DeFine

An A-Z glossary of common crypto terms

DeFine is Coinpad’s abridged A – Z glossary of common crypto terms but with some detailed explanations of certain key terms, particularly ones that commonly feature on our platform. This glossary is regularly updated and expanded to keep up with the fast-pace crypto world. It is meant primarily for those who are new to crypto. If you are looking for a more comprehensive glossary or cannot find a term in our guide, we highly recommend Genimi’s Cryptopedia Glossary, which has over 1,000 terms, some of which you have probably never heard of before.

Address

An address is a string of letters and numbers that is unique to a wallet or a token contract. A wallet address is akin to a bank account number, the number needed to deposit cryptocurrency into that wallet. However, different coins have different address configurations and thus a Bitcoin address is different than an Ethereum address, even if it is in the same wallet. Moreover, many coins are represented on multiple blockchains and these will also have different addresses as well (for example if you have a multi-chain wallet your wallet address for depositing Bitcoin in its native blockchain will be different than your wallet address for depositing Bitcoin on the Binance Smart Chain Network or Wrapped Bitcoin on the Etherem Network).

Some cryptocurrencies such as IOST allow users to create their own address, similar to an email address, but normally addresses are randomly generated. While no names / identities are attached to an address, any address is searchable for anyone to see the balance in that address. For example, if someone gave you their Bitcoin address, you could enter that address in Blockchain.com and see the balance of Bitcoin they hold in that wallet. Yet, no name would be associated with that address and if you did not have that address, there would be no way to find that address by searching the person’s name.

Airdrop

An airdrop is a popular marketing technique that distributes a specific cryptocurrency to a selected audience. It is commonly used by new projects / cryptocurrencies to bring awareness to the project, or as a form of incentive to bring users to a platform and / or maintain a loyal user base.  For example, Coinpad offers regular airdrops to promote our site and reward our loyal subscribers.

Algorithmic stablecoin

An algorithmic stablecoin uses a price stabilization algorithm to track a particular unit price, typically 1 USD to stabilize the coin at this price (thus a stablecoin). Some examples include Ampleforth (AMPL), DefiDollar (DUSDC), Empty Set Dollar (ESD), and Frax (FRAX). However, some algorithmic stablecoins have been notoriously unstable. BDO (bDollar) on the Binance Smart Chain, for example, has seen its price fluctuate widely from over $1.20 to just a few cents. Moreover, algorithmic stablecoins are not nearly as popular as the top traditional stablecoins that are pegged to a reserve asset such as the US dollar (such as USDT, USDC and BUSD). Here is a useful article on the four types of stablecoins.

Altcoin       

Any cryptocurrency other than Bitcoin, literally meaning an alternative to Bitcoin. It is commonly shortened as alt / alts.

APY / APR

APY stands for annual percentage yield, while APR stands for annual percentage rate. The difference between the two is that APY takes into account compound interest, while APR does not. Therefore, if you see both APY and APR listed (on DeFi protocol for example), the APR will always be a lesser percentage as it does not take into account compounding.

Atomic Wallet

Atomic wallet is a decentralized cryptocurrency desktop wallet that supports over 500 coins. Some key features include a decentralized exchange called Atomic Swap (where users can exchange one coin for another) and the ability for users to purchase crypto with a credit card. The wallet also has its own coin, Atomic Wallet Coin, allowing holders of the coin to receive rewards (cashback) for each completed exchange. The coin can also be staked in the wallet with a generous annual percentage yield of up to 20%. The wallet also supports staking for over a dozen over coins, including Cardano, Solana and Zilliqa.

The wallet supports multiple operating systems including Windows, MacOS, Android, and iOS. It can be downloaded here.

Bitcoin

Bitcoin is a blockchain network with its native cryptocurrency of the same name. Often Bitcoin with a capital B refers to the blockchain / protocol while bitcoins with a lower-case b refers to the coin.

Further reading:

Block

A file where transaction data is recorded on the blockchain.

Blockchain

Blockchain is the technology that enables the existence of cryptocurrency (and other forms of digital information). In short, blockchain is a decentralized public ledger of transactions that is maintained and verified by a decentralized, peer-to-peer network of computers.

