Welcome to the HedgeTrade Encyclopedia!
We built this resource with you in mind – we know that blockchain technology and cryptocurrency projects are advancing rapidly. It can be a challenge to keep up with all the latest developments and trends. Having a quick reference to help with the terminology can give you a valuable boost when learning about crypto trading.
We’ve created this encyclopedia of crypto terms with two purposes in mind. One, we want it to be easy to understand. And two, we make sure our definitions comprise the best possible information available today. We accomplish both missions by having our experienced team of blockchain technical writers and editors behind each and every definition.
When you need to look up a blockchain or crypto term, come to HedgeTrade first.
Not only will we strive to provide the most simplified and elegant definition, but we’ll also point you in the right direction for additional information on some of the more advanced topics. When a definition is not enough, you can easily click to a corresponding article that we’ve composed on that topic.
Thank you for visiting our HedgeTrade Encyclopedia of cryptocurrency trading terms. We hope that you find it to be a valuable tool as you make your way through the markets.
A 51% attack happens when a group of cryptocurrency miners gains control of more than 50% of a blockchain network’s computing power. Though unlikely to happen due to the resources it would require, a 51% attack could enable one dominant group to change the blockchain transaction records and stop the confirmation of new transactions. To learn more, read our article, What is a 51% Attack?
Aaron’s Law was a bill that was introduced in 2013 as an amendment to the Computer Fraud and Abuse Act (CFFA). The CFFA basically was crafted so as to prosecute and convict malicious hackers. Aaron’s law, which did not pass, brought attention to abuses within the CFFA’s enforcement. Find out more about the background of Aaron’s Law in our article, What is Aaron’s Law?
Cryptocurrency addresses on a blockchain contain 26-35 alphanumeric characters. Each address acts as your unique identifier when sending or receiving cryptocurrencies. As opposed to your private keys, your address is the public identifier and is listed on the blockchain. Find more information on blockchain addresses in our article, What are Addresses on a Blockchain?
A cryptocurrency airdrop happens when a crypto project distributes small amounts of its tokens to a variety of users all at once. Airdrops provide a way for projects to increase community engagement and build hype around a token project. These tokens go to community members who may or may not need to perform specific community building tasks in order to participate, such as retweeting or inviting friends. During an airdrop, the token platform sends out the tokens to all wallets all at once and for free. Learn more in our “What is an Airdrop” article.
An app coin is a cryptocurrency token that is native to a decentralized application (DApp). In other words, an app coin is a cryptocurrency that fuels or used on a particular decentralized application. Creators of DApps are able to monetize their applications using a specific token that may have been built on a protocol such as Ethereum. The more the app coin gains adoption and utility on the DApp, the more the value of the underlying app coin may become. More information on app coins can be found in our Ultimate Guide to App Coins.
Since Bitcoin was the original blockchain and the world’s first cryptocurrency, it has a status outside of all other virtual currencies. So while Bitcoin is Bitcoin, every other cryptocurrency is considered an alternative coin, or altcoin. Learn more about altcoins in our article, What is an Altcoin?
A trader using arbitrage buys a security in one market while simultaneously selling it on a different market, thereby profiting from the price difference. In general, arbitrage represents a low-risk investment option, since there is a minimum holding period in which the price could fluctuate. In the past, arbitrage most often referred to stocks, bonds, and fiat currencies, but now also includes cryptocurrencies as there can be price discrepancies between various exchanges. To learn more, check out our Guide to Cryptocurrency Arbitrage.
Application-Specific Integrated Circuits, or ASICs, are specialized hardware units that, by design, perform only one specific activity. In contrast to the computer hardware most people use today, which have multiple uses, ASICs are built with one goal in mind – to complete the computational work necessary to maintain transactions on a blockchain network. For a more comprehensive look at ASICs, be sure to read our article, ASIC Mining Basics.
