be considered a password that enables individuals to access their crypto wallet/account.
Public Blockchain
A globally open network where anyone can participate in transactions, execute consensus protocol to help determine which blocks get added to the chain, and maintain the shared ledger.
Public key or address
Like a private key, a public key is an extended code unique to each wallet, like a bank account number. This code is encrypted (hashed) and shortened to create the addresses you use when making transactions. The double layer of public on top of private keys is part of what makes crypto networks so secure.
Pump n Dump
This is where people manipulate the market by buying up large in order to quickly increase the price, then they sell all their tokens at the peak, thus crashing the market and making huge profits.
Protocol
There is a saying in Crypto “the value is in the protocol”. This is the type of coding in the blockchain or smart contract. Everything is code, just as a seed has a code that ensures a specific, healthy plant, so too the code (protocol) in the blockchain will create a specific outcome that the code determines. This is why it is ridiculous to dismiss all crypto currencies, we need to research their differences. In a general sense, this is why we love DeFi, decentralised projects. “you shall know them by their fruits”.
S
Smart contract
Like real-world contracts, smart contracts simply enforce which outputs happen based on certain inputs. They are used to automate the execution of an agreement so that all participants can be immediately certain of the outcome without an intermediary. This reduces third-party verification and the risk of fraud.
Stablecoin
A stablecoin is a type of cryptocurrency whose value is tied to an outside asset, such as the dollar or gold. USDT, USDC are well known stable coins, always pegged 1:1 to the US dollar.
StateThe set of data that a blockchain network strictly needs to keep track of and represents data currently relevant to applications on the chain.
Seed phrase (also known as mnemonic)
This is a set of 12 or 24 words as a layer of security for your wallets to keep your crypto safe. Always record this set of words in a safe place offline, preferably in a note book. Always use wallets where you get this seed phrase, and/or a private key. Even though traditional apps are centralised with Google or Apple, they cannot get access to your wallet.
T
Testnet
An alternative blockchain that developers use to test applications in a near-live environment.
TokenA token represents an asset built on an existing blockchain (different from a coin). Tokens are designed to be unique, liquid, secure, instantly transferable, and digitally scarce.
Tokenisation
This is a term to describe how the entire economy, and all assets, such as shares, property, consumer goods, insurance, etc will be ‘tokenised’, where everything will be listed on the blockchain and will have a ‘token value” to be bought, sold, held or traded.
Trust-less system
A term to describe a key benefit of the blockchain, where no humans need be trusted or relied upon, when transacting or holding your crypto tokens. What we CAN trust, is the code that the blockchain and its resultant tokens are based upon.
W
Wallet
A designated storage location for digital assets (cryptocurrency) that has an address for sending and receiving funds. The wallet can be online, offline, or on a physical device. Consider your wallet as your bank account for your crypto. There are many wallets available on the app stores, or downloadable on your computer.
A cold wallet is where your crypto tokens are stored offline, known as a ledger wallet much like a USB stick. This ensures maximum security. The two main types are ledge nano and Trezor. NOTE; when your computer or phone is off, or offline, your app wallets are effectively “cold”.
Y
Yield farming
This is similar to staking, except it is related to when you “lend” your crypto to another platform for its liquidity, whereas staking usually means when you lend your crypto to its own project, which in turn ‘validates’ the network. In both staking and yield farming, you earn passive income, or rewards. This is how we can “make our money work for us, rather than working for money!”, This is a paradigm shift, as this action was generally only reserved for the banks and financial institutions, using OUR money!
X
XRP & XLM
Two leading global payment based crypto currencies based on DLT, Distributed Ledge Technology. Focused on wholesale (banks) and retail investors.
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