In this article, we’re going to break down the most important blockchain and crypto terminology to extend your crypto vocabulary. From arbitrage to zero-knowledge proofs, we’re going to dive deep into some of the most important and widely used phrases and expressions you’re likely to hear throughout the industry.
In Web3 and blockchain education, Moralis Academy is the premier platform. Be sure to check out our Blockchain and Bitcoin 101 course to gain a firm understanding of blockchain technology and crypto terminology. Also, save our “What is Litecoin?” and “Cardano vs Solana” articles for later! Regardless of experience, we can help you to achieve your goals in crypto. Join our community of over 30,000 students today and begin your blockchain adventure with Moralis Academy!
Why is Blockchain Terminology so Complex?
Blockchain technology comprises many different disciplines and practices, including cryptography, computer sciences, and finance. Accordingly, crypto and blockchain terminology incorporates several “languages” into one. Also, crypto is global. As such, the subtle nuances of the crypto vernacular vary from region to region.
Blockchain terminology features various popular culture references. Now, if you’re not familiar with blockchain, odds are you’ll find certain memes or jokes strange. However, familiarizing yourself with blockchain terminology will help you to develop a stronger vocabulary and understand more about the industry.
Crypto Terminology: A – B
Airdrop: A marketing strategy that crypto projects use to distribute free coins or tokens to incentivize adoption. By giving away free crypto in an airdrop, platforms seek to promote their services while giving value to potential users.
Altcoin: Any cryptocurrency or token that is not Bitcoin. These lesser-known cryptocurrencies can also be subdivided by market cap (low/mid-cap etc.) and utility (exchange token/DeFi token or layer-1s etc.).
Application Programming Interface (API): This is a type of intermediary software that enables two applications to communicate. For example, APIs can fetch price feeds or weather data from one application and display it in another.
Arbitrage: The process of profiting from the difference in prices between two or more different markets. For example, if a token is trading at a lower price on one exchange, you could buy some of those tokens and sell them for a higher price on another exchange to make a profit.
Automated Market Maker (AMM): A decentralized exchange (DEX) protocol that uses algorithms instead of order books for trading digital assets. AMMs use smart contracts, liquidity pools, and liquidity providers to facilitate permissionless token swaps without intermediaries.
Block: A data structure that holds transactional data within a blockchain. Blocks record transactions that are yet to be validated by a blockchain network. When the data is validated, a block is appended to the blockchain. Also, this process is immutable, meaning that nobody can alter it without the entire network agreeing.
Block Confirmation Time: The time it takes to record a transaction on the blockchain after it is broadcast. Typically, this metric measures the average speed of a network and how long it takes for miner nodes to collect transactions.
The Terminology of Crypto: B – C
Block Height: The number of blocks in a blockchain. This term can identify the historical location of a transaction. Also, block height tells us the size of a particular blockchain.
Blockchain: A type of distributed database securing a record of transactions across a network of nodes. Public blockchains are decentralized, with no single point of failure. However, private blockchains share many of these same principles but across a permissioned network. Furthermore, blockchains create an immutable record of transactions and form the basis for creating cryptocurrencies.
CeDeFi: A combination of centralized finance (CeFi) and decentralized finance (DeFi) where the traditional finance industry meets the world of blockchain and Web3 technology.
Centralized Exchange (CEX): A type of cryptocurrency exchange with central ownership. These company-run exchanges provide fiat gateways to deposit, withdraw, and buy and sell crypto for fiat.
Coin: Broadly speaking, all cryptocurrencies are coins. However, there is a slight difference between coins and tokens. Technically speaking, coins are first-generation cryptocurrencies that are native to a particular blockchain.
Cold Storage: A type of offline wallet for storing cryptocurrencies. Generally speaking, cold storage wallets are physical devices that look similar to a USB drive.
Consensus Algorithm: A way for a distributed network to reliably agree on data values. These computer processes enable blockchain networks to agree that transactions are valid. Popular examples include proof-of-work (PoW) and proof-of-stake (PoS).
Cryptocurrency: A digital currency using cryptography and blockchain technology. Cryptocurrencies are assets and a medium of exchange that operate outside of the jurisdiction of governments or banks.
Crypto Terminology: D – F
Decentralization: An organizational structure whereby activities are distributed transparently away from any central authority or single point of failure.
Decentralized Application (dApp): An app that uses decentralization, smart contracts, blockchain, and cryptocurrencies. Also, dApps tend to operate using a community governance model with no single point of failure.
Decentralized Autonomous Organization (DAO): A type of organization where decisions are automated and transparent. Rules are encoded into smart contracts, and agreements are made by voting members instead of a central authority.
Decentralized Exchange (DEX): A crypto exchange that has no central authority. Unlike centralized exchanges, DEX users must take custody of their assets.
Decentralized Finance (DeFi): A series of smart contract-based permissionless financial applications operating on public blockchains. DeFi exists outside of the legacy financial system. DeFi protocols use distributed ownership to prevent a single point of failure.
Ethereum Virtual Machine (EVM): A computation engine for creating instances of computer programs for dApps on Ethereum.
Fiat: Money that the government issues. This is the money you see in your bank account. It has no real backing or intrinsic value, as central banks can create it at any time.