Asset classes are groups of investments that have similar characteristics and abide by the same regulations. Traditionally, we’ve had 3 major asset classes: equities, fixed income bonds, and cash equivalents such as CDs and US treasury bills. In the modern era, we also have newer asset classes such as real estate, commodities, and cryptocurrencies. When speaking of diversifying a portfolio, recommendations often lean towards investing in more than one asset class. Learn more in our article, Guide to Asset Classes.
Base58check is a modified version of Base 58 binary-to-text encoding and is primarily used to encode Bitcoin addresses. This type of encoding converts 160-bit hashes into P2PKH addresses. Find out more in our article, What is Base58Check?
Sometimes referred to as bps or “bips”, a basis point is a unit of measure that represents a fraction of a percentage of a financial instrument. One basis point equals 0.01%, or .0001. Fractional basis points simply mean a fraction, such as with 1.5 basis points, which would equal 0.015% or 0.00015. Basis points usually refer to interest rate changes or the bond yield paid out to investors. You can learn more about basis points in our article, What is a Basis Point?
A bear market is a period of time in which asset prices or sentiment in a market is in a negative downward trend. Traditionally, bear markets have been associated with stock trading. But cryptocurrencies now represent a new asset class which can also experience a bear market. During a crypto bear market, investors are “bearish” and commonly will sell off their assets, creating a cycle of negative price action. Find out more in our article, Bear Market vs. Bull Market.
Bitcoin was the first cryptocurrency ever created and the first use case of blockchain technology. Its mysterious creator Satoshi Nakamoto published the white paper and unleashed the Bitcoin Network in 2008. Since then, Bitcoin has grown to a market cap in the hundreds of billions and has enjoyed a cryptocurrency market dominance of greater than 50% of the entire cryptocurrency universe. Bitcoin’s design offers the world a decentralized, peer to peer system of payments that vastly cuts costs and speeds up global financial transactions, all without the need for 3rd parties or central authorities.
Bitcoin dust refers to tiny amounts of Bitcoin that are leftover in wallets. These small amounts of BTC do not constitute enough Bitcoin to pay the small transaction fee that the Network requires. There are a couple of problems relating to Bitcoin dust. For example, when transaction fees rise, it becomes a bigger problem. Additionally, some nefarious characters exploit dust to perform certain types of attacks. Learn more about it in our article, What is Bitcoin Dust?
Bitcoin script is a stack-based set of instructions in the form of a programming language. It uses a systematic list of computational processes that enable Bitcoin transactions to function. Bitcoin’s scripting language processes left to right, is non-looping, and is intentionally non-Turing complete. These elements of limited functionality prevent infinite loops which can happen theoretically in Turing-complete languages. For every Bitcoin transaction to go through, the script enables all the necessary steps.
As essential elements of any blockchain ledger, blocks are data records that are stored on the blockchain. Each block, beginning with the very first block in a blockchain (the genesis block), is linked together using cryptography. The connecting element is called a cryptographic hash. Find out more about blocks in our article, How Does a Blockchain Work?
Block height refers to the number of blocks in a blockchain. The very first block, the genesis block, has a block height of 0. Then the next block’s height is 1, and so on. At the time of this writing, the Bitcoin block height was 586002. Information about block height for various blockchains is available on blockchain explorers.
A block reward is given to the Bitcoin miner who is first to solve the block’s cryptographic puzzle. The block reward comes in the form of newly minted bitcoins. Miners can earn block rewards for each block they successfully mine. Currently, the reward per block is 12.50 + 0.5971 bitcoin, which at the moment equals $139,649.22. For more information, check out our article, What is a Block Reward?
A blockchain is a digital ledger that records transactions, such as with cryptocurrencies, and is distributed across multiple computers that are all linked to a specific Blockchain Network. Each of these computers has a full copy of the blockchain in real-time on their system. The blockchain is made up of two essential concepts, a block, which contains transactional information, and the chain, which connects all the blocks in a blockchain using a cryptographic hash. Learn about all the different types of blockchains in our article, 3 Types of Blockchain Explained.
