This is the path to understanding this scarcely understood corner of the new crypto reality. This content can be found scattered across various sites but we're happy you found it here.
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A sort of “hostile takeover” of a cryptocurrency; it's possible in theory, but at this time quite unlikely.
The process of mining blocks of digital currency data often requires considerable computing time and energy. It's conceivable that a miner or mining pool could expend the computing resources necessary to control more than 50% of the total computing power devoted to the currency's network, and once they have majority control, they could “take over” and do some damage.
For example, they could reverse current and new transactions, and could keep new data blocks and currency from being created. They would create more of an interruption than anything else, as they would not be able to “steal” currency or hack other investors' accounts.
Any coin that is not bitcoin is an alt coin, and this includes tokens on the Ethereum network. There is some debate about what you become after you fork out from the original, so we have some clones like ETH and ETC, BTC and BCH which were made out of the same blockchain. These are called contientous forks, and you can learn more about them here.
Basically, in those cases, the development of the forked coin continues in its own direction. Imagine the trunk of a tree. It is one unit towards one point until it branches out and the branches each grow in its own direction. Some branches become part of the treetop, some wither and die.
Application Specific Integrated Circuit – a computer chip created to perform one specific function and only that function.
Since mining of cryptocurrency data can demand a lot of computer resources, some miners set aside entire specialized devices—or partition off a section of their computers — to do nothing but mining. An ASIC usually looks like a little brick you can see here – in a nutshell, you plug it into the wall and give it an internet connection so it starts the mining process (it does require a bit more tweaking, depending on the currency and the device).
All time high. The moment at which the price of a certain cryptocurrency or coin has broken all of its past records and is trading at the highest price relative to a fiat currency it has ever achieved.
In cryptocurrency, it defines what you become when you succumb to FOMO and buy what you think will be the next Bitcoin. The term has origins in the traditional stock broker circles. Sometimes you can get back half of what you put in (you probably won’t). A bagholder is, simply put, stuck with 1000 horses when the car got adopted as a means of transportation.
Manipulation of a stock or commodity by investors. Traders who “set” the bear trap do so by selling stock until it fools other investors into thinking its upward trend in value has stopped, or is dropping. Those who fall into the bear trap will often sell at that time, fearing a further drop in value. At that point, the investors who set the trap will buy at the low price and will release the trap—which is essentially a false bear market. Once the bear trap is released, the value will even out, or even climb.
Those who predicted (or gambled on) Bitcoin's rise when it was still small. Their love for the cryptocurrency is so strong most or all of their portfolio is Bitcoin. Maximalists are typically so heavily invested into Bitcoin, they refuse to see its many downsides even when laid out clearly.
Bitcoin Price Index – used to find out how much Bitcoin is worth in “real money” – the one you can currently buy bread with. In 2013, CoinBase decided to offer a solution for this and they created the Bitcoin Price Index (BPI). It looks at the BTC value on all exchanges and averages it together to balance out the value across the globe.
A collection of transaction data, one of the fundamental elements of cryptocurrency. After blocks have been created, they're processed by miners for transaction verification; this process is known as mining. To learn more about this process, see here.
This is the payout given to a miner who has successfully calculated the hash in a data block during the mining process. This is how new coins are born. The new coins minted by the mining process are called “virgin” coins, since they're brand new and have not yet been used for any transactions.
There are software tools available to investors that aim to make the process more precise and automatic. They are also present 24/7 as the crypto market never closes. “Bots” will carry out transactions automatically according to the price criteria the investor has set.
A bubble occurs when a market is driven upward by investors; this has happened in the dot-com and housing industries in the past decade or so. More money going in is like blowing more air into a balloon. The normal movement of the balloon is the movement between breaths – that is what you can see on all the graphs – moving up and down. The difference is that this balloon is being blown into by millions of others at the same time.
As you blow air into the balloon it becomes more sensitive to negative impact in the form of news and/or events, which can puncture holes in its skin. Each hole is leaking a bit of air out, represented by the drops on the graph. But as confidence grows, more air goes in vs the amount going out. Leaks get fixed by good news.
This cycle repeats itself until a big impact hits and a big hole appears, ripping the balloon. You can have an upper hand and minimize your losses if you anticipate the bad news by reading and keeping yourself informed. You hold your breath until you feel safe to breathe again, and then you reinvest.
For an example of a big hole, and how this bubble is manifested in the crypto community, see this post.
A bull trap is set by investors in a stock or commodity who will buy large amounts in order to artificially drive the value upward, or create a false bull market. Traders who are fooled by the bull trap will often buy shares at the inflated price, in the belief that the upward trend will continue and the shares they're buying will rise in value. Unfortunately, those who fell into the bull trap will often be left holding shares for which they paid too much, since once the trap is released, the market evens out, and sometimes even drops. See Pump'n'Dump. The reverse approach is a Bear Trap.