Further reading:

Cardano / ADA

Cardano is a proof-of-stake blockchain platform recognized as the first to be founded on peer-reviewed research and developed through evidence-based methods. As described on its website, it combines pioneering technologies to provide unparalleled security and sustainability to decentralized applications, systems, and societies. The native cryptocurrency token of Cardano is ADA, named after Ada Lovelace, a 19th-century mathematician who is recognized as the first computer programmer.

Proponents of ADA regard it as technologically superior to Bitcoin and Ethereum and envision it as eventually taking over Ethereum’s dominance (thus it has been dubbed an Ethereum Killer).

The coin has received significant attention by crypto watchers after its price surged from just a few cents in March 2020 to over $3 in early September 2021.

One of Cardano's founding principles was to solve real-world problems, such as economic accessibility, and this was recently exemplified in a partnership with the Ethiopian Ministry of Education to use the Cardano platform to create digital IDs for 5 million students.

Decentralized application (dApps)

Decentralized applications (dApps) are digital applications or programs, typically integrated into a website, that exist and run on a blockchain or P2P network of computers instead of a single computer. dApps are outside the purview and control of a single authority. Some examples of notable crypto dApps include Uniswap, Aave, and Quickswap. Many dApps are also considered decentralized exchanges, see next entry. Dappradar is an excellent site that tracks crypto dApps.

Decentralized exchange (DEX)

A decentralized exchange, or DEX, is a peer-to-peer cryptocurrency exchange platform that connects cryptocurrency buyers and sellers. In contrast to centralized exchanges (CEXs), decentralized platforms are non-custodial, meaning a user remains in control of their private keys. In the absence of a central authority, DEXs employ smart contracts that self-execute under set conditions and record each transaction to the blockchain. Typically there is no registration or sign-up process and interaction is done directly through your wallet (yet only a type of wallet than can interact with a webpage, such as a browser-based wallet like MetaMask or one that has a WalletConnect function like Trust Wallet or Safepal.

DeFi

DeFi is short for decentralized finance, a broad term for financial products and services that are based on the blockchain and do not rely on central financial intermediaries such as banks. DeFi is accessible to anyone with an internet connection and is revolutionizing the financial sector due to its ease of use, accessibility, high rate of returns, and negligible fees. Everything is controlled by smart contracts and is fully automated. Yet, DeFi is also risky as projects are governed by themselves with no central regulator or insurance over your money. Risks stem from a number of factors, including security, integrity, and coding.

Desktop wallet

A desktop wallet is a type of cryptocurrency wallet that is downloaded and installed on a computer. Examples include Atomic Wallet and Exodus.

ERC-20 token

An ERC-20 token is a token / coin designed and used solely on the Ethereum blockchain. ERC-20 is among the most common type of token, due to Ethereum’s market dominance in the non-Bitcoin crypto sector. “ERC” stands for “Ethereum Request for Comments”, which is an official protocol used to propose improvements to the Ethereum network. The “20” is the unique ID number used to identify the proposal.

Ethereum

Ethereum is a decentralized open source blockchain system that features its own cryptocurrency, Ether, or ETH, which is the second largest cryptocurrency by market capitalization after Bitcoin. Ethereum describes itself as “the world's programmable blockchain” and distinguishes itself from Bitcoin as a programmable network that serves as a marketplace for financial services, games, and apps.

Exodus

Exodus is a cryptocurrency wallet that supports over a hundred cryptocurrencies and is available as either a desktop or mobile wallet. It is ideal for a newcomer due to its easy-to-use and intuitive interface. There is also an exchange feature where you can swap one cryptocurrency for another. The desktop version can be downloaded here.

Fiat

Traditional, centralized currency such as the US dollar or the Euro.

Fork

In a blockchain, a fork is a split of one protocol / blockchain into two, similar to a fork in a road where one road splits into two, and is typically either intentional or accidental. This article explains it well.

FUD

This is a common crypto acronym that stands for “fear, uncertainty and and doubt.”