A blockchain explorer is a website that allows you to browse transactional and block information for a specific blockchain. Sometimes, you can view multiple blockchains from one explorer. In the explorer, you can view a live feed of the most recently mined blocks, learn the block height, see the history of a particular address, and much more. Learn all about explorers in our article, What is a Blockchain Explorer?
Bonds are an example of a fixed income security investment and are considered a low-risk portfolio item. That’s because they usually pay out a fixed amount regularly to investors for the term of the bond. Essentially, bonds are loans taken out en masse by a corporation or government. They sell the bonds, pay the “coupon rate” during the bond’s term to all the bond investors, and then must pay back the principal amount to investors at the end of the term. Find out more about bonds in our blog post, Stocks vs. Bonds – A Beginner’s Guide.
A bull market represents a period of time when you have market prices or sentiment experiencing a positive uptrend. During a bull market, investors are generally ‘bullish’, meaning there is increased buying of assets. Additionally, demand is on the rise during a bull market. This often further perpetuates higher prices and more demand. Learn more in our article, Bear Markets vs Bull Markets.
Big investors and whales who have large amounts of cryptocurrency are strongly affected when a price fluctuates. As a way to try and control a price, these investors sometimes place a large block of orders for an asset at a specific price. When this happens, the order book fills up and compels other traders to buy at a slightly higher price because if they place orders at a lower price, they believe their order may not get filled because the price is ‘below’ the buy wall. Learn more in our Guide to Sell Walls and Buy Walls.
A capital gain is a profit you make when selling a property or other investments (otherwise known as capital assets). Capital gains occur whenever the price of a capital asset rises and you cash it out, realizing the gain. What you earned on that investment is the capital gain.
In many regions, when an investor sees any capital gain, they must pay a capital gains tax on the amount of profit. Learn more about how capital gains may affect traders in our article, What are Capital Gains?
A call option is when an investor enters an agreement to buy certain assets at an agreed-upon price on or before a specified date. These assets may be a stock, bond, or a commodity. Someday, this may include cryptocurrencies as well. Essentially, a call option is a right to buy these assets, so traders are not obligated to buy if they choose not to. Find out how traders use call options in our blog post, What are Call Options and Put Options?
A chart pattern offers a way for traders to study the price movements of securities, commodities, and cryptocurrencies. The historical prices of an asset or a group of assets can be visually represented on a chart in graph form. The data that is plotted may hint at a pattern. Traders look to these charts to find patterns that naturally occur and may repeat over time. During technical analysis, traders can study chart patterns to help them make decisions about when to sell or buy an asset, or what to expect in the future. Learn more in our Guide to Chart Patterns.
Cold storage refers to a certain way of securing the cryptographic keys to a crypto wallet. The term ‘cold storage’ is the opposite of hot storage, which is when you store your keys in an online wallet or a crypto exchange. While hot storage may put you at risk of hacking, cold storage reduces the risk of hackers or scammers getting to your crypto since the data is stored offline. Examples of cold storage include hard wallets and paper wallets. Learn all about cold storage options in our article, What is Cryptocurrency Cold Storage?
In economics, commodities are basic goods such as fuels, metals or agricultural products. They are also fungible, meaning 50 tons of wheat from one company, for instance, has the same value and can be divided into fractions as another company’s 50 tons of wheat which can be divided as well. Both are interchangeable in markets. Generally, traders invest in commodities to diversify their portfolios and hedge the risk of inflation. Additional examples of commodities include oil, sugar, iron, chemicals and computer memory. Today, a new commodity is emerging called Cryptocurrency-Backed Commodities.
Confirmation on a blockchain signifies that there is a network-wide consensus that a transaction is not an instance of a double spend. Once this takes place, the transaction can be verified and stored as a legitimate transaction on the blockchain. When making cryptocurrency transactions, one or more confirmations are expected before the transaction can go through. Learn more about blockchain transactions in our blog post, How Does a Blockchain Work?