When you want to buy coins, you open an order saying how much are you ready to pay and what quantity you want to get (“I want to spend x amount of dollars on Bitcoins”). Buy orders don't necessarily guarantee your purchase; if your price is too low, for example, the offer may expire without being filled unless you make adjustments. It's important to keep in mind that you're always buying from someone, and selling to someone – it's market driven, so if no one is buying, no price is going to sell your coin, and vice versa.
This is a popular at-a-glance type of chart that is commonly used in stock and commodity exchanges. Candlestick charts are ideal for showing day-to-day market activity in a concise—but still accurate—way, denoting the full range of activity for that period.
Unless you have a lot of space, free power, and sound insulation, mining on your own might not be the best choice. Instead, you can go to some of the companies online who offer this service.
These companies invest in the hardware that allows for high-end mining power, and they in turn lease the access to this mining capability to third parties. As an individual miner, this means you can sign a contract that allows you to use a predetermined amount of mining power through cloud computing, without the hassle.
For the individual rules and information on how this operates, you will need to read the FAQ of the service of choice.
Not to be confused with mining pools.
When a block of transactions is successfully processed, or mined, all the transactions within that data block are considered confirmed or validated. Depending on the type of cryptocurrency, the confirmation time for transactions can vary anywhere from 30 seconds to several minutes; longer validation times—though considered a small inconvenience to those making transactions—are generally considered to be more secure, since a “closer look” is being given to the data as it is mined. For most intents and purposes, a transaction is considered “official” after one level of confirmations; however, some exchanges and merchants will wait until several levels of confirmations have taken place before the funds related to the transaction are unfrozen. This practice helps guard against double-spending of digital currency, or using the same currency for more than one transaction.
Continuation Graph Pattern
When you take a look at a market value graph on a digital currency exchange site, you'll be able to see at a glance the upward (“bull” market) and downward (“bear” market) trend lines. However, on occasion, you'll see graph patterns that show fluctuations that go against the flow of the current trend, only for the trend to continue in the same direction afterward. This type of graph pattern is known as a “continuation” type; though there may be momentary up-and-down movement in a currency's value, from a macro view the trend hasn't really changed direction. Continuation graph patterns show that investors have tested the current trend and found it to be sound—therefore, it continues. This is actually a brotherhood of graphs. See here.
A digital currency impossible to falsify. A cryptocurrency generally does not have a central authority controlling its issuance or use. More information about this can be found in our introduction to cryptocurrencies.
Cup and Handle Pattern
A pattern which appears on market value graphs when investors want to test the validity of an upward, or “bullish” trend.
The upward trend, due to investor buying and selling, will gradually slope downward, then back up again, in a gently-sloping “Letter U” shape. After this “cup” is formed, the market will be tested again briefly, making a quick downward slope that's considerably smaller (and shorter in duration) than the “cup” preceding it; this then forms the “handle” to the teacup shape. The cup and handle is considered a “continuation” pattern, in that, once the handle is formed, the upward trend will continue. See more here.
This is the practice of buying and/or selling a stock or commodity, with the beginning-to-end process of the trade taking place all within the same calendar day. Day traders look for small price shifts minute-to-minute, and do their best to maximize their profits (or at least minimize their losses) by making several transactions a day—but without leaving any business unfinished overnight. Day traders depend on “micro-trends,” which are minuscule shifts in market value, as compared to regular traders, who may observe the trends of a stock or commodity over several days, weeks, or months before taking action.
Day trading can be dangerous, but also incredibly profitable.
Dead Cat Bounce
In market trading terms, this somewhat unsavory phrase relates to a momentary recovery in a downward trend for a stock or commodity, such as a cryptocurrency. When there's a bear market—that is to say, a market in which a commodity's values are steadily moving downward—there are two types of recovery. The first type is a true recovery, in which the downward slide is reversed over a long period of time, and prices trend upward consistently. The second type is the “dead cat bounce.” The price trend—which has been going downward for a long period of time—shifts upward briefly, usually for no more than a week or two at most. Dead cat bounces can occur in tiny timeframes—over the space of a few hours or days—but most analysts consider this version a minor blip in the market as opposed to calling it a “true” dead cat bounce. No matter the bounce's duration, it's a false recovery, and the downward trend in valuation continues afterward. The term comes from an old—and slightly disturbing—saying, “Even a dead cat will bounce if it falls from a great height.”
