This glossary is full of terms that you will likely encounter while navigating the cryptocurrency and blockchain ecosystem. Keep it handy!
A unique string of letters and numbers to and from which cryptocurrency is sent. An address—which is usually a hashed version of a public key—functions like an email address.
A distribution of cryptocurrencies to a pre-defined set of blockchain addresses, free of charge. Airdrops can generate awareness of the cryptocurrency being airdropped, helping drive adoption.
A cryptocurrency that functions similarly to—but not exactly the same as—bitcoin. Typically, founders will detail in their whitepaper how their project’s altcoin is distinct from bitcoin.
A peer-to-peer network of nodes that maintain a blockchain-based distributed ledger of bitcoin balances. The cryptocurrency native to the Bitcoin network is bitcoin.
A discrete group of valid transaction data that is cryptographically tied to the previous block; collectively forming a chain of blocks (i.e., a blockchain).
A website or software application that allows users to browse and analyse the entire history of a specific blockchain network.
The number of blocks that exist between a given block and the genesis block. The eighth block to be added to a given blockchain will have a block height of seven, for example.
The amount of newly minted cryptocurrency and transaction fees automatically awarded by the blockchain protocol to a miner when they successfully validate a new block.
A database created and maintained by a peer-to-peer network of nodes. Blockchains comprise individual blocks that are each cryptographically linked to one another.
A type of debt security which effectively represents an IOU. Bonds are typically issued by governments and corporations when they want to raise money. (Head to What Are Investment Bonds & How Do I Buy Them? for more on bonds.)
An individual or firm (i.e., a brokerage firm) that typically charges a fee or commission for executing buy and sell orders submitted by cryptocurrency investors.
A deliberate misspelling of ‘build’, this term is essentially a reminder to focus on improving the quality of tech and projects occupying the space.
A unit of digital information. Typically, there are 8 bits in a byte. (A bit is a basic unit of information in computing and digital communications. It’s a portmanteau of ‘binary digit’.)
A program code that has been compiled from source code into low-level code. This code is designed for a software interpreter. Bytecode can be executed by a virtual machine. The Ethereum Virtual Machine (EVM) is an example of a virtual machine.
An option contract where the owner has the right, but not the obligation, to buy a specified amount of an underlying asset at a specified price (i.e., strike price) within a specified time.
A financial institution that exercises control over key aspects of the financial system of a country or group of countries. Examples of central banks are the Reserve Bank of Australia, U.S. Federal Reserve and European Central Bank.
A term used to describe a way that keys are secured offline. Cryptocurrency wallets with cold storage capabilities are referred to as ‘cold wallets’. The most popular types of cold wallets are hardware wallets and paper wallets.
A basic good used in commerce that is interchangeable with other goods of the same type. Commodities are typically used as inputs in the productions of other goods or services. Coffee, oil, beef, copper and iron ore are examples of commodities.
The amount of time it takes for an unconfirmed cryptocurrency transaction to be included into the blockchain by miners. Transaction fee size can greatly affect confirmation time.
Contract for difference (CFD)
A CFD is a broker-client agreement to pay the difference between a security’s opening and closing price. CFDs are derivatives. So, when you buy or sell a CFD, you are not buying or selling the underlying asset.
A kind of money and medium of exchange. The most common type of currency is fiat currency.
A scarce digital asset or digital form of money enabled by blockchain technology. Cryptocurrencies are native to particular blockchain networks (e.g., bitcoin to Bitcoin).
The practice and study of encrypting and decrypting information through complex mathematics Cryptography is a significant component of blockchain technology.
Short for ‘decentralised application’, a dApp is an app that is coded in a program running on a blockchain.
An abbreviation of ‘decentralised finance’, which is a term used to described a suite of crypto projects that are decentralising financial services. (Learn more at What Is DeFi?)
Also referred to as a carrying cost of money, demurrage is a term that describes the cost associated with owning or holding currency over a given period.
A security with a price that is dependent upon or derived from one or more underlying assets. The derivative itself is a contract between at least two parties. Common forms of derivatives are futures, forwards, options, and swaps.
An open-source, decentralised computing infrastructure that uses blockchain technology to synchronise and store changes in state. The cryptocurrency native to Ethereum is ether.
An online platform that allows buyers and sellers to trade a range of cryptocurrencies using fiat currency or other cryptocurrencies.
Exchange-traded fund (ETF)
An investment fund that can be traded on a stock exchange just like listed company shares. There are ETFs based on market sectors, asset classes, market caps, and foreign markets.