With public blockchains, there are no central authorities to verify the truthfulness of transactional data or determine how to go about improving a particular blockchain network. So instead, an automated consensus mechanism is distributed amongst network users to achieve agreement or consensus. Learn about the different types of consensus mechanisms, such as Proof of Work (PoW) and Proof of Stake (PoS) in our article, What are Consensus Mechanisms?
A cryptocurrency is a digital currency that operates on a blockchain, where all of its transactions are immutably stored. Cryptocurrencies all utilize encryption technologies to regulate how many units of currency will be minted and how transactions are carried out. Additionally, crypto enables secure, peer-to-peer payments and other economic opportunities that rest outside of 3rd party financial institutions and central banks. Read more in our article, How Does Cryptocurrency Work?
Crypto gas refers to the internal pricing for successfully executing transactions and smart contracts on the Ethereum Blockchain. More simply put, it’s the fuel needed in order to conduct transactions. The pricing value of gas specifically relates to the consumption of computational expenses, resulting in the computational cost. Miners of Ethereum, who verify and process transactions on the Ethereum Blockchain, receive gas for these computational services. Get more details in our article, What is Crypto Gas?
A cypherpunk represents individualism, privacy, and freedom when it comes to our cyber world. By using encryption to access computer networks, cypherpunks often stay off the radar of governmental authorities. They believe that by enabling people to have private, secure financial transactions, they are safeguarding a fundamental human right. Naturally, they are not generally supportive of regulatory efforts in the cryptocurrency space. Get an in-depth history of cypherpunks in our blog article, What is a Cypherpunk?
Dandelion is an added privacy feature used by the MimbleWimble Protocol, which helps to make cryptocurrency transactions untraceable. Dandelion works by spreading out transactions randomly, far and wide. As a result, they make many hops before broadcasting the transaction to the blockchain. It’s similar to how a real dandelion flower sends it’s fluff out to blow around in the wind until the seeds are ready to drop. Essentially, dandelion improves upon cryptocurrency mixers, further enhancing the security of privacy coins. Read more about Dandelion in our article, Is MimbleWimble a Dark Mark for Bitcoin?
Decentralized applications, or DApps, are computer applications that run on a distributed network, have no central point of control, and enable peer to peer functionalities. Many DApps are built on the Ethereum Blockchain using smart contract technology. Read all about DApps in our article, What is a DApp?
A distributed denial-of-service (DDoS) attack is a form of a cyber attack. The end goal in attempting a DDoS is to shut down a network or server so its users cannot access it. Attackers will disrupt the normal traffic heading to a particular server by overwhelming it with unnaturally high and falsely engineered traffic. Find out more in our blog post, How to Stop a DDoS Attack.
Decentralized Exchange (DEX)
A decentralized exchange (DEX) is a cryptocurrency trading market that has no central authority and allows for peer to peer crypto trading. A DEX is trustless in nature, meaning you don’t have to trust a third party to make financial transactions. Everything runs according to the algorithmic, automated protocol. Additionally, DEX’s do not require investors to give any personal details about their identity to transact in crypto trading on the exchange. Learn more in our article, Decentralized Exchanges.
DeFi stands for Decentralized Finance and refers to traditional financial services that are built on open, public blockchains, such as Bitcoin and Ethereum. DeFi projects include everything from margin trading to Bitcoin lending to prediction markets and beyond. Learn more about DeFi in our article, DeFi vs. FinTech.
A hierarchical deterministic wallet is also known as an HD wallet. It uses a 12- or 18-word seed phrase, which is a string of random words, to generate both private and public keys in a cryptocurrency wallet. Users can easily back up and store their seed phrase and then that, along with an internet connection, is all they need to restore their wallet and access their crypto. Find out more in our article, What is a Deterministic Wallet?