This is a term you'll hear often when cryptocurrency is being discussed. In this context, it means the currency isn't issued or controlled by a central authority, such as a bank or government. While this means cryptocurrency isn't directly affected by inflation or governmental regulations—which its advocates insist makes for a more level international playing field—it also means its investors carry more responsibility for its well-being. They should be aware of the risks inherent with cryptocurrency, such as value fluctuation and the lack of institutional protections against theft and fraud. There's no FDIC for digital currency—as there is in the centralized US banking system—so once it's stolen, it's gone forever.
Financial deflation refers to a decline in prices of consumer goods. On the surface, this may seem like a good thing; after all, you're paying less for your groceries, clothing, and so forth. However, a sustained period of deflation can have negative effects on an economic system overall, because it represents reduced spending power in the population at large. Longer periods of deflation can lead to recessionary periods, and—in severe cases—depression. Governments and banks will often take steps to induce temporary inflation, or the rising of prices, to curb the effects of long-term deflation. As history has shown, these actions have had varied degrees of success.
Deflation can also refer to the falling prices or values of assets, such as homes, cars and investments such as cryptocurrency. Severe asset or equity deflation can result in an “underwater” situation; for example, if you are a homeowner, and the current appraised value of your house is less than what you paid for it, in that specific case you would be considered underwater. The same can happen with a digital currency portfolio; however, most periods of deflation tend to be corrected over time—so knee-jerk reactions such as selling off an investment can, in the long run, prove to be unwise.
A charge levied against the accounts of investors who don't use their digital currency for transactions, but just leave it sitting as a long-term investment (HODL). Some cryptocurrencies use this as a way to keep their tokens in circulation, and to prevent hoarding. After all, it's in the issuer's best interest to keep their currency active; it makes it more stable and supports its value.
If you're looking to invest in cryptocurrency—and not necessarily use it for purchases—you'll want to shop around to see which ones carry demurrage fees. For example, Freicoin. On the other hand there's something like the Insanity coin which destroys 10% per transaction and thus actively encourages hoarding.
Refers to how easily a data block of transaction information can be mined successfully – how long it takes to mine a block. Each type of cryptocurrency has algorithms (such as SHA-256 and SCrypt) that determine the mining difficulty for their corresponding coins—and adjust those difficulties as circumstances warrant.
Setting the difficulty for cryptocurrency mining is a challenge, one that needs to strike a delicate balance. Make the process too easy, and miners will flood the market with too many new coins created by the mining process. Make it too difficult, and miners will lose interest in taking part. The latter has become an issue with more popular digital currencies like Bitcoin; its difficulty has risen to the point where most individual miners can't justify the added cost of specialized mining machinery. Collective mining like mining pools or cloud mining have eased this somewhat, but many prospective miners are looking for newer and “easier” currencies to mine.
Double Bottom Pattern
Forms on a market chart when investors buy and sell to test a downward trend in value. Buying and selling will take place, and over time this will form two distinct and almost-equal valleys on the chart's trend line. Once the second valley has formed, an upward trend will develop past the point of the peaks or tops formed during the pattern's formation. Once that happens, the market is likely to be “bullish,” or upward-trending, for a while; thus, the double bottom pattern is considered a “reversal” pattern, transitioning from a bear to a bull market.
The opposite is the Double Top Pattern.
Those who turn a critical and skeptical eye on the cryptocurrency industry insist that double spending is the biggest flaw in the concept. Since digital currency is 100% electronic, the argument goes, there's no accounting for one electronic coin being spent more than once. And, indeed, it has been tried many times; a holder of an alternate currency coin will spend it in one place, and will turn around and use its unique code for a transaction somewhere else.
This cynical argument, however, tends to assume there are no safeguards in place for this kind of fraud—and that couldn't be further from the truth. For all types of cryptocurrency, there is a validation system in place, and it happens as data blocks are mined, or verified. For example, if Coin A is used for Transaction B, all is well and good; when the data block for that transaction is mined, the transaction is confirmed, and that's that. But, let's say our unscrupulous coin holder turns around and tries to use the code for Coin A for Transaction C a little while later. When the data block for Transaction C is mined, a red flag is raised, because the code for Coin A—which has already been electronically “spent”—has been duplicated. As a result, Transaction C will not be confirmed; instead, it will be rejected. So, yes, in theory double spending is an issue with cryptocurrency. But in practice, security measures built into the mining process doesn't allow it to happen.
Double Top Pattern
A form on a market chart when investors buy and sell to test an upward trend in value. Buying and selling will take place, and over time this will form two distinct and almost-equal peaks on the chart's trend line. Once the second peak has formed, a downward trend will develop past the point of the dips or valleys formed during the pattern's formation. Once that happens, the market is likely to be “bearish,” or downward-trending for a while; thus, the double top pattern is considered a “reversal” pattern, transitioning from a bull to a bear market.
