New to the cryptocurrency sector and confused by the variety of terms and abbreviations you’ve come across? There are so many different buzzwords and terms thrown around the sector that it can be hard to keep track sometimes. That’s why we’ve assembled this glossary and guide for digital asset sector terms. Let’s dive in.
Common Crypto Terms and Their Definitions
Below we’ve gathered common terms you may come across within the cryptocurrency sector. Each term is defined and examples are given where relevant. These are in alphabetical order.
Airdrop
An airdrop is an event through which a crypto project gives coins or tokens to users for free, “dropping” them into their wallet addresses. Airdrops work as a marketing strategy to help draw in new potential users/investors.
Altcoin
An altcoin is any cryptocurrency that isn’t Bitcoin, as Bitcoin is the original cryptocurrency.
AMM
AMM stands for Automated Market Maker and they are used with Decentralized Finance (DeFi). Rather than needing an intermediary to trade with each other, AMMs allow users to swap assets with each other through liquidity pools and replace traditional order books.
Uniswap is an example of a decentralized exchange that uses an AMM system.
CBDC
CBDC stands for Central Bank Digital Currency. These would be digital currencies issued by a governmental body and pegged to the local fiat currency.
CEX
CEX simply means Centralized Exchange. These are exchanges such as Coinbase, Binance, or Kraken, that are run by a company and are centrally controlled.
DAO
A DAO or Decentralized Autonomous Organization is an organization that is meant to function without a central authority. An organization run by a collective.
Dapp
Dapp is simply short for Decentralized Application. These are applications such as Uniswap or Lido where users can interact with crypto protocols using their wallets.
DeFi
DeFi stands for Decentralized Finance. It encompasses any and all financial applications that are run in a non-centralized way, such as Uniswap. A centralized equivalent would be eToro.
DEX
DEX means Decentralized Exchange, which is simply an exchange that is run by users rather than a company or central point. Once again Uniswap is an easy example.
Fiat
Fiat is currency that is backed by a government or central bank.
FOMO
FOMO means “Fear of Missing Out” and it refers to the psychological effect that causes people to buy in as an asset shoots up in price.
FUD
FUD stands for “Fear, Uncertainty, and Doubt” and it is the act of spreading negative or misleading news about a project that is false or inaccurate.
HODL
HODL means “Hold on for Dear Life” and is just a fun way to say that you should “hold” your investments through bull and bear markets.
KYC
KYC or Know Your Customer is a process of verifying a customer’s identity for financial institutions. This applies to both traditional and cryptocurrency financial companies.
Liquidity
Liquidity refers to the ease of lack of ease at which an asset can be sold, but also refers to something you can provide to a DEX. By providing liquidity, you’re giving your assets to the platform in order to earn a share of revenue generated through transaction fees.
NFT
An NFT or non-fungible token is a crypto token with unique qualities, such as a piece of art or a deed to a property.
P2E
Play to Earn or P2E are games where you earn crypto assets for playing the game. Axie Infinity (AXS) is one of the best known examples of a P2E game.
P2P
Peer-to-Peer or P2P refers to platforms where you trade with other individuals or “peers”.
PoS
PoS means Proof of Stake and it refers to a type of blockchain consensus algorithm where the likelihood of you or your validator being chosen to validate transactions and add the next block depends on the amount of the asset you have staked, rather than your computer processing power like in PoW blockchain networks. New asset emissions are distributed to stakers in a prorated manner.
PoW
PoW means Proof of Work and instead of the amount of power being based upon a stake, it requires miners to solve complex mathematical problems in order to win the right to verify transactions and add new blocks to the blockchain. This also gives you the block reward of new Bitcoin and transaction fees for that block. The more processing power you have, the more likely you will solve the block.
Only a few networks still use PoW, namely Bitcoin, Dogecoin, and Litecoin.
SAFU
SAFU means Secure Asset Fund for Users and it is Binance’s reserve fund in case of some sort of loss of customer funds. It can make them whole in such a case. The term is also used to say that there isn’t anything to be concerned with as in “funds are safe”, which eventually became funds are SAFU as Changpeng Zhao used to tweet out the phrase frequently.
SATS
SATS, or Sats, stands for Satoshis, the smallest unit of a Bitcoin (0.00000001).
Sharding
Sharding is a way in which blockchain networks can scale to improve a network’s efficiency by separating the database into manageable “shards”.
Stablecoin
A stablecoin is simply a digital asset that is pegged to the value of a fiat currency such as USD, EUR, or CAD. It should always be the same price as the fiat currency to be a good stablecoin.
Staking
Staking is the process of locking up your assets in order to earn a return on them. It helps to secure a blockchain network when you stake your assets.
TPS
Transactions Per Second or TPS refers to the speed at which a blockchain network can process transactions.
TTF
Time to Finality or TTF refers to the speed at which a blockchain can finalize and guarantee a transaction to be valid.
Validator
A validator is a blockchain network participant who is responsible for verifying transactions and maintaining its security. They tend to only exist on PoS networks and have prerequisites such as having a node running and/or having a certain amount of that network’s assets staked.
Yield Farming
Yield Farming is a way to lock up crypto assets to earn more, often through some sort of aggregated system. It’s different from providing liquidity or staking because it’s often done using a variety of platforms to create the desired results.
Wallet
A wallet is the place where you store your crypto assets. They come in multiple forms such as a hardware wallet, software wallet, or a browser extension.
Web3
The “third” version of the internet, where there will be much more interaction between users and the platforms they use.
Whale
A whale is a crypto holder that has a large value or quantity of an asset.
Whitepaper
A whitepaper is a document released by the developers of a blockchain project that outlines their goals for the network. This includes the network’s asset(s), how everything works from a technical standpoint, how assets are distributed, and more.
Zero-Knowledge Proof
A ZK proof or zero-knowledge proof is a blockchain system that allows a user to prove they possess certain information or assets without revealing the actual information. They allow private information to be exchanged without it being exposed.
