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A Must-Know Crypto Investment Glossary Recommended by Ray Dalio

Designed by LUKRUM

As a new investor in the growing cryptocurrency sector, you might feel overwhelmed by the terminology you’ve encountered exploring the market and chatting on forums. In order to help familiarize yourself with crypto colloquialisms, LUKRUM has provided you with an essential glossary of terms that will enable you to get a basic grasp on investing in digital currencies.

Blockchain

A linked list of modification-resistant blocks of data. Cryptocurrency transactions are publicly recorded in chronological order on the blockchain using cryptography.

Bitcoin

Bitcoin (BTC) is a digital, peer-to-peer currency that exists without the need for a central bank or intermediary.

Altcoin

Any cryptocurrency model other than Bitcoin can correctly be called an altcoin.

Ethereum

Unlike Bitcoin, Ethereum is a blockchain platform designed to allow other projects to run smart contract protocols, enabling the execution of a given task if certain agreed conditions are met. The Ethereum token (ETH) serves as an incentive mechanism.Fork

A change in protocol. A hard fork obsoletes the old protocol, whereas a soft fork is backwards compatible. Both Bitcoin Cash (BCH) and Ethereum Classic (ETC) are examples of hard forks.

Consensus Algorithms

The rules of a blockchain network aimed at preventing fraud (in the form of double-spending) and validating transactions.

Proof of Work (PoW)
Bitcoin’s consensus algorithm is a Proof of Work system, where miners verify the transactions within the network by competing to solve blocks before being added to the blockchain.

Proof of Stake (PoS)

Ethereum’s consensus algorithm is a Proof of Stake system, where blockchain network miners stake their ETH in a native wallet tied to the network and commit to fairly processing transactions in exchange for a mining reward.

Exchange
A cryptocurrency exchange, such as Binance or Coinbase, enables users to trade cryptocurrencies for other digital or fiat assets.

Token
A unit of value based on an underlying blockchain. A token’s use depends on the platform, and can be used for payment/fees, access rights, voting, and numerous other features.

Bug Bounty
A reward offered for finding ‘bugs’ or issues with computer code.

Bounty
A reward offered for completing a certain task.

Bounty Hunter
Someone who profits from participation in bounties.

Pump and Dump scheme
An investment scheme that that raises the price of an asset by the issuer in order to sell it for a profit.

Circulating supply

The approximate amount of coins circulating in the market

Total supply

The total amount of existing coins, both in the market and uncirculated. Normally, the total supply is equal to or greater than the circulating supply.

Maximum supply

The maximum amount of coins that will ever be mined or produced. Note: some coins have an infinite supply.

Market capitalization (market cap)

Determines the value of a coin or grouping and is calculated by multiplying the current coin price by the circulating supply. This calculation can also be used to analyze groupings of coins or companies to determine a collective value.

ICO

An ICO, or Initial Coin Offering, is a fundraising event to sell a new token in exchange for Bitcoin, Ethereum, and/or fiat money. Instead of purchasing equity in a company, investors are acquiring a new token with the expectation that it will either increase in value or grant them access to opportunities specific to the project.

Soft cap / Hard cap

A capped ICO has a fundraising limit, and its hard and soft cap represent fundraising goals. The hard cap is the absolute limit, whereas a soft cap is only a hypothetical minimum.

Volatility
Extreme fluctuations of an asset’s price.

ASIC
‘Application Specific Integrated Circuit’. A computer chip used in cryptocurrency mining.

Mining
The verification process for transactions to complete a block to be added to the a Blockchain.

Mining Pool
A group of miners sharing their computer resources and the rewards for mining.

Mining Reward
The reward for volunteering computer resources to verify cryptocurrency transactions, often a cryptocurrency or a portion of a transaction fee.

Node
Any device on the blockchain network

Emission curve / Emission schedule

The schedule of how coins will be mined

FOMO
‘Fear Of Missing Out’ is the result of the impulsivity that a volatile market produces in investors.

FUD
‘Fear, Uncertainty, Doubt’ refers to the spreading of unfounded, negative opinions on a coin.

HODL
Originally a typo in a BitcoinTalk forum, a HODLer is a crypto trader who plans to ‘Hold On for Dear Life’.

Bagholder
Someone holding a declining asset or a coin after a pump and dump scheme.

Bearish
A ‘bearish’ person expects the market and prices to go down.

Bullish
A ‘bullish’ person expects the market and prices to go up.

Whale
An investor with a large reserve of an asset.

51% Attack
Someone gaining control of more than 50% of nodes contributing to a blockchain network means being in control of the network and enables the ability to verify double-spend transactions.

The Flippening
An event wherein the total market cap of Ethereum surpasses that of Bitcoin.

Professional investments take expert knowledge, and crypto presents an entirely new set of challenges. Our glossary of essential cryptocurrency terms should not only give you an overview of the day-to-day vernacular, it should serve as a starting point for your deeper research. Be sure to bookmark this page and check out our other blog posts for more useful information on cryptocurrency investment.

Think something is missing from our list? Let us know in the comments.

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