Money that has no intrinsic value and is declared legal tender by a government. Examples of fiat currencies include the U.S. dollar, Japanese yen, and Australian dollar.
An acronym for ‘fear of missing out’, FOMO refers to the anxiety that one feels when they believe they’re missing out on a potentially lucrative investment or trade opportunity.
Short for fear, uncertainty, and doubt, FUD refers to any baseless, negative information that is intentionally spread by those seeking to gain—often financially—from FUD-induced hysteria.
The process of looking at a company or cryptocurrency at the most fundamental financial level.
A type of derivative contract that represents a binding agreement to buy or sell a given cryptocurrency at a specified price and date. Upon expiration, futures are either cash-settled or physically delivered.
A unit value that quantifies the work Ethereum does. Gas exists in order to incentivise node operators on the Ethereum network to process transactions.
The first block in a blockchain. Because its block height is always equal to zero, the genesis block is also referred to as ‘block zero’.
In the context of blockchain technology, governance refers to the process of determining what changes to a given network are permitted.
A scheduled event in which the amount of newly minted cryptocurrency awarded for successfully mining a block (i.e., the block subsidy) halves.
A code change in a blockchain protocol so significant that it becomes incompatible with older versions.
The values returned by a hash function—a deterministic mathematical algorithm that maps data of variable size to a new fixed-size set of data.
The speed at which miners are computing hashes. In the cryptocurrency space, measurements of hash rate are typically approximations.
A pool of money contributed by private investors and run by a fund manager. The hedge fund manager’s goal is to generate as high a return as possible whilst taking on as little risk as possible.
A deliberate misspelling of ‘hold’, the phrase originated in 2013 when a user posted to the Bitcoin Forum message board, “I AM HODLING.” It is used to reinforce a long-term outlook by cryptocurrency owners.
A type of mutual fund or exchange-traded fund (ETF) that is designed to track the returns of a market index such as the ASX 200.
The extent to which blockchains are cross-compatible and can leverage other blockchains’ unique properties.
A technique involving the use of borrowed funds (i.e., debt) that allows traders to open a position that is larger than the balance of their account.
The ability to buy or sell a particular cryptocurrency in the market without significantly affecting the price.
A trading position opened by investors and traders who buy a cryptocurrency with the expectation to sell it at a higher market value in the future.
A fully developed and deployed blockchain protocol that is able to facilitate the sending and receiving of cryptocurrency by users.
A method of trading cryptocurrencies where traders use funds borrowed from third parties in order to leverage their positions.
Calculated by multiplying circulating supply by market price, market cap(italisation) represents the total trading value of a given cryptocurrency.
Short for ‘memory pool’, a mempool is a collection of all cryptocurrency transactions that are waiting to receive their first confirmation from a miner.
A method of structuring data that can significantly reduce the amount of data that a trusted authority must maintain for verification purposes. Merkle trees are widely used in public blockchain networks.
The process of verifying transactions and recording them on a blockchain. Mining is performed by so-called ‘miners’. In exchange for their efforts, miners are compensated in cryptocurrency.
A digital signature scheme that enables multiple users to authorise a cryptocurrency transaction before it is broadcasted to the corresponding blockchain network.
A pool of money contributed by many multiple investors and run by a fund manager. The portfolio of a mutual fund will typically include assets like stocks and bonds.
A participant in a blockchain network that communicates with other nodes to ensure its security and integrity. Nodes are able to validate transactions.
Non-fungible token (NFT)
NFTs are tokens that represent scarce digital content items. As distinct from cryptocurrencies like bitcoin, NFTs are not interchangeable.
A solution that allows investors and traders to convert cryptocurrencies to fiat currencies. Off-ramps are offered by most leading cryptocurrency exchange operators.
A solution that allows investors and traders to convert fiat currencies to cryptocurrencies. On-ramps are offered by most leading cryptocurrency exchange operators.
Code that is designed to be publicly accessible, meaning anyone can see, modify and distribute the code as they see fit.
A type of derivative contract that gives the owner the right—but not the obligation—to buy or sell an underlying cryptocurrency at a specified price on or before a specified date, depending on the form of the option.
A blockchain middleware that serves as a secure connection between smart contracts and off-chain data; significantly bolstering the functionality of smart contracts.
A method of obtaining personal information such as usernames, passwords and banking details through deceptive means. Phishing is a common type of cyber attack.
