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Cryptocurrency Cheat Sheet: A Glossary of 30 Crypto Terms You Should Know

Lynnette Khalfani-Cox, The Money Coach by Lynnette Khalfani-Cox, The Money Coach
in Crypto, Featured, Investing
Reading Time: 8 mins read
cryptocurrency definitions AskTheMoneyCoach
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Are you confused about cryptocurrency? Baffled by digital assets? Or just curious to better understand some of the lingo you hear people using when referencing Bitcoin, blockchain or other things related to cryptocurrencies? 

Then improve your digital literacy with this cheat sheet. It contains brief definitions for some of the most common terms you’ll encounter in conversations or articles discussing crypto. 

Each of these concepts is worthy of its own deep dive. But this glossary – featuring working definitions for 30 commonly used terms – will at least get you started learning about the digital economy. 

  1. Adoption – The legitimization of cryptocurrency through various market actions, like businesses accepting it as tender, traditional institutions adding it to their portfolios, and everyday investors purchasing it more widely. [Learn more about Adoption from Forbes.]
  2. Altcoins – All cryptocurrencies other than Bitcoin. There are more than 12,000 altcoins on the market. [Learn more about Altcoins from U.S. News & World Report.]
  3. Bitcoin – The first decentralized digital currency to be exchanged on a peer-to-peer basis without intermediaries like governments or banks. Bitcoin is also used as shorthand to describe the overall concept created by founder Satoshi Nakamoto (see definition below). [Learn more about Bitcoin from NerdWallet.]
  4. Blockchain – The underlying technology that powers cryptocurrency.  The blockchain is a shared, immutable ledger that facilitates crypto transactions, chronologically records transaction data, and tracks crypto-exchanged assets. [Learn more about Blockchain from IBM.]
  5. Central Bank Digital Currency (CBDC) – Virtual money that’s backed and issued by a central bank.  CBDC aims to provide more regulation, transparency, and prevention of illicit activity than decentralized cryptocurrency. [Learn more about CBDCs from the Atlantic Council’s Central Bank Digital Currency Tracker.] 
  6. Cryptocurrency – Digital currency that can be used to purchase goods and services.  In most cases, cryptocurrency refers to any decentralized currency that’s not issued by a traditional financial institution. [Learn more about cryptocurrency from Investopedia.]
  7. DAOs – Decentralized autonomous organizations that act as investment firms, VC firms, or LLCs.  In a DAO, a small group of people come together exclusively online and collect capital to make investments or manage blockchain-based projects. [Learn more about DAOs from this article by CNBC.] 
  8. Decentralized – The transfer of authority from a centralized entity to a distributed network, enabling individuals to facilitate transactions directly with one another instead of using an official third party. Cryptocurrency is decentralized because money is issued and transactions are conducted across a distributed network, not through a bank or the government. [Learn more about Decentralized from Nasdaq.]
  9. Dogecoin – A popular dog-themed meme token, this alt coin originally began as a joke but gained serious traction in 2020 when it became one of the top traded cryptocurrencies. Even though it was only about 25 cents per token in November 2021, fans of Dogecoin held out hopes for big gains after billionaire Elon Musk briefly changed his Twitter handle to Lorde Edge, supposedly an anagram for ‘Elder Doge’ – since Musk is often called the ‘Godfather of Dogecoin’ and is known to have invested in Dogecoin. [Learn more about Dogecoin from the official Dogecoin website.] 
  10. Ethereum – An open-source blockchain platform with its own programming language and cryptocurrency, Ether (ETH), which is the second-most popular cryptocurrency behind Bitcoin.  Ethereum users pay to use special entertainment, financial services, and business apps called dApps (decentralized apps). [Learn more about Ethereum from TIME.]
  11. Exchanges – Online platforms where you can buy, sell, and trade digital assets based on their market value. [Learn more about Exchanges from Intuit MintLife.]
  12. Fiat Currency – Government-issued money that is backed by the government itself instead of a commodity like gold.  Example: the U.S. Dollar. [Learn more about Fiat Currency from SoFi Learn.]
  13. Fork – What happens when a blockchain community changes the blockchain’s underlying protocol (or rules).  With new rules, the chain is split, resulting in a second blockchain that goes in a different direction – a fork. [Learn more about Forks from Coinbase.]
  14. FUD – An acronym for fear, uncertainty and doubt.  FUD is a catch-all term that stands in for all the cryptocurrency concerns expressed outside of the community.  For example, fears about Chinese regulations on crypto mining and transactions are FUD, and so are worries about crypto’s energy use. [Learn more about FUD from Fortune.]
  15. Gas – The fee required to conduct transactions and execute contracts on the Ethereum platform.  The price fluctuates based on supply and demand. [Learn more about Gas from The Balance.]