Gas

Gas is what is used to send Ethereum and other tokens across the network. A small amount of that cryptocurrency is necessary for a transaction to process, and this is referred to as “gas”. You may think of this as similar to a bank transaction fee, yet in many cases this fee is negligible (depending on the blockchain / network). Ethereum, however, has notoriously high gas prices.

Gwei

Gwei is the smallest unit of Ether, the native cryptocurrency of the Ethereum blockchain. 1 Gwei is equal to 0.000000001 ETH. Ethereum gas (transaction) fees are charged in Gwei.

Hardware wallet

A cryptocurrency wallet that is a secure, physical, hardware device which stores a user's private keys. Ledger and Trezor are the most common, while newcomer SafePal has a sleek looking model called the S1.

HODL

This is crypto slang for “hold,” as in hold on to your crypto and do not sell it.  It was reportedly coined by an early user of an online Bitcoin forum who misspelled the word “hold” and subsequently interpreted as an acronym for “hold on for dear life”, a reflection of crypto’s high volatility.

Impermanent loss

This is a temporary loss of funds occurring when providing liquidity, for example in a liquidity pool on Uniswap. It occurs when the value of the funds staked to the liquidity pool fluctuates drastically. Impermanent loss only becomes permanent if a provider decides to withdraw their liquidity from the pool for good. However, any impermanent loss potentially can be offset by fees earned while providing liquidity in a profitable pool, while even taking a permanent loss may not be a bad thing. Sound complex? It is. Yet let us give you a recent example that we experienced in which we gained from taking a permanent loss in a liquidity pool.

We were providing liquidity in a Uniswap pool with a low-cap token and the stable coin USDC. When we entered the pool, the low-cap token was approximately 17.5 cents. As your must provide equal amounts (in dollar value) of the two coins in the pool, we provided about 30,000 of those tokens with about 5,000 USDC. For several days we were earning fees amounting to about $100/day. Then the price of the low-cap token dropped drastically and we lost all of the 30,000 tokens (but gained some $5000 more USDC). So the impermanent loss was 30,000 of these tokens. We stayed in the pool and the price recovered so we got them back (hence the term impermanent loss) yet in hind-sight it would have been a better decision to have withdrawn our liquidity (some 10,000 USDC) and used $5000 (or any amount including the full 10,000) to buy back the tokens at the discounted price as the price quickly recovered and eventually doubled. In short, impermanent loss is a complex process and even a permanent loss is not always a negative outcome.

Further information:

Market capitalization

Market capitalization (“marketcap”) is one of the most important concepts to grasp in order to understand the present and potential future valuations of coins. Marketcap is determined by multiplying the number of coins or tokens of a cryptocurrency that are in circulation by the current market price of that cryptocurrency. A great site to find the marketcap of coins is coinmarketcap.com (this site should be among your top bookmarked crypto sites).

Let’s provide some examples to understand the significance of marketcap.

If a cryptocurrency has a circulating supply of 1 billion and its price is $1, its marketcap is $1 billion. Similarly, if a cryptocurrency has a circulating supply of 100 million and its price is $10, its marketcap is also $1 billion. In other words, even though the prices of these two coins are different ($1 and $10), in reality these two coins are of equal value. So the first thing to understand in evaluating cryptocurrencies is that price means nothing without taking into account circulating supply to establish its marketcap.

Let’s go further and take the example of two hypothetical coins, Coin A and Coin B. Let’s say Coin A currently trades for half a cent, while Coin B currently trades for $10,000. At first glance - and certainly for any newcomer who does not understand the importance of marketcap - Coin A seems very cheap and Coin B seems very expensive. For any newcomer, it would seem obvious that Coin A has a far better chance of doubling or tripling in value than Coin B. Yet, as noted above, in reality the price of a coin is essentially a meaningless measure without taking into account its circulating supply and marketcap. Using our hypothetical example, let’s say Coin A’s circulating supply is 10 billion and Coin B’s circulating supply is 1,000. At half a cent, Coin A’s marketcap is $5 billion. At $10,000, Coin B’s marketcap is $10 million. By factoring in marketcap, we get a very different picture of these two coins; Coin B is the one that should be viewed as “very cheap” compared to Coin A. Or in other words, if Coin B became the same value (marketcap) of Coin A, then Coin B’s price would be $500,000 ($500,000 x 1,000 coins in circulation = a marketcap of $5 billion, the same as Coin A).