The opposite is the Double Bottom Pattern.
The act of having a third party store the funds for a transaction in a temporary account until the details of the trade can be acknowledged and approved by the two chief parties involved. Digital currency exchanges often use escrow accounts when large amounts of currency are being traded; this allows the traders to do research not only on each other, but on other factors that may affect the transaction. When the payer and the payee are both satisfied with the transaction details, they notify the escrow holder (in this case, the exchange representative), who releases the funds to the recipient.
At the heart of an exchange is the premise of a secure third-party location where transactions can take place—but not all exchanges are alike. For example, some sell cryptocurrency directly to investors and buy from them as well — whereas some simply offer a platform where buyers and sellers can connect. Investors can find market values, exchange rates, and other trading information on exchange web sites, and many exchanges offer wallet services, too. Several exchanges also maintain directories of merchants who accept cryptocurrency as payment.
Fear, Uncertainty and Doubt. This is usually disseminated by people and/or companies to put others at a disadvantage. See more here.
A system for distributing free stuff for promotional purposes. There are many places online where those interested can stop by and request some shiny virtual coins for free. The sites that offer free digital currency are called “faucets”.
The amounts of currency given away on faucet sites are quite small, and they offer just enough of a taste to get potential investors interested. Some of them require you to have a central address registered like Faucethub and use that generated address to redeem the micro portions on affiliate websites. Usually when sharks taste blood in the water they are attracted to the source of it. It is designed to drive traffic and incremental sales through direct and indirect advertising. On occasion, either lack of investor interest or shortage of funding will cause a faucet site to shut down; when that happens—in keeping with the terminology—that faucet is said to have gone dry.
The most famous example of a faucet is the one by Gavin Andresen from 2009 where users could get 5 bitcoins by submitting a simple form. In today's value, that's $20,000 per click.
“Fiat” is the Latin word for “it shall be,” so that translation isn't of much help to us here. In a nutshell, a fiat currency is a financial tool that is not backed by any physical commodity or good; essentially, it exists and flourishes simply because the people have faith that the value is stable and sustainable enough for them to trust it, regardless of its fragility (“it shall be – considered valuable”).
ALL Currency has the tendency to fail if faith is lost – remember the Communist countries where you needed an armful of cash to buy milk as the value of money plummeted. Vietnam to this date is one of the easiest places to become a millionaire.
You can read more about the history of currency here.
Fib Retracement Levels
Technical analysis system that can predict crypto price corrections. Also, the amount of money you can lose using this system is proportional to a Fibonacci spiral.
Fill or Kill
This is a simple type of buy order. You say how much currency you want and what you are ready to pay for it. If the supply/demand hasn't been met for your order by the cutoff date, the order is canceled and left unfilled. In other words, fill this order according to these guidelines and within this time frame. If you can't, kill it.
This pattern forms on market value charts when investors want to test a current trend in a commodity's value. The buying and selling that takes place during this testing period—which generally lasts one to three weeks—forms fluctuations that can be bordered by parallel lines, forming the “flag” shape. Trading periods in crypto are usually shorter than in traditional markets, as this is Wall Street on steroids.
Flag patterns can occur during both upward-trending (“bear”) and downward-trending (“bull”) markets. Since they don't signify the current trend is going to reverse, the flag pattern is considered one of the “continuation” pattern types. Once the pattern is formed, the trend will continue moving in the direction it had been beforehand.
The fear of missing out. You see and hear how everyone is buying Lambos and turning their life around, or see graphs going green and up (to the moon). But don't buy at the top in FOMO because if the market turns, you will learn what it means to be a bagholder. General rule of thumb is to buy when the market is in the correction mode aka in RED. When the market goes green you sell.
Fontas is a mysterious investor or group of investors who has been using pump and dump schemes to manipulate the value of various digital currencies. That is to say, they have been buying large amounts of currency at low prices, then they've used misleading information to get other investors to buy, falsely inflating the currency's price. At that point, Fontas sells a large chunk of their cryptocurrency investment for a sizable profit. See Pump'n'Dump.
Possibly related to Spoofy.
Refers to the fork in the road, path or flow.
During development, some cryptocurrency chains may decide to split like an amoeba. The two blockchains are exact copies of each other at the time of the split or fork, giving the people who have X amount of coins on one blockchain the same amount of the newly forged coin on the newly created blockchain. Forks are generally the standard and normal way of upgrading software, as described here. In the rare case of a contientous fork, each coin continues its own independent development and goes in its own direction, or gets abandoned by miners and disappears. Examples include ETH and ETC, BTC and BCH – in those cases both chains are still present and developing.
