Crypto 101: Popular Terms Explained (Pt. 1)
The crypto space like every industry is full of buzz words who's usage often times sound strange to the uninitiated but provokes excitement amongst crypto enthusiasts. This is in no way an exhaustive list or an attempt to make a comprehensive glossary of commonly used terms. This post rather tries to highlight the most popular words or acronyms used frequently in many crypto communities on Telegram, discord channels, CT (crypto twitter), etc and explain them in ways readers, especially those new to crypto, can quickly understand within the context used. Let's take a dive into each and have fun learning these buzz words.
1.) Crypto:- the word crypto short for cryptocurrency can be a bit misleading depending on usage. It is largely used in two sense. In the original use of the word, which is short for cryptocurrency, it is digital money that exist only on the blockchain and can be use to store, exchange or transfer value.
Cryptocurrency transactions are near instant (few seconds), eliminates middlemen and offers very low transaction fees in comparison to legacy payment systems. Transactions are irreversible, immutable (cannot be altered), viewable by anyone and are secured by means of cryptography, which is very resilient to data breaches. Bitcoin and Ethereum are by far the most widely used and known cryptocurrency.
Lately, crypto is also used to describe the whole industry that includes cryptocurrencies, blockchain technology and other parts that is associated with it.
2.) Blockchain:- this is used to describe a peer to peer network of shared database connected over the internet by millions of computers around the world.
Unlike conventional database systems that stores data in tables and can be reversed or altered, in blockchains data are stored in blocks in a timely manner. As each block gets filled, it is time stamped and linked (chained) to the previous blocks before it, establishing a chronological order of integrity in the process. These records (collection of information) are secured by means of cryptography and is irreversible, immutable and viewable by anyone using block explorers.
Of note, blockchains are decentralised and thus eliminates single points of failure obvious in centralised systems. Blockchains are the foundational layer on which other things are built on and is often times also referred to as the settlement layer or an L1 (layer 1). The most popular blockchains are Bitcoin and Ethereum.
3.) Decentralised:- means community - owned. Instead of a single person or few entities controlling how things work or are done, truly decentralised systems removes these single points of failure (reserve banks) or authority (government) and allow people directly govern the systems they use. Responsibilities are shared to members of the community and decisions are jointly agreed on by voting. Decentralisation is the core on which blockchain technology is built on.
4.) Blockchain wallets:- these are applications used to store or transfer crypto assets on the blockchain. These days most wallets include more functionalities than just storing crypto assets. Examples of popular wallets include Metamask, Trust and Imtoken wallet.
5.) Altcoins:- this is used to refer to coins and / or tokens that are not bitcoin.
6.) Shitcoins:- is used to describe in a funny way coins or tokens with perceived low or zero intrinsic value with no use case other than traded for a quick pump and dump.
This is not always the case though. In crypto generally, even for good projects, when the price value of a coin depreciates rapidly for whatever reasons, it is often referred to as a shitcoin. Example Terra (Luna) dumped from highs of $119.50 on April 5, 2022 to $0.00000112 (binance chart) during UST depegging event and subsequent collapse on May 12, 2022.
7.) Memecoins:- these set of coins are derived from popular memes on the internet or from circumstances in a particular community. They are created for fun or as a joke. Memecoins are a special category of shitcoins. The most popular memecoin is Dogecoin. Shiba Inu is another memecoin that gained prominence during 2021 crypto bull market.
8.) Coins:- these are crypto assets with their own blockchain. Created by design as a store of value (what many call 'sound money') and native coin of their blockchain, they power their entire ecosystem and are used to pay fees on their network. Popular coin examples are Bitcoin (BTC), Ethereum.(ETH), Solana (Sol) and Binance coin (BNB).
9.) Tokens:- these are crypto assets without their own blockchain. They usually have different utilities (purpose) and rely on other blockchains to work. Examples are all SPL, Erc-20, BEP-20 tokens, etc.
10.) CEX:- stands for (C)entralised (Ex)change. As the name suggest, it is a market place where crypto assets can be traded (bought or sold) for a profit or transferred to others. It is owned by one or more individuals or business entity, hence centralised, who operate the crypto exchange as a business within it's jurisdiction of operation and have the responsibility of keeping assets under their care safe. Most popular CEX examples are Binance, FTX, Coinbase and Bitfinex.
11.) DEX:- stands for (D)ecentralised (Ex)change. Unlike a CEX where the exchange model is centralised and users rely on exchange to watch over their assets, in a DEX users have custodial responsibility and full ownership of their wallets with a private key which gives them unfettered access to their stored crypto all the time. That is the major difference between a CEX and a DEX. DEX users can equally buy and sell coins of their choosing for a profit. It is pertinent to note, once a DEX private key is lost or forgotten, the coins can't be recovered and are lost forever.
12.) SAFU:- (S)afe (A)sset (F)unds for (U)sers originally created by Binance exchange as an insurance fund to safeguard exchange users funds from losses arising from hacks or any unforeseen circumstances. Over time during scheduled maintenance, Binance CEO regularly tweets 'Funds are SAFU' as a way of reassuring users their funds are safe. SAFU is jokingly used nowadays to mean your funds are safe.
13.) HLOD:- the acronym stands for Hold On to your Dear Life. It is a rallying cry used majorly during bearish market sentiments to tell traders or investors not to sell their positions at a loss with the hope the price of held assets will recover and bounce back for a profit or break even at least. For others, HLOD is a long term investment strategy where they buy, say asset A for $0.01 each and HLOD for years in expectation price of A will grow in value to $5 per A.
14.) Pump:- a sudden and explosive surge in price of a coin / token. This could happen due to an imminent huge product release, big exchange listing or some other exciting news about a project. If the price is not sustained and drops immediately to the previous levels before the pump or lower, such a scenario is referred to as a Pump and Dump (P n D) event.
15.) Dump:- this is the reverse of a pump where the price of an asset crashes suddenly by over 10% or more either due to bad narratives (project hack / exploit, hyperinflation event (eg., Luna/UST collapse), huge token unlocks, exchange delisting news, etc) or global macro events.
16.) Bullish:- a market condition where prices of crypto assets keep rising as investors / traders keep buying at higher prices with the expectation prices will keep going higher. These buyers are known as the 'bulls' and their buying behaviour suggest a stronger demand that exceeds supply. Confidence is at a premium during bullish market.
17.) Bearish:- this is used to describe a market condition marked by huge selloffs and continued downward prices of crypto assets as investors / traders keep selling their positions to cut losses or make gains (short selling in margin trades) with the belief prices will keep going lower. Bearish market sentiments typifies period of low demand or lack of strong buying interest and extreme fear amongst market participants.
I hope it was a refreshing read and you learnt something new. If you find this post useful, kindly give it a like and look forward to the continuation (part 2) where I will explain more buzz words and together, we will get to explore the exciting world of crypto in future post.