A distributed ledger is a database that stores digital data through consensus, replication and sharing across multiple participants (nodes) in a computer network. There is often no central authority in charge of the ledger, it is instead run by all the nodes in the network. Each node, which can be located anywhere geographically, maintains its own copy of the ledger in real-time and takes part in processing every ledger transaction through consensus. Learn more in our article, What is a Distributed Ledger?
A dividend has traditionally involved regular payouts from a company to all of its shareholders from the revenue it makes. Investors who buy stock in a company earn a return on their investment this way. They usually get paid in relation to the number of stocks they hold on a quarterly basis. In the modern cryptocurrency industry, dividends sometimes refer to the staking of coins or running masternodes. Learn about traditional dividends in our article, What is a Dividend?. To find out more on crypto dividends, check our post, What is a Masternode?
A dividend yield is an incredibly important factor in determining the overall value of a stock. It’s especially useful for investors who want to extract dividend income from their investments. Dividend yields represent the general scale of a company’s annual dividend in comparison to its share price. The concept is a simple way to measure the relative attractiveness of various stocks.
Dollar-cost averaging is an investment strategy that involves buying the same dollar value of an asset on a regular basis. An example would be setting up a recurring buy where you automatically purchase $100 of bitcoin every first of the month, regardless of the price of BTC. Dollar-cost averaging is a long term wealth-building strategy that helps to smooth out the volatility of crypto markets. It also takes the emotion out of dealing with price swings through automation. Find out more in our article, What is Dollar-Cost Averaging?
Double spending happens when a digital token is spent more than once. Since a token is essentially a digital file, there’s potential for duplication or falsification. In relation to blockchain technology, an instance of double-spending occurs when a transaction uses the same input as one that already has been broadcast to the blockchain network. For further information, refer to our article, What is Bitcoin Double Spending?
An escrow is an account in which a 3rd party manages money or property for the other parties in a transaction. People use escrow accounts to temporarily hold assets until certain requirements are met. One example would be a bank creating an escrow account that you deposit money into regularly and then the bank automatically pays your mortgage, insurance and property taxes.
In the blockchain, when you are accepting investor contributions in crypto for a specific purpose (as when an ICO team holds investor assets until the end of the sale), having an escrow set up is considered a security measure. Ethereum has also designed a smart contract for administering escrow accounts for crypto. Get more detailed information in our article, What is an Escrow Account?
Ethereum is a decentralized blockchain network with smart contract capabilities. Other projects can build upon Ethereum’s open, public blockchain to create decentralized applications (DApps). Ethereum uses a system of mining and a Proof of Stake (PoS) Consensus mechanism to operate the network, which is fueled by its native cryptocurrency, Ether. There’s a lot more to Ethereum, so learn more by checking out our article, What is Ethereum in Layman’s Terms?
Exponential Moving Average
A moving average is an indicator in technical analysis that helps to illustrate price fluctuations by following trends based on past prices. An exponential moving average (EMA) is a type of moving average that applies weighting factors, or more importance, on the most recent prices. As a result, EMAs respond faster to recent price changes. Get the full details in our blog post, What is an Exponential Moving Average?
A fiat currency is money that is issued by a central bank or government. It does not have intrinsic value, meaning there is nothing physical backing it, such as gold. Its only value stems from the government who stands behind it and the two parties in a transaction agreeing on its value. Learn more about fiat money in our article, The Pitfalls of Fiat Currency.
The Financial Technology industry, otherwise known as FinTech, refers to innovative ways of combining technology with financial services. FinTech companies play a leading role in the technology start-up space. They often contribute to major disruption of the status quo in finance and banking. Examples of FinTech would be Forex trading, Bitcoin lending platforms, and improved payment services. If you’re interested in learning more, read our article, FinTech vs. DeFi.