In the cryptocurrency mining process, blocks of data are processed and validated one by one, and each of these blocks is linked in chronological order to its predecessor, forming what is called a blockchain. But every chain has to start somewhere, and the very first block of data mined in order to launch a currency is known, appropriately enough, as a “Genesis block.”
The main way in which a Genesis block differs from all the other blocks on the chain following it is that the Genesis block will have its “previous hash” data set to all zeroes. This indicates that no other data was processed before the block in question; all other blocks will have other numbers in this data field.
The most famous collector’s edition of the Genesis block generated was Block 0 of the Bitcoin chain, created by the currency's founder, Satoshi Nakamoto, in January 2009.
On occasion, gaps will appear in trend lines on market value graphs. These gaps indicate a visible drop or rise in a commodity's value that hasn't necessarily happened due to trading. These can be the result of closed markets, statistical adjustments by analysts, or strong news about the commodity. There are three types of gaps:
Breakaway Gap. These appear at the beginning of a strong upward or downward trend, and represent very high-volume trading.
Runaway Gap. These occur during an upward or downward trend, and represent a quick momentary intensification of that trend.
Exhaustion Gap. This occurs toward the end of an upward or downward trend, and tends to indicate a small trend in the opposite direction.
A hash is a random and complex string of letters and numbers used in the verification of blocks of transaction data in the process known as mining. Once a miner calculates the proper hash in a block, they're rewarded with coins and a percentage of the transaction fees embedded in that block.
Calculating the right hash in a given block can take several tries and calculation adjustments—and some blocks, even though properly processed, may not “pay out.” Miners mostly do not work together but are competing against each other in order to calculate the hash and keep the Block Reward to themselves.
If you are not in possession of a huge amount of hash power, then mining pools are a good option – groups of miners working together. In that case if the whole pool calculates the hash, everyone reaps the reward.
The hash rate is the speed at which complex mathematical calculations are performed in the mining of cryptocurrency data blocks. What this measurement boils down to is: the higher the hash rate of a mining system, the more data blocks can be successfully mined—which in turn means more block rewards for the miner or miners involved. The hash becomes more difficult to calculate over time in order to keep the value and rate stable. The following terms are used for mining hash rate measurement:
KH/s: Kilohashes per second, or 1000 hash computations/s (10^3)
MH/s: Megahashes per second, or 1 million hash computations/s (10^6)
GH/s: Gigahashes per second, or 1 billion hash computations/s (10^9)
TH/s: Terrahashes per second, or 1 trillion hash computations (10^12)
PH/s: Petahashes per second, or 1 quadrillion hash computations (10^15)
Head and Shoulders Pattern
The head and shoulders pattern forms on a market value chart when two smaller fluctuations in value surround a larger one in the middle.
Typos can make you famous. On one of the more known forums HOLD was mistyped and the term was coined as we know it today. It is a meme of constant amusement, because hodling a shitcoin is the wrong approach. You will hear this battlecry in times of market corrections, telling you that better times will return and not to succumb to sales under the paid price. “HODL” – “Hold on for dear life”.
A cryptocurrency storage and management system that is a combination of a software wallet (stored on your home computer) and a web wallet (stored on a third-party server). The bulk of your digital currency account information is stored on the wallet host's server—except for one important detail. Your private key (the code that uniquely identifies you) is stored only on your own device.
When you make a transaction, your private key is encrypted on the way to the exchange's server, so they never see it. This is an impressive security feature, but access to your private key also includes a password that—again–only you know. If you lose or forget that password, access to your account could be denied, and you could potentially lose your account balance forever. See more about wallets here.
ICO – initial coin offering – is just like an IPO – initial public offering, only for tokens of a cryptocurrency, including tokens based on programs of a blockchain (i.e. ERC20 Ethereum tokens).
Inflation indicates the general trend of rising prices for consumer goods and services. As a result—unless consumer income matches the rate of inflation—it means consumers have a lower level of purchasing power as prices go up. Banks and governments often do whatever they can to stop long periods of excessive inflation, just as they do the same for its opposite, deflation—or a sustained drop in prices. Though inflation is a natural financial process, most countries try to keep the rate of inflation at a more manageable level of 2-3% annually – the majority of consumers are able to adapt more readily to these rates.
See margin trading first.
When someone is “long”, they're invested in the growth of the asset or stock. Being long on X means buying X, and being margin long means buying X on a loan.
See margin trading first.
When someone is “short”, it means they're invested in the drop in value of a certain commodity or stock. Short means “selling”, and a margin short means selling on a loan. Here's how it works:
- let's assume we're talking Bitcoin
- you borrow 10 BTC from someone
- you sell the 10 BTC at current value in USD, because you're expecting the price to drop.
- the price drops, and you buy back 10 BTC for less than you sold them for.
