A Beginner’s Glossary of Cryptocurrency Terms

Cryptocurrencies have changed the financial environment by introducing a decentralized digital currency that is based on blockchain technology. The terminology is overwhelming for newcomers. This cryptocurrency glossary is brought to you by Altcoin Beacon to drive you away from the jargon and complex crypto terms. Let us define them clearly and in simple words.

Altcoin

Any cryptocurrency other than Bitcoin.

For example, Ethereum, Litecoin, and Ripple are altcoins.

Blockchain

A decentralized, distributed and public record of transactions across many computers that form one single chain of blocks. 

The transactions in Bitcoin are all recorded on its blockchain.

Consensus Mechanism

Protocols that assume a transaction to be valid and add them to the chain.

The Proof of Work and Proof of Stake are common consensus mechanisms.

Cryptocurrency

A digital currency with which transactions are secured by cryptography and which is independent from a central authority. Bitcoin is the first and most popular cryptocurrency.

Candlestick

A candlestick is a visual representation of an asset’s price movements within a specific time frame. It provides traders and chartists with an easy way to observe the opening, highest, lowest, and closing prices of an asset. Although candlestick charts can be applied to various types of data, to analyze financial markets. The origin of the candlestick chart is attributed to Japanese traders in the 17th century.

Capitulation

Capitulation refers to a period characterized by heavy selling activity, where investors quickly abandon their positions and liquidate their holdings. This phenomenon is often associated with panic selling, as the volume of sell orders surges far beyond the typical level, causing the asset’s price to decrease rapidly until a bottom is reached. Capitulation can be seen as the point at which investors lose confidence in their positions, accepting significant losses and abandoning their prior gains. After this phase of panic selling ends, it is often followed by a period of consolidation, where prices move sideways, or by the start of an upward trend that could signal the beginning of a bull market.

Decentralization

Peer to Peer that is distributing control that is not from a central authority and allows for P2P transactions. In a decentralized network, cryptographic currencies do not require intermediaries.

Distributed Ledger

Replicated, shared, and synchronized digital data that are distributed geographically across multiple sites, countries or institutions, which makes up a consensus.

For example: A specific distributed ledger technology is Blockchain.

Exchange

A system or platform where users can buy, sell, and exchange the cryptocurrencies.

For example, cryptocurrencies can be exchanged on Coinbase and Binance.

Fiat Currency

Government-issued currency is not backed up by any physical commodity, as in gold or silver.

For example, US Dollar, Euro, and Indian Rupee are fiat currencies.

Fork

It is split in the blockchain network and ends up as a chain of its own.

Example: Hard fork resulted in the creation of Bitcoin Cash from Bitcoin.

Gas

A unit of measuring the amount of computational that is involved to carry out operations on the Ethereum network like making transactions or running dApps.

Example: Users pay gas fees to miners for transaction validation on Ethereum.

Hash

A function that converts an input into a fixed-size string of bytes, typically a digest that is unique to each input.

Example: Bitcoin uses the SHA-256 hashing algorithm to secure its transactions.

For instance, users pay gas fees to miners for transaction validation in Ethereum.

ICO (Initial Coin Offering)

Fundraising Mechanism: A new cryptocurrency project selling its tokens to investors.

Particular example: Ethereum’s ICO launched in 2014 raised money to develop their platform.

Miner

An entity that validates transactions and does add them to the blockchain solving hard mathematical problems.

For example, Bitcoin miners use powerful computers to secure the network and validate transactions.

Mining

Validating transactions and adding the validated transactions to the blockchain ledger.

Miners compete to solve mathematical problems in Proof of Work systems, such as example.

Node

A computer used in the cryptocurrency network which puts effort by relaying transactions and preserve a copy of blockchain.

For example: The Bitcoin network has full nodes that validate transactions and blocks.

NFT (Non-Fungible Token)

NFT is a form of a digital asset that represents the ownership or authenticity of a unique artifact or item of content operated on top of the blockchain.

For instance, NFTs can represent digital art, collectibles or virtual real estate.

Private Key

A secret alphanumeric code known only to the owner of cryptocurrency used to sign transactions and to access cryptocurrency holdings.

In this case, Example: You should make sure that you have your private key secure so that no one can get to your funds without permission.

Public Key

An alphanumeric code from the private key that receives cryptocurrency transactions.

For example, your public key is like an email address that you publish in order to receive funds.

Proof of Stake (PoS)

PoS is a consensus mechanism by which validators are picked to produce new blocks and stale according to how many coins they possess and are prepared to put up as collateral.

Example: The current transition of Ethereum to PoS will reduced the energy consumption.

Proof of Work (PoW)

A concept of a consensus mechanism that involves network participants to solve some complex mathematical problems to verify transactions and create new block.

Bitcoin’s PoW mechanism is an example where miners need to solve a cryptographic puzzle.

Satoshi

Satoshi is the smallest unit of Bitcoin and is named after the pseudonymous creator of it, Satoshi Nakamoto.

Example: One Bitcoin equals 100 million satoshis.

Token

A form of cryptocurrency that stands for the unit of account in ICO.

For instance, Chainlink (LINK) is used as a means of payment for data services on their network.

Wallet

A digital tool used to store and manage users’ cryptographic private keys to send and receive digital assets using it.

This means hardware wallets like Ledger and Trezor which hold offline storage for increased security.​

Whale

The one who possesses a significant amount of a particular cryptocurrency can influence its market price through buying and selling actions.

Example: Buying or selling a whale’s huge amount of Bitcoin can result in large price decrease.

Whitepaper

A long document issued by cryptocurrency projects detailing technology used, use of cryptocurrency, and its implementation strategy.

Example: During the invention of Bitcoin, the whitepaper “Bitcoin: A Peer to Peer Electronic Cash System” was its whitepaper.

Yield Farming

DeFi staking is practice of staking or lending cryptocurrency assets in decentralized finance (DeFi) platforms to earn high returns in the form of more cryptocurrency.

For instance, users can provide liquidity in a decentralized exchange and be rewarded for the amount and duration of their funding.

Zero-Knowledge Proof

A cryptographic method for one party to be able to prove to another party that a statement is true; this does not reveal any information about the statement beyond its validity.

In such cases, Zero-knowledge proofs (zks) help enhance privacy in transactions.