A fork happens when a blockchain splits into two separate chains, essentially creating one new cryptocurrency with the code copied from the original. Forks can happen or be planned in the event of a change to the blockchain protocol, or when there’s a split in consensus. There are several different types of forks:
- A contentious hard fork (i.e. Ethereum Classic or Bitcoin Cash)
- A planned hard fork (SegWit)
- Soft fork (Litecoin)
Learn about the different types in our article, Guide to Bitcoin Forks.
As opposed to technical analysis, which focuses on price movements, fundamental analysis involves the assessment of an asset’s intrinsic value. This means investors research potential projects, looking at all the different aspects that may affect profitability, including:
- Financial statements
- The current state of the market
Learn more in our Guide to Fundamental Analysis.
Whereas a bitcoin node is any computer that is hooked up to the Bitcoin Network, full nodes are set up to validate blocks and transactions. Generally, it is beneficial for bitcoin users to run a full node because they enjoy:
- Increased security and privacy
- A choice during a fork
- A way to handle their own transactions without relying on a 3rd party server
Get the full rundown in our article, What is Bitcoin Full Node?
A futures contract is a legal agreement in which one party agrees to buy or sell a particular asset at a set time for a predetermined price. Usually, the asset is a security such as a currency, an index, or a commodity like wheat. As a form of derivative trading, futures are designed for high risk-tolerant investors who are comfortable using high levels of leverage in highly liquid markets like commodities. Recently, CME Group and TD Ameritrade rolled out new programs for bitcoin futures, thus opening futures up to a new asset class. Learn more in our blog post, What is a Futures Contract?
The genesis block is the very first block of a blockchain. It’s hard-coded into applications that build on top of that blockchain’s software. At the creation of the genesis block, all other blocks will be connected to it through a hashing system. As such, the genesis block is the only block that has no blocks before it. A genesis block may also be referred to as Block 0. Find out more in our article, What is a Genesis Block?
Going long is an investment strategy where an investor takes a long position on an asset because they are confident about it. When they go long and buy a stock, commodity or cryptocurrency, it’s because they expect its value to rise (or decrease) over time. If a trader is going long, they are said to be bullish about a particular asset. Going long can mean an investor has ownership of the asset, but it can also mean they are holding an option to buy or sell the asset at a later date.
Going short is the opposite of going long and is considered an advanced trading strategy. Going short is a form of speculation, where traders try to profit from a decline in stock, security, or cryptocurrency. Shorting refers to when a trader sells an asset first with the intention of buying it, or covering the short, at a lower price. If they manage to buy it back for a lower price than what they initially sold it for, they make a profit.
A naked short is when the trader never had possession of the asset before they sold it. A covered short is when the trader borrows the asset first and then repays it when they purchase the asset to close the position.
It is important to know that there is a finite profit potential of shorting because the lowest price an asset could trade is zero. But there is an infinite potential for losses since an asset’s price could rise indefinitely.
After every 210,000 blocks are confirmed on the Bitcoin Blockchain, the reward earned by miners for mining blocks is cut in half, which means fewer Bitcoins will be minted and distributed as a reward for mining. Historically, the halving event occurs about every four years. Each time the rewards are halved, bitcoin experiences a deflationary trend, which leads to a scarcity effect and can cause positive pressure on the BTC price. Read more about that in our article, Bitcoin Halving and the Scarcity Effect.
A hardware wallet is a physical, electronic storage device for cryptocurrencies, somewhat similar in appearance to a thumb drive. Hardware wallets, which are a type of cold storage, help you store the private keys to your cryptocurrency safely offline. When you need to access your digital assets, you can simply plug in the hardware wallet to your device, make the transaction, and then once again store it safely offline. Learn more in our article, What is a Hardware Wallet?
Hashing is when a computer takes a large input of data (letters, numbers, and symbols), applies a mathematical function, and generates a different output of data of a certain length unrecognizable from the original input. The Bitcoin Network utilizes the SHA-256 algorithm to generate randomized numbers with a known amount of CPU effort. Hashing allows for security during the transmission of data while providing a way to efficiently store the values. You can find additional information in our article, What is Blockchain Hashing?