- you return 10 BTC and pocket the rest.
A margin short allows you to do this with BTC that isn't yours, by paying the commission to the person or entity who lent you the BTC.
The act of buying or selling with a loan. This entails borrowing assets or money from a broker who's executing the transaction. The loan is backed by the funds in the investor's account.
Cryptocurrency transactions are bundled together in packets of data that are called blocks. The timely processing of these blocks is essential to the health of a cryptocurrency, and since there's no central entity that can carry out all this processing on their own, it's done by the currency's investors. This is called mining, and the miners are offered incentives to take on the task.
When the hash of a block has been mined, the miners collect a reward of coins and a percentage of the transaction fees from the block they've processed. It should be noted that mining is more a perk than a requirement; you can invest in cryptocurrency without mining, if you wish. Mining serves a dual purpose; not only does it validate transactions, but it results in minting of new cryptocurrency.
In many cases, the process of mining can be a resource hog; it can eat up a lot of processing time and space on computers. Since most individual miners don't have the computing power or the hardware to dedicate one or more machines strictly to mining, they'll join with other miners to distribute the processing burden. When more than one miner is involved in the processing of data blocks, this is called a mining pool. Once the mining of a block is completed and verified, the pool's members divide the coin and transaction fee rewards evenly.
Most cryptocurrencies will eventually stop being created when they reach a predetermined amount known as a mintage cap. Bitcoin's current theoretical limit is at 21 million coins by 2140. This limit is built into the technology powering the cryptocurrency, but it's just software, and even decentralized software can be changed if the majority votes that way. In most cases, the cap won't be reached for a number of years—that's by design, so new investors will be allowed to join up for some time to come.
“N00b” is an abbreviation for the term “new blood,” and is also sometimes expressed as “newb” or “newbie.” It applies to anyone who is a newcomer to a given community—in this case, investing in digital currency.
As in the world of online gaming, there are people who will help you level up and there will be people who will want to gank you and take your lunch money. N00bz can be easy prey due to their lack of knowledge.
Also called Cold Storage. It directly relates to the way your cryptocurrency wallet is stored – Cold or offline means exactly that. It is stored on a medium, device, or computer that is in no way attached to the internet so it cannot be hacked or compromised. The best way to do this is to not trust any 3rd party with this, but get your own offline cold storage.
Yes. Finally, you can print your own money without being locked up.
A paper wallet is a printed code, usually a QR code of your public and private key that can be scanned and then the money is deposited into an account of your choice.
Avoid water and washing machines as well as waving it around – if someone takes a photo of it and deposits it, there is no way back.
To learn about sweeping and importing a private key, read our introduction to Bitcoin sending and receiving, whereas if you're interested about really securing your crypto, read more about cold storage.
Made popular by the Napster generation, also abbreviated as P2P. A concept that's central to cryptocurrency. Transactions are made between individuals (peers), with no interruption or dictation from a centralized authority.
This is a digital currency exchange which limits its own role in transactions made between investors. The majority of exchanges are there to facilitate these transactions, and make them easier to carry out. The exchange will sort through buy and sell orders, and will then match up investors who meet the criteria of the order in question. Their algorithms are designed so the trades being made are both secure and fair to both parties involved. Beyond that, the exchange does not play any “middleman” or mediating role. This is in contrast to exchanges that will hold the transaction funds in escrow, or will discuss the details of the trade with both investors before moving forward.
This unique identifier code is issued to investors to be used as a digital signature during transactions. Compared to public keys—which are openly listed in the directories of many cryptocurrency exchanges—private keys are just that: closely guarded and not given out.
See more here.
Proof of Stake
Rewards for this type of mining are based on the amount you've already invested in the cryptocurrency in question. The more currency you hold, the higher your potential rewards for mining will be. You stake a certain amount of cryptocurrency, guaranteeing that you'll validate other people's transactions truthfully. If the network identifies you as malicious – sending wrong data or sabotaging others – you lose your stake. Hence, playing against the system becomes very expensive.
Proof of Work
The rewards for this type of mining are straightforward: you receive coins and transaction fee rewards in direct correlation to the actual mining work you do. As such, the more mining you do, the more you can make. With some major cryptocurrencies such as Bitcoin and Litecoin, this is the only type of mining option available. It is explained in human-friendly detail in our introduction to blockchain.
A unique encrypted code issued to a wallet owner. When they want to make a transaction, they give their public key out—many cryptocurrency exchanges have a directory of these for their investors—so the transfer can be made. The public key is a way to positively identify someone making a transaction, even though their actual name or personal information is not embedded in the key itself. This is in contrast with a private key which is not publicly known and should be closely guarded as it is used to generate a transaction. See more here.