  16. Halving – When the reward for mining bitcoin transactions, the bitcoin inflation rate, and the rate at which new bitcoins enter circulation are all cut in half.  This happens after every 210,000 blocks are mined (roughly every four years) and is programmed to continue this way until 2140. [Learn more about Halving from Kiplinger.]
  17. Hash ID – A unique string of characters assigned to every transaction that’s verified and added to the blockchain.  A hash ID may be needed to locate and access crypto funds. [Learn more about Hash ID from Binance Academy.]
  18. HODL – Short for “hold on for dear life”.  HODL resembles a misspelling of hold and refers to crypto investors’ buy-and-hold strategy, which often involves holding regardless of instability or in the market. When crypto investors say are HODLing through a market downturn, or volatility, they say they have “diamond hands” – meaning they’re firm and won’t sell, no matter what. [Learn more about HODL fromBloomberg | Quint.]
  19. ICO – Short for initial coin offering.  Companies launch ICOs to raise capital for new business ventures, and they serve as the cryptocurrency industry’s version of an initial public offering, or IPO, which is when a private company goes public, by listing its shares on a stock exchange such as the Nasdaq or the New York Stock Exchange. [Learn more about ICOs from the SEC.]
  20. Mining – The process of using computers to solve cryptographic equations and earn cryptocurrency.  It involves validating data and adding records to the blockchain. [Learn more about Mining from Yahoo! Money.]
  21. NFTs – Non-fungible tokens – which are 100% unique digital assets that can be bought and sold like property – exploded in popularity in 2021 and generated more than $14 billion in trading volume. Though they’re tokens, NFTs operate like certificates of ownership for virtual or physical assets and can’t be used interchangeably with other tokens. As such, NFTs act like deeds of ownership for virtually any creation, from GIFs, popular memes or Tweets, to recordings, unique artwork, and collectibles of all kind. [Learn more about NFTs from BBC.]
  22. Node – A computer that’s connected to a cryptocurrency network.  Thousands of nodes exist in a given network and execute various network functions, including verifying crypto transactions. [Learn moreabout Nodes from PC Mag.]
  23. Proof-of-Work (PoW) – The consensus protocol used by most cryptocurrencies, including Bitcoin and most altcoins.  A large network of computers must solve mathematical puzzles to verify transactions and maintain the cryptocurrency’s integrity. [Learn more about Proof of Work from Ethereum.]
  24. Proof-of-Stake (PoS) – An emerging consensus protocol currently being adopted by Ethereum.  A smaller group of validators are charged with verifying transactions instead of large networks. [Learn more about Proof of Stake from Ethereum.]
  25. Satoshi Nakamoto – The pseudonym used by the inventor of Bitcoin, whose real-world identity is unknown.  The name first appeared in the original Bitcoin whitepaper. Also, just like a dollar can be broken down into 100 pennies, Bitcoin is divisible. When you buy fractions of Bitcoin, they’re called Satoshis or “Sats”. One Satoshi is equal to 0.00000001 Bitcoin. [Learn more about Satoshi Nakamoto from Robb Report.]
  26. Smart Contracts – Digital contracts stored on the blockchain that automatically initiate when predetermined conditions are met.  They’re used to facilitate cryptocurrency transactions without use of a third party or middleman. [Learn more about Smart Contracts from IBM.]
  27. Stablecoins – Cryptocurrencies that attempt to peg their value to a physical asset, in an effort to minimize volatility. [Learn more about stablecoins from Bankrate.]
  28. Staking – The process of committing cryptocurrency assets to support a blockchain network and verify transactions. When you “stake” crypto that you own, you put it up for use by others, and you can earn interest off of your investments – sometimes 10% to 20% or more. Staking also makes participants eligible to become validators. [Learn more about Staking from The Motley Fool.]
  29. Wallet – A physical device or software program where investors can store cryptocurrency. [Learn more about Wallets from Business Insider.]
  30. Whales – Entities or individuals who hold large amounts of cryptocurrency and have the potential to move – or possibly manipulate – the market. [Learn more about Whales from Bloomberg.]

At first glance, many of these 30 crypto terms can seem confusing or like a foreign language. But don’t let that deter you! 

The important thing is to just start learning and familiarizing yourself with crypto terminology. Then, little by little, you can build upon your knowledge and go deeper to better understand each concept. An excellent way to further your learning is to read my primer, A Beginner’s Guide to Understanding and Investing in Cryptocurrency.

Feel free to keep this cryptocurrency cheat sheet, too, and refer back to it as often as necessary as a refresher whenever you come across crypto terms in the future.

Tags: cryptocurrency
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About

Lynnette Khalfani-Cox, The Money Coach®, is a personal finance expert, speaker, and author of 15 money-management books, including the New York Times bestseller Zero Debt: The Ultimate Guide to Financial Freedom.

Lynnette has been seen on more than 1,000 TV segments nationwide, including television appearances on Oprah, Dr. Phil, The Dr. Oz Show, The Steve Harvey Show, Good Morning America, The TODAY Show and many more.

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