Hence, the best way to look at the valuation of a coin, and assess its future price prospects, is to look at its current market cap and market cap ranking to determine if it has significant room to grow in terms of price compared to coins with a similar market cap and / or compared to similar coins (competitors) with a significantly different market cap.

Let’s take a few more examples for further clarity.

Cardano (ADA) is often labelled as a potential Ethereum killer (a coin that could replace Ethereum’s dominance). At the time of writing, ADA trades for just under $3, while Ethereum (ETH) trades for just under $4,000. Without taking into account circulating supply (and ultimately marketcap), an uninformed investor may therefore believe that if ADA does in fact succeed in overtaking Ethereum, it would overtake ETH’s price. While anything is possible in crypto, this would be a highly implausible scenario because the two coins have vastly differing circulation supplies. So the appropriate way to calculate ADA’s price potential should it actually take over Ethereum would be to compare the current marketcap of both coins and figure out what ADA’s price would be if it equaled the market cap of ETH.

At the time of writing, the market cap of ETH is about $460,745,000 at the price of just under $4,000 while the marketcap of ADA is about 90,000,000 at the price of just under $3. In terms of marketcap, ETH is slightly over 5.11 times higher than ADA (to keep it easy let’s just 5 times higher). Therefore, if ADA and ETH had equal marketcaps, the price of ADA would be roughly 5 times higher than its current price, or about $15. In other words, if ADA succeeded in taking over ETH by a small margin (and assuming the price of ETH stayed relatively the same), ADA would still only be about $15.

Another useful way to look at market cap data to gauge future price prospects is to look at a coin that is viewed as a “hidden-gem,” (a coin assessed as having great potential but still relatively obscure and thus having a low ranking in terms of marketcap). In this example, we will look at Ergo (ERG). After researching and following this coin for over a year, we assess that this coin should – and most likely will be - a top 50 coin (please read our disclaimer1 as this is not financial advice). At the time of writing, ERG’s marketcap is about $500 million (and trades for 15.5 cents) or coin number 135 in terms of marketcap position. Meanwhile, the 50th ranked coin has (at the time of writing) a marketcap of about $3 billion. As we believe ERG will become a top 50 coin, we can then do the math on the price: to reach a market cap of 3 billion, the coin would be six times its price now, or priced at around $93.

Mining

This is the process of using computing power to verify and record blockchain transactions. Mining is also used for the creation of new coins, which miners earn as a reward for their efforts. Mining is utilized in Proof-of-Work (PoW) blockchains, with the most notable one being Bitcoin.

Non-fungible Tokens (NFTs)

Non-fungible tokens are units of value used to represent the ownership of unique digital items like art or collectibles. For further information, see here.

Private key

A private key is a string of letters and numbers, similar to a password, that allows you to access and manage your crypto funds. As long as you (and only you) have access to your private key, your funds are safe and can be accessed anywhere in the world with an internet connection. Conversely, anyone else that has your private key will be able to do the same - this never give away your private key and never lose it.

Further reading:

What is Private Key?

Private key explained by Investopedia

Public key

A public key, similar to a private key, is a string of letters and numbers that allows users to receive cryptocurrencies into their accounts. While anyone can send transactions to the public key, you need the private key to “unlock” them and prove that you are the owner of the cryptocurrency received in the transaction. Your public key is not necessary to write down and remember, it is your private key(s) that is of utmost important to have stored in a safe place.

Roadmap

A roadmap is a planning document which lays out the short and long term goals of a particular project within an estimated timeline. Normally a project’s roadmap is one aspect of the project’s whitepaper, which is a document released by a crypto project that outlines all of the relevant information about the project.

