It’s no mystery that the world of cryptocurrency can be daunting for anyone new to it. With so many unfamiliar terms floating around, it’s easy to feel like you need an insider to figure out what’s going on. Fortunately, we have what you need. If you’re reading this, chances are you’ve heard of Bitcoin (and maybe Ethereum, too). But beyond these two, there is a whole world of other digital currencies – called altcoins or tokens – that are now available to investors online. And while beginners might find the terminology as confusing as trying to speak Elvish, there’s no reason why you shouldn’t dive in and learn more about the world of “crypto” – that it whether it’s investing or operating or just knowing how this whole phenomenon works.
Today we will explain commonly used terms and phrases related to the topic of crypto assets and blockchain technology.
ICOs and airdrops
Initial Coin Offering (ICO) is a way for startups to start their crypto business by issuing crypto tokens to the public. EOS (Electro-Optical System), which has become one of the most popular blockchain protocols, started life as a project with a massive ICO (Initial Coin Offering), raising a whopping $4 billion. ICOs are used by blockchain startups to finance the creation and launch of their product. They do this by selling their own digital tokens to investors looking to make a profit in the future. Investors are usually rewarded with higher returns if the value of the token increases as more people use it.
Parachuting: A free giveaway of tokens by a company to promote their business or to start their token economy by distributing tokens to existing crypto users.
FUD and FOMO
The crypto market is often a site of emotions of all kinds: greed, hope, confusion, and doubt. Whether you are an investor or a trader, it is important to identify these emotions and try to control them. FUD stands for Fear, Uncertainty and Doubt. It involves spreading false information to create doubt in the minds of investors, causing them to sell their tokens, which in turn drives down the price of the token in question. This is one of the most common ways for scammers to profit from crypto.
FOMO is the fear of missing something. This refers to the “gotta catch ’em all” mentality that drives people to invest in every promising token they hear about.
Hodl and shilling
Both hodl and shilling are used as verbs in the crypto world. hodl is a misspelling of “hold” and is used to refer to holding on to your investment through dips and bumps. HODL was first used in a Bitcoin forum in 2013 where an investor said, “I AM HODLING.” Since then, it has become the battle cry of people who have refused to let go of their investment and ride out the storm. Shilling is the paid promotion of a product or service, usually on social media. In crypto, the shilling is usually made by scammers who try to drive up the price of a low-quality token by spreading fake news about its future.
CAD and NFT
A Decentralized Autonomous Organization (DAO) is an organization run by a smart contract on the blockchain. The idea was to create a venture capital fund that would not be managed by a central person but by a code that would be open-source, transparent and based on a democratic vote. However, the first DAO turned out to be a disaster as it had a coding error that allowed someone to steal $50 million. NFTs are non-fungible tokens that are unique, like tickets to a football game or a museum. They are used for rare items where you cannot create multiple copies, such as unique works of art. NFTs can be used for anything rare.
POW and POS
A blockchain network is a record of all transactions that have ever been made between members of the network through their computers. It is accessible to anyone using the network. To ensure that everyone follows the rules and that transactions are secure, the computers on the network must agree on the transactions that have taken place and order them in chronological order. This is called “mining”. Proof of work (PoW) is the most commonly used consensus mechanism in blockchain. Computers on the network compete to solve a mathematical puzzle. The first computer to solve the puzzle and verify the transaction receives a reward in the form of tokens.
Proof-of-Stake (PoS): With this method, network members must lock up their tokens in order to gain the right to verify transactions and receive a reward. The more tokens they lock, the more they can verify. This method removes the need for computers to solve complex mathematical puzzles in order to secure the network.
Altcoin literally means another coin. You may have heard people refer to Bitcoin as the “king” of cryptocurrencies. And it’s true: it was the first digital currency, and it’s still the most popular. But it’s not the only one – in fact, it’s far from the case. The thing is, since bitcoin was first released in 2009, more than 3,500 more coins and tokens have been created. Many of these “altcoins” are based on alternative blockchain technology, which is not based on the same powerful computer systems that Bitcoin uses.
Decentralized Applications (DApps)
A decentralized application runs on a network of computers that are not controlled by a single authority. It’s a way of building software that isn’t controlled by one company or person. This has become possible thanks to the rise of blockchain technology, which allows a system to operate autonomously, without a central control source. The most prominent example is a cryptocurrency, which is run by a blockchain-based network that is largely decentralized. There is no single control source that regulates the network, and it’s open source.