Crypto Glossary: How Many Terms Do You Know?

Magnifying glass next to scattered English characters

The world of Web3 and cryptocurrency is evolving rapidly–and the only thing that gets created faster than crypto in this space is new terminology.

Whether you’re an experienced Web3 user or a n00b trying to get the hang of it, you’ll want to stay up on the latest terms, so we’ve compiled a crypto glossary of the important terms to know. We’ll update it as new terms come into common usage.

How many do you recognize? Here’s your chance to test your knowledge.

ABI – Application Binary Interface. ABIs define the available methods of an Ethereum smart contract.

Altcoin – Cryptocurrencies other than bitcoin.

AML – Anti-Money Laundering. Legal requirements and regulations directed against money laundering.

AMM – Automated Market Maker. A protocol that employs liquidity pools to determine asset prices on a DEX, as an alternative to an order book.

Bitcoin – The first cryptocurrency and the largest by market capitalization. Bitcoin is supported by an open-source blockchain.

Blockchain – A distributed ledger consisting of records linked together using cryptographic hashes, implemented on a peer-to-peer distributed network. Blockchains are designed to be secure against alteration.

BTC – The trading symbol for the bitcoin token.

Burning – An algorithmic process that reduces the supply of a particular coin by taking some of it out of circulation. Analogous to a stock buyback in the equity markets.

Coin – A blockchain token, often but not necessarily one intended for use as a digital currency.

Cryptocurrency – Blockchain tokens that are fungible–identical and divisible units of value–intended for use as a digital currency.

DAO – Decentralized Autonomous Organization. A DAO uses smart contracts to define the operating rules for a community that works on a project together.

dapp – A decentralized application. dapps operate on a blockchain and often enable direct, peer-to-peer interactions.

DeFi – Decentralized finance. An emerging alternative to traditional finance, DeFi enables peer-to-peer financial transactions, with a goal of personal control of funds, eliminating middlemen, and reducing fees.

DEX – A decentralized exchange, where users can buy, trade, and sell assets.

DLT – Distributed Ledger Technology. A technology that establishes consensus for replicated, shared, and synchronized data over a distributed network. Allows computers in different locations to synchronize their actions, such as validate transactions and updating records.

DYOR – Do Your Own Research. In crypto, it’s important to DYOR to ascertain whether a project or token has great potential, stands on shaky ground, or is an outright scam.

EOA – Externally Owned Account. An Ethereum account controlled by a private key. An EOA has an ETH balance and can send transactions.

ETH – The trading symbol for the Ethereum token, ether.

Ethereum – An open-source blockchain designed to support smart contracts. Second in market capitalization only to bitcoin.

Exchange – A platform that allows users to buy, trade, or sell various assets.

51% attack – An attack on a blockchain by a group of miners who control more than 50% of the network's mining hash rate, which would allow them to alter the blockchain. Most relevant for smaller blockchains.

FHE – Fully Homomorphic Encryption. A form of encryption that allows arbitrary computations on the encrypted data without access to the encryption key while yielding the same results as if run on the decrypted data.

FUD – Fear, Uncertainty, and Doubt. A marketing practice intended to impede competition through negative messaging about them.

Gas fee – A fee incurred on Ethereum and similar blockchains to process a transaction or execute a smart contract. Gas fees are also rewarded to users who stake ETH and participate in transaction validation.

Hard fork – A change to a network's protocol that is not backwards compatible, requiring nodes to upgrade to the new version. If some nodes do not upgrade, the blockchain splits into two. An example was the bitcoin hard fork of 2017, which split off bitcoin cash (BCH) from bitcoin (BTC).

Hash – An algorithm that maps data of an arbitrary size to a bit array of a fixed size, the hash value. In blockchain algorithms, each block often contains the hash value of the previous block. This hash value serves to protect the integrity of data on the blockchain. In proof-of-work algorithms, miners often race to solve a 64-digit hexadecimal hash before others, in order to earn a coin.

HODL – A deliberate misspelling of “hold.” The investment strategy of buying and holding indefinitely.

ICO – Initial Coin Offering. The first release of a new token on a blockchain. The name is intended to be suggestive of an IPO or initial public offering in the stock markets.

IDO – Initial DEX Offering. An initial offering of tokens via a decentralized exchange.

IEO – Initial Exchange Offering. An initial offering of tokens managed by an exchange, typically a centralized exchange, as opposed to by the project itself.

KYC – Know Your Client. Customer identification measures intended to prevent fraud legally required in banking and certain financial systems.

Layer 1 – Blockchains providing an architecture for tokens and smart contracts that other applications can be built on top of.

Layer 2 – A blockchain that exists to relieve congestion and help speed up transactions for an underlying layer 1 blockchain, thereby improving scalability. Layer 2 chains rely upon and “inherit” the security of their Layer 1 chains.