Recovery phrase

A recovery phrase (also called a seed phrase, back-up phrase or pnemonic phrase) is a series of words, usually 12, 15 or 24, that represent the single piece of data in a cryptocurrency wallet to generate both the public and private key of your account.  In order to restore your wallet, for example if the device it was on was lost, stolen or damaged, you will need this phrase to regain access to your wallet and therefore your funds (alternatively you could also recover the funds with your private key(s). Importantly, if you lose your recovery phrase but still have access to your wallet, you can view the phrase in the security setting of your wallet so you are fine. However, if you lose your recovery phrase (and you don’t have your private key) and lose access to the wallet, your funds are permanently lost. This is why it is critical to write down and store your recovery phrase off of your computer or phone, for example by keeping it in a physical safe. Having the phrase kept safe in more than place is also prudent.

Also take note that anyone could “recover” your wallet if they have your recovery phrase or private key – so do not share these with anyone other than your trusted loved ones. One of the most common crypto scams or ways that people get hacked or their funds stolen is that a perpetrator got access to the recovery phrase. This could be from a vengeful former partner or a scammer who poses as a support staff. Wallet support will never ask for your recovery phrase. Anyone who asks for it is trying to scam you. Never share your recovery phrases and private keys.

Seed phrase

See recovery phrase above.

Smart contract

A smart contract is a self-executing contract with the terms of the agreement between buyer and seller , or other parties, written into lines of code and code therein exist across a distributed, decentralized blockchain network. The code controls the execution of the contract and transactions are trackable and irreversible. Smart contracts are an integral part of DeFi protocols.

Stablecoin

Stablecoins are cryptocurrencies that attempt to peg their market value to some external reference, commonly the US dollar. There are also commodity backed stablecoins, which are pegged to a commodity's price such as gold. Stablecoins are ideal as a medium for buying or selling crypto, or holding in reserve if you are waiting for a buying opportunity. Notable examples are USDT (the highest stablecoin by market cap), USDC, BUSD, and DAI. PAX Gold is a notable example of a commodity-backed stablecoin with its price pegged to the price of gold.

Staking

Staking is a broad term for locking or delegating a digital asset in return for passive income yield, typically either paid in the cryptocurrency that is being staked or a second token, such as the native token of the platform where the staking is occurring. For clarity in our guides, we differentiate between two types of staking, PoS staking and DeFi staking. PoS Staking is the act of delegating / locking a coin to participate in transaction validation on a proof-of-stake (PoS) blockchain. DeFi staking can take a number of forms yet broadly of “locking” your crypto tokens into a DeFi smart contract in order to earn rewards (dividends), that are either paid back in the same token or, more commonly, paid back in a different coin (usually the native coin of the platform where the staking occurs.)

Token contract address

A token contract address refers to the location of the actual token contract that manages the logic for the tokens. This does not refer to the address that holds your personal tokens (i.e. this is not your wallet address). This is commonly used for adding a custom token in a wallet. For example, in Atomic Wallet if it does not list your coin or token, you can choose “Add Custom Token” and then “Add by Contract.” You would then paste the contract address to add the coin. You can typically find the contract address of a coin by searching the coin in question on coinmarketcap or coingecko (links). If it is a new coin not listed on those aforementioned sites, typically the token address would be provided on the project’s website.

Tokenomics

Tokenomics combines the words token and economics and refers to the topic of understanding the supply and demand characteristics of cryptocurrency. It is a very broad term that consists of anything that impacts a token’s value. For a detailed explanation, see here https://www.exodus.com/blog/tokenomics/

Trust Wallet

Trust Wallet is a decentralised, mobile cryptocurrency wallet that supports over 160 digital assets and allows users to stake their coins to earn interest. A key feature is a built-in Web3 browser that gives users access to decentralised applications (dApps) and exchanges using the WalletConnect feature. The wallet also features a decentralized exchange. It is only available as a mobile wallet (there is no desktop version). For more information and link to download, see here.

Whitepaper

A document released by a crypto project that outlines all of the relevant information about the project. Typically these are provided on the project’s website and their level of detail and professionalism is typically a good initial litmus test of the project’s prospective.

1

The information provided in this guide, as well as on our website (coinpad.io), does not constitute investment advice, financial advice, trading advice, or any other sort of advice and you should not treat any of the content as such. Investing in cryptocurrency is risky; do your own research and invest at your own risk.