Hash rate refers to how fast a computer can take a set of information and turn it into a string of letters and numbers of a specified length, or a hash. In simpler terms, it’s how fast a miner’s computer can complete an operation in bitcoin code. Find additional details in our article, Hash Rate vs. Hash Power.
Hash power, which is often referred to as hash rate, is a measurement of the power used by a computer to run and solve hashing algorithms on a blockchain network. Find out more in our article, Hash Rate vs. Hash Power.
A hard fork happens when there is a radical change in the code of a blockchain network that causes a spin-off, creating two cryptocurrencies out of one. So the existing blockchain stays on its path and a brand new blockchain just like it splits off and creates its own path. As such, the change requires miners and those who are running nodes on the original blockchain to upgrade to the new version of the protocol’s software. Or, if they’re running a full node, they can choose which road to follow. When this happens, the blockchain essentially splits into two incompatible software programs. With the newly forked blockchain, users receive brand new tokens in a number relative to their total holdings on the original blockchain (which they retain as well). Learn all about forks in our article, What is a Hard Fork?
A hot wallet is a storage unit for cryptocurrency keys that are connected to the internet. An example of a hot wallet would be the cryptocurrency you hold on an exchange, or in an online wallet. Generally, it’s best practice to keep all your cryptocurrencies in cold storage (such as hard or paper wallets) unless you are planning a transaction.
HODL was a misspelling of the word HOLD when referencing the concept of cryptocurrency enthusiasts to ‘hold’ their coins and not sell them. A suitable acronym is also Hold On for Dear Life. HODL is a popular term for crypto enthusiasts who choose to hang on to their cryptocurrencies for the long term as opposed to trading them or selling them off. HODL’ers are generally bullish on a particular digital asset and are well known for surviving bear markets and being immune to FUD.
Laddering is an investment strategy that allows traders to move in and out of positions. They can do this by arranging for incremental buy and sell limit orders instead of buying all at once at the current market price. Laddering enables traders to spread their buy-in or sell amounts somewhere between the price now and what they expect the price to be at a later date.
Lightning Applications, or LApps, are software applications that use the Lightning Network as part of the service or product they are providing. Since the Lightning Network enables better payment support, LApps, in general, may boost crypto adoption by enabling more merchants and service providers to accept multiple types of crypto payments. Learn more in our Guide to Lightning Apps.
A buy limit order is when a trader sets the price to buy a security or asset below a certain price (below the market price, for example). The order enables the trader to specify the price they are willing to pay to execute the trade, thereby controlling their costs.
A sell limit order is when a trader sets the price to sell a security or asset above a certain price so they can sell the asset at the price they want. In essence, the investor sets the buy or sell limit orders to fix the price that they are willing to make the trade with, rather than choosing to buy or sell at the market price (by filling orders that have been submitted to the order book).
Limit orders are used to gain more control over execution prices and to help stem the risks of volatility and liquidity. Find out additional details in our article, Differences Between Market Orders and Limit Orders.
LockTime is a field added to the Bitcoin Script. It is used to postdate the earliest block time that a transaction can be verifiably added to the Bitcoin Blockchain. Transactions will only get confirmation and be added to the block if the predetermined LockTime has elapsed. LockTime can either be set to an actual time or it may refer to the block height. Find out more in our article, What is LockTime?
Margin trading is the practice of using funds that are borrowed from a broker to purchase and trade financial assets. The margin itself refers to the difference between the total value of an investor’s assets and the amount they borrowed from the broker. Buying ‘on margin’ means that the investor pays a percentage when buying an asset, with the remaining percentage is paid via the borrowed funds. Such use of financial leverage can potentially amplify gains but also create devastating losses. As such, leverage has the reputation of essentially being a double-edged sword and is often relegated to the most experienced traders.