Pump and Dump
This is a market strategy that's strongly frowned upon by conscientious investors. An individual or group will invest heavily in a stock or commodity when its price is low, and will then publicize it aggressively, often using misleading or outright false statements. This is the “pump” part of the term, and it's designed to get other investors interested and to drive the price upward. Once that happens, the individual or group will sell off their shares at a higher price; this often results in a profit for them, but it also creates a drop in the commodity's value. This is the “dump” part and, needless to say, it does not please the other investors. Also see Fontas.
These are a lot like the rectangular bar codes you'll find on just about anything you buy, except QR codes are square in shape and can hold more information than bar codes.
Merchants who accept cryptocurrency as payment—as well as other types of electronic payment—will often display QR codes in their stores. All the customer has to do is scan the QR code with their smartphone.
Most digital currency mobile apps include QR code-scanning capability. For example, the payment structure in China is based all around payments with your phone. WeChat Pay and AliPay own the majority of the market and credit cards and cash are on the way out! Some places reject payment by cash. QR code example:
QR codes are often used in the creation of paper wallets.
The phrase used when someone's buy order or sell order closes at a loss. For example, you bet the price of bitcoin will rise on a platform like Bitmex. The platform itself has set the loss limit at which it will auto-close your trade to 80% of the current price (that's generally how trading works), and bitcoin drops to 79% of its starting value. Your order is now rekt.
Reversal Graph Pattern
A type of pattern that forms on market value charts you'll see on many digital currency exchange websites. A reversal pattern indicates that a market that has been trending upward (known as a “bull” market) will reverse direction and start moving in a downward direction, or become a “bear” market—or vice versa. When a reversal graph pattern appears, it shows that investors have been testing the current trend, and for one reason or another they don't find it viable or sustainable—thus the market changes direction.
Currently, this is the smallest possible fraction of bitcoin available for transactions. It refers to 0.000000001 Bitcoin, and is named after Satoshi Nakamoto, the enigmatic creator of the first publicly-available digital currency. Nakamoto wrote the white paper in 2008 which evolved into Bitcoin in 2009. To learn more about the division of bitcoin into smaller parts, see this post.
Scrypt is a type of mining algorithm used by major cryptocurrencies such as Litecoin and Novacoin. It has one major advantage over other algorithms such as SHA-256 in that it's quicker and easier to use. It doesn't use up as much computer processing space or time, so individual miners can more readily process blocks of data with it.
The opposite of a buy order. This takes place when an investor approaches an exchange with the intent to sell some or all of their cryptocurrency.
Sometimes sell orders are simple and straight to the point (“Just sell what I have at the best price you can find”). Other times, the investor can set criteria that have to be met before the sale can be made. If there are no offers but there are limits in place, and the price shifts too much, the order can get rekt.
This is a mining algorithm used by cryptocurrencies such as Bitcoin and Peercoin. While a popular algorithm, SHA-256 tends to use a lot more computing power and processing time than others, so it can be more difficult for individual miners to use.
As a result, the majority of SHA-256 mining is performed by mining pools or individual miners who have separate computers they can devote solely to mining.
A coin without a future – financial or otherwise. Can still be used for flipping and turning a profit, just don't fool yourself into thinking it's anything more than a shitcoin (e.g. Dogecoin, Weedcoin, etc.).
A notorious online black marketplace where drug deals and money laundering occurred on a regular basis. Many of the transactions on Silk Road used cryptocurrencies, which gave the entire industry a black eye for a while. After a long FBI investigation, Silk Road's owner was arrested in October of 2013, and the entire operation was shut down. The owner was found via common techniques of identifying bitcoin traffickers, like those described in this post.
When a block of cryptocurrency data has been successfully processed by a miner or mining pool, that block of data is considered stale. Experienced miners know to skip stale blocks, for it would be a waste of their time and resources to try to mine them again.
This is a standing “get me out of here!” sell order that investors in stocks or commodities (such as a cryptocurrency) use to stop or minimize their losses.
Investors often establish a stop-loss order the minute they make a purchase. This is a sell order that specifies the price at which the currency should be sold. For example, if you buy shares of something at $100 each, you might decide to issue a stop-loss order at $60. As long as the share price remains above that number, all is well—and nothing will happen unless you contact the exchange personally. However, the second the price hits $60, all or part of your currency (whichever you specify) will be sold at your stop-loss order price. Different exchanges treat this differently; some sell immediately, and some wait to see if it's just a momentary “hiccup” on the market; if the price falls below your stop-loss limit, you'll get the latter amount for your shares. Stop loss orders are not always the best option: see more here. Luckily, Coinbase reimbursed the people who lost money due to this.