Fork: There are two types of “fork,” a hard fork and a soft fork. A hard fork occurs when the rules of a blockchain change and the chain is split in two. Following a hard fork, one chain follows the old set of rules, and the new chain follows a different set of rules. Furthermore, a fork can represent divisions within blockchain communities. Examples of this include Ethereum Classic and Bitcoin Cash. However, a soft fork could work much like a software update. Also, soft forks do not have to result in two separate chains.
Fundamental Analysis (FA): A way of measuring the intrinsic value of an asset by considering various macroeconomic factors.
Crypto Terms: G – H
Gas: This is a type of fee, often referred to as “gas fee.” For instance, to execute a transaction on Ethereum, you would need to have a certain amount of ETH. This fluctuates according to network congestion and the number of available nodes.
Genesis Block: The first-ever block to be mined and added to a blockchain.
Halving: When the block reward for mining a cryptocurrency is cut in half. This often signifies a new market cycle.
Hash: A unique sequence of characters that identifies blocks within a blockchain. Also, hashes are alphanumeric code calculations relating to buyers and sellers in transactions. This mathematical function ensures the validity of transactions on a blockchain network.
Furthermore, a hash is a string of characters generated by a formula. The process of hashing involves putting data into a formula to produce an outcome, known as a hash. Moreover, hashes are always the same length, regardless of the amount of data put into them. Accordingly, hash functions can map data of any arbitrary size into a fixed value.
Hashing Algorithm: This dictates the rules of the complex mathematical problems that miners must solve to process transactions throughout a blockchain network.
HODL: “Hold on for dear life”. A “hodler” is someone who holds onto their investments for a long time.
Cryptocurrency Terminology: I – M
Initial Coin Offering (ICO): A fundraising method similar to an initial public offering (IPO) but using crypto instead of shares.
Interoperability: An application or technology’s ability to operate on multiple blockchain networks.
Liquidity Pool: Liquidity providers (LPs) can deposit funds into a liquidity pool. Often, this liquidity facilitates token swaps on a DEX. Being a liquidity provider enables token holders to earn transaction fees by lending out their idle assets. This can be a great way to earn a passive income. However, funds are at risk, and financial loss can occur.
Metaverse: A series of virtual lands and blockchain gaming platforms featuring elements of futurism and science fiction.
Mining: This is how new cryptocurrencies enter circulation and how transactions are confirmed. For example, Bitcoin mining requires supercomputers (or “mining” rigs) that compete to solve complex mathematical equations to confirm transactions. The “miner” who solves the equation first can append a block of transactions to the blockchain.
Crypto Terminology: N – S
Node: One of several computers that connects to a blockchain network.
Non-Fungible Token (NFT): Fungible assets like USD, BTC, or ETH are interchangeable. However, non-fungible tokens (NFTs) represent unique sets of data. Furthermore, NFTs can effectively tokenize any asset on the blockchain.
Oracle: A third-party service that enables smart contracts and blockchains to connect to real-world, off-chain data.
Proof-of-Stake (PoS): A consensus mechanism for the validation of crypto transactions. Blockchain networks using a PoS mechanism require validators to lock up funds to have “skin in the game” when processing transactions. Accordingly, any rogue node that tries to trick the network could lose its stake.
Proof-of-Work (PoW): A type of cryptographic proof whereby a party can prove it is expending a certain amount of computational effort. Also, PoW is the consensus algorithm for validating transactions throughout the Bitcoin network.
Satoshi Nakomoto: Pseudonymous developer(s) responsible for creating Bitcoin. Also, a “satoshi,” or “sat,” is the smallest unit that Bitcoin can be broken into. Moreover, there are 100 million satoshis in one Bitcoin (BTC).
Smart Contract: An irreversible agreement with automations cemented in code. Smart contracts form the basis of most DeFi protocols, dApps, and DEXs.
Staking: Locking up crypto funds to earn interest or rewards.
Crypto Terminology: T – Z
Technical Analysis (TA): A trading discipline for evaluating price movements using chart patterns and historical prices.
Token: Any type of cryptocurrency that is not the native asset of that blockchain.
Token Burn: When tokens are purposefully sent to an unusable wallet, sometimes called a “burn address,” to reduce their supply.
Wallet: Where you store your crypto assets. A crypto wallet comes with a wallet address (public key) and a seed phrase (private key) that operates like a password to authenticate transactions.
Web3: The next generation of the internet, Web3, refers to a series of permissionless, interoperable protocols and dApps operating on public blockchains without a central authority.
Web3 Browsers: Web3 browsers are open-source web browsers with privacy-preserving features and dApp integrations.
Yield Farming: This is an investment strategy where you put your tokens to use and earn interest. The process includes hopping between multiple liquidity pools and DeFi protocols to get the highest interest rates for depositing assets.
Zero-Knowledge Proof (ZK-Proof): A protocol or method in cryptography whereby one party can prove to one or more other parties that a statement is true without revealing any other information.
10x: 10x means turning a profit that is ten times your initial investment, or 1,000%. For example, if you had $400, doubling it would give you a 2x. However, turning it into $4,000 would give you a 10x. Equally, a 100x would give you $40,000, and a 1000x would give you $400,000!
Crypto Terminology: All Terms You Need to Know – Summary
Now that you’re familiar with the most common blockchain terminology, you should be ready to explore the broader world of Web3 and crypto. Furthermore, you should be in a better position to participate in technical discussions and continue your learning path at a higher level!