Maxi – Maximalist. Someone who believes that a given blockchain technology is the only one that is viable or needed. Most often used in reference to bitcoin.

Mempool – A buffer in which pending transactions are held before being verified and added to a new block.

Merkle trees – A data structure used to efficiently secure blockchain data. It is a tree in which every leaf is labeled with the hash of a data block, and every inner node is labeled with the hash of the labels of its child nodes. Named for their creator, Ralph Merkle.

MEV – Maximal Extractable Value. The maximum value a miner or validator can derive from block production, beyond standard block rewards or gas fees.

Mining – The process of appending new blocks to a blockchain in a PoW algorithm through mathematical computations.

Minting – The process of creating new tokens in a proof-of-stake algorithm, or of creating new NFTs.

Mixer – Service that comingles the assets of multiple users to obscure the original ownership. Used for transaction privacy.

Nonce – An attribute of an Ethereum transaction recording the number of transactions sent by the sender’s address.

NFT – Non-Fungible Token. Blockchain tokens that are uniquely identified and non-replicable. They are often linked to digital artifacts such as images or music.

Ordinals – A technique for inscribing arbitrary data (up to 3 MB) on satoshis, the smallest unit of bitcoin. Inscribing such data makes satoshis non-fungible, allowing them to be used as NFTs native to the bitcoin blockchain.

OFAC – U.S. Treasury’s Office of Foreign Assets Control, the governmental body that issues sanctions against organizations that engage in commerce with banned foreign countries.

Off-chain – Data that resides outside a blockchain and is managed by computational processes apart from the blockchain protocol. Data is often handled off-chain to improve speed or reduce transaction costs.

On-chain – Data that resides within a particular blockchain, such as transaction records.

POAP – Proof of Attendance Protocol. An NFT that serves as proof you were at a particular event, like a badge issued to attendees at a convention. POAP collectors use these NFTs to build a digital memory book.

PoH – Proof of History. A consensus protocol that cryptographically verifies the order in which events occurred. Solana uses PoH.

PoS – Proof of Stake. A consensus protocol in which coin owners validate blocks based on the number of coins they have staked. The next block writer is selected at random with probability based on the number of staked coins. PoS consumes less energy than PoW. Ethereum has switched to using PoS.

PoW – Proof of Work. A consensus protocol in which miners solve for a cryptographic hash to validate transactions and mine coins. A large amount of energy is required for the hash computations. Bitcoin uses PoW.

PKC – Public-key cryptography. A system of asymmetric cryptography using a pair of keys, one public and one private. The public and private keys are strings generated together by cryptographic algorithms. The public key is publicly shared and is used to encrypt data. The private key is kept secret and is used to decrypt that same data. In blockchains, the hash of a public key is used as an address, and the private key allows the owner to move tokens out of the address.

Rails – A platform or network that moves currency from a payer to a payee.

Satoshi (as a unit of bitcoin) – The smallest unit of a bitcoin, representing one 100-millionth of a bitcoin.

SBT – Soulbound Token. An NFT that cannot be transferred from its owner. Potentially useful for digital records that are inherently associated with a single personal identity, such as medical records.

Sidechain – A separate blockchain with its own consensus protocol and providing its own security that connects to a parent chain.

Smart contract – A program stored on a blockchain that runs when specified conditions are met.

Stablecoin – A cryptocurrency whose value is pegged to an external currency such as the U.S. dollar. Popular examples include Tether’s USDT and Circle’s USDC, which both track the U.S. dollar.

Testnet – An instance of a blockchain used for testing, separate from the primary instance (mainnet). Often used for testing protocol upgrades and smart contract functionality.

Token – A digital asset residing on a blockchain under the control of an owner. Tokens can have different properties and use cases. They can be fungible and used as cryptocurrencies or non-fungible and linked to other assets. Tokens can also have utility within the blockchain’s operation or governance.

TradFi – Traditional Finance. The banking system and capital markets.

Turing complete – A programming model (e.g., language or virtual machine) that is computationally universal and so can emulate any general-purpose computer.

TVL – Total Value Locked. The total amount of funds stored in a given blockchain or DeFi protocol. One can also speak of the TVL summed across the entire DeFi ecosystem.

UTXO – Unspent Transaction Output. The amount of a cryptocurrency remaining unspent after a transaction. Bitcoin uses a UTXO model.

Validator – Node in a PoS blockchain network that validates transactions. The equivalent function in PoW blockchains is provided by miners.

Wallet – Software that contains a set of private keys. Wallets come in a variety of configurations and may run on a laptop, smartphone, or special-purpose device.

Web3 – Web applications built on open protocols and decentralized networks, including blockchains, and emphasizing user privacy and data ownership.

Wei – The smallest subdivision of ETH. 1 ETH = 10^18 Wei.

Whale – A user who owns enough of a cryptocurrency to significantly move its market price through trading.

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