Named after the subject of a book on identity dissociation disorder (multiple personality disorder), a Sybil attack is any attack on a peer-to-peer or decentralized computer resource that includes simulating various identities from a single origin point. An example of a Sybil attack is an ICO which features contribution caps from people – an attacker could create multiple addresses and contribute from those, thereby gaining a higher ratio of tokens compared to other investors.
A currency created on the Omni layer of the Bitcoin blockchain. Each Tether is supposed to have a 1:1 value relationship with the underlying fiat currency it represents, so 1 USDT is 1 USD. There's a lot of controversy surrounding the Tether company, most notably the fact that the company responsible for minting new Tethers, whose owner is also the owner of the Bitfinex exchange, seems to be printing unbacked Tethers into existence and buying Bitcoin from themselves. See wash trading.
To the moon!
A rallying cry for a currency's price to rise sky-high. It has sparked existential questions—”Can we please define ‘moon’?“
Generally speaking, the trend line on a chart will move more or less diagonally as trades are made. However, once in a while there is a buy or sell order that comes in which will make the trend line move directly up and down, creating a vertical line that resembles a wall. These “walls” represent a temporary high demand in interest, either in buying or selling a certain type of digital currency. If a wall is created by a large buy order, it's called a “buy wall,” and if it represents a sizable sell order, it's called a “sell wall.”
Most trades made with cryptocurrency include a small transaction fee. This fee is fed into the data block that contains the transaction's information, and all or part of the transaction fee will be rewarded to the miner or mining pool that successfully processes that block.
Triangle patterns form on market value charts when investors buy and sell to test a current trend. The highs and lows of these fluctuations can be surrounded by straight lines that define the highs and lows during that testing period; these lines form an open-ended triangular shape.
There are three types of triangle patterns:
Descending Triangle. Formed when the lower line of the triangle is a horizontal line, and the upper line tilts downward from left to right. The descending triangle represents a downward-trending, or “bear,” market.
Ascending Triangle. The inverse of the descending triangle, with an upward left-to-right tilted line at the bottom, and a horizontal line at the top. Ascending triangle patterns indicate an upcoming “bull,” or upward-trending, market.
Symmetrical Triangle. The symmetrical triangle stands out because both lines forming the triangle are tilted. It's also a trickier pattern to predict, because it can continue in either an upward (“bullish”) or downward (“bearish”) direction.
The chat box that sits on the edges of a trading screen at some exchanges (Bitmex, Poloniex). Everything said in the Trollbox should be taken with more than just a grain of salt, as it's a fertile ground for Pump'n'dump marketing. It is what you would generally expect from any chatroom on the internet populated primarily by teenage to middle aged males, however I would argue that cryptocurrency trollboxes add cash to the mix.
Serves the same purpose as a regular wallet – keeping currency safe. We've explained them in detail here.
Buying or selling a good, asset, or stock from oneself – trading with yourself in order to create the illusion of demand and market liveliness.
These are a type of continuation pattern you'll see on market value graphs; that means they represent a momentary shift against the current trend. The trend tends to continue in the direction it was going once the pattern is fully formed. Wedge patterns can be spotted by two diagonal, but non-converging, lines that border the up-and-down fluctuations that occur while investors test the current trend. There are three types of wedge patterns:
Rising Wedge. This wedge shape is tilted upward; thus, the name. However, a rising wedge occurs during a downward trend, or “bear” market. It's a momentary upward shift, but the bear market continued afterward.
Falling Wedge. The falling wedge is tilted downward. It represents just the opposite of the rising wedge, in that it denotes a brief downward movement during a “bull” market, which continues once the wedge is formed.
Level Wedge. These appear to move in more or less a horizontal direction on a graph. Just like the rising and falling wedges, the level wedge shows a brief respite in a trend, which will continue once the wedge pattern is complete.
In finance, a whale is usually a very wealthy investor or institution. In crypto, it's someone who entered a cryptocurrency's ecosystem early enough to have made a disproportionate fortune by now.
A whitepaper is a central part of any ICO. It's a paper in which the company doing the ICO describes, in great detail, what its project is about and how it'll make money for investors. It's a read that shouldn't be passed up.
Zero Confirmation Transaction
The processing of data for cryptocurrency transactions can take anywhere from half a minute to hours in some cases. This is necessary in order to validate transactions — it guards against fraudulent activity such as double spending. The waiting period can be inconvenient for those involved, and as a result, some exchanges and businesses that deal with digital currency are offering “zero confirmation” transactions, which are almost immediately verified without waiting for the mining process to confirm the data block.
This can be risky, but for smaller transactions where trust isn't a major factor it's a healthy compromise.
Remember, of you'd like to add new terms to this glossary or suggest changes, please do so via Github, where all our content lives.