A unique string of letters and numbers that essentially functions as a user’s digital signature. It is vital that private keys are kept secret.
Proof of stake
A mechanism by which block validators are selected based on how much cryptocurrency they are staking (i.e., committing funds to help maintain blockchain network).
Proof of work
A mechanism by which cryptocurrency miners expend computing power to solve cryptographic puzzles; proving they have done so by writing the solution to the blockchain.
A set of rules that tells something how to do certain actions. The rules set forth in protocols can be encoded in software. Examples include the Bitcoin protocol and Internet Protocol (IP).
A unique string of letters and numbers that is visible on a blockchain. A public key can be derived from a private key—but the opposite is not possible.
An option contract where the owner has the right, but not the obligation, to sell a specified amount of an underlying asset at a specified price (i.e., strike price) within a specified time.
A precise request for information retrieval with databases and information systems. Query languages are programming languages used to create queries in databases and information systems.
A slang version of the word “wrecked” that is most commonly used to describe a margin trader who has just had their position liquidated.
The repo market is where banks, financial institutions and other participants borrow and lend cash for short periods in exchange for high-quality securities. (Repurchase agreements, or repos, are short-term loans which are often made overnight.)
The smallest denomination of bitcoin (i.e., one hundred millionth of a single bitcoin, or 0.00000001 BTC). The plural form—satoshis—is commonly shortened to ‘sats’. Sats are to bitcoin what cents are to dollars.
The name used by the person(s) who invented Bitcoin, authored the Bitcoin whitepaper, and published the original Bitcoin client software.
In finance, a security is an investment which can be traded in financial markets. (Securitisation refers to the process of transforming assets into interest-bearing securities.)
Also known as a mnemonic phrase, a seed phrase—which is typically 12 or 24 words in length—stores the information needed to recover a wallet.
The profits earned by central banks or other monetary authorities through the production and maintenance of fiat money.
The process of aggregating a large number of text documents and categorising them in a way that indicates the current level of sentiment over a given asset.
A trading position opened by investors and traders—known as short sellers—who believe the market value of a given cryptocurrency will decline in the future.
The difference between the expected price of a trade and the actual price at which it executes. Slippage is typically less severe on highly liquid exchanges.
Computer code that is able to be stored and executed on a blockchain. Smart contracts self-execute when and if certain predetermined conditions are met.
A code change in a blockchain protocol that is backwards-compatible. That is to say, soft forks do not mandate all participating nodes update their software.
A type of cryptocurrency designed to maintain as stable a price as possible. Despite offering the same utility, the form and function of stablecoins differ tremendously.
Bitcoiners use this Matt Odell-coined term to share ways they’ve been accumulating bitcoin. Common examples: buying on Cash App, earning via Lolli, and profitably trading BTC-paired altcoins.
The set price at which an option holder can buy or sell the underlying asset when the option is exercised. Strike price is sometimes called ‘exercise price’. (With options, to ‘exercise’ means to put into effect the right to buy or sell the underlying asset.)
The process of forecasting the direction of an asset’s price movements by relying on historical price and volume data.
An alternative blockchain network that is used—predominantly by developers and programmers—for testing and experimentation purposes.
A collection of information the blockchain needs in order to transfer cryptocurrency. Transactions are not valid unless they are signed with the appropriate private key.
An amount of cryptocurrency included in a transaction that is collected by a miner of said cryptocurrency. Transaction fees incentivise miners to process transactions.
The tendency for investors to buy shares and cryptocurrencies based on their relatively low per-unit cost. Typically, these investors fail to appreciate the relationship between the total supply of units and per-unit cost.
The frequency and severity with which the market price of an asset fluctuates. Generally speaking, rising volatility is associated with rising uncertainty among investors and traders.
A software application or hardware device that manages private keys. These keys are needed to access the specific blockchain address to which a user’s cryptocurrency belongs.
Describes the vision of a serverless internet or decentralised web. That is, a version of the internet where each user is in control of their own data and identity.
A document prepared by a project’s founders detailing the problem the project addresses and how a blockchain-based cryptocurrency is fundamental to said project’s existence.
Income return of a financial asset. Yield is typically expressed as a percentage.
Also referred to as liquidity farming, yield farming describes the practice of generating passive income by providing liquidity—or another value-added service—to a DeFi protocol. Income received is denominated in the protocol’s native crypto token.
An encryption scheme used to prove to someone that you know something without revealing what that something actually is.