Traditionally, the market cap of a company equals the market value of its publicly traded outstanding shares. So market capitalization can be calculated by multiplying the share’s current market price by the number of outstanding shares. In crypto, the market cap is calculated by taking the circulating supply of tokens and multiplying that by the current token price. Learn all about cryptocurrency market caps in our article, What is Cryptocurrency Market Cap?
A market correction refers to a steep decline in the price of a security, commodity or market. The decline here would signify a greater than 10% drop of the current price. Market corrections can be viewed as disastrous but often are a healthy adjustment of an overvalued asset. Get more details in our article, What is a Market Correction?
A market order is a buy or sell order that an investor requests that is to be executed immediately at the best available price. Generally, market orders are filled right away to take advantage of the current price. Once the order has been placed, the lowest priced sell orders will be filled for market buy orders, and the highest priced buy orders will be filled for market sell orders. Learn more in our article, Differences Between Market Orders and Limit Orders.
A market maker is a participant in an exchange, either an individual or a member firm, who uses their exchange account to buy and sell securities for others. For example, a market maker could be a brokerage house that uses that exchange to create buy and sell solutions for other traders. The main benefit to market makers is that they help increase liquidity in financial markets. They often have large holdings on exchanges and to mitigate this risk, they have the ability to spot price drops in the value of an asset after it’s been bought from a seller, but before it’s sold to another buyer. Learn how crypto market makers are emerging by reading about the Top Crypto Market Makers.
A masternode is a computer that is part of a blockchain network and which helps to run that network. It is considered a full cryptocurrency node in that it hosts its own copy of the blockchain, enables voting rights, and performs additional functions to maintain consensus. For performing these tasks, a masternode operator receives cryptocurrency in a special wallet, offering alternative crypto earning opportunity outside of mining and regular staking. Learn more about running a masternode in our article, What is a Masternode and How to Get Started?
The MimbleWimble privacy protocol is aptly named for the Harry Potter spell that rendered its victims unable to speak. Using elliptic-curve cryptography, which requires smaller keys, MimbleWimble enables blockchain networks to hide wallet addresses so they don’t show in the ledger. With reduced data storage requirements, MimbleWimble also offers a highly scalable solution for blockchain storage, quicker speeds and a further step away from central control. Learn more about this privacy protocol in our article, Is MimbleWimble a Dark Mark for Bitcoin?
Cryptocurrency mining is a process in blockchain technology that involves confirming transactions and minting new, “virgin” coins to miners. With bitcoin, miners receive newly minted cryptocurrency in return for performing computational work to help the network run according to its rules. With Ethereum, miners earn by staking coins (or holding them in a special wallet) and verifying transactions. Miners use their computers, special software, and often hardware units such as ASICs to verify transactions and add blocks to the blockchain following that particular cryptocurrency’s protocol. Learn the intricacies of bitcoin mining in our article, What is Bitcoin Mining?
A mining rig is specialized computer hardware whose sole function is to support a blockchain network. The rig stores a real-time copy of the blockchain, while enabling miners, or operators of the mining rig, to solve mathematical problems in a competition to verify bitcoin transactions and subsequently, earn newly minted bitcoins. The work they do follows all the rules of the Proof of Work (PoW) consensus mechanism, which is coded into the Bitcoin Blockchain. Find out more in our article, What is Bitcoin Mining?
Multi-signature often referred to as multisig, is a kind of digital signature that requires two or more users to authorize a transaction. When more than one signature is required, it is harder for malicious attackers to succeed. With bitcoin, multisig means needing more than one private key to authorize transactions. With this system, it is much more difficult for hackers to break the encryption. Learn more in our blog post, What is a Digital Signature?
Multipool mining is when a miner is able to mine in different pools for different cryptocurrencies. Miners look at a network’s mining power and exchange rates to determine which cryptocurrency is most profitable to mine at a given time. If interested in knowing more, check out our article, What is Multipool Mining?
A node is a computer that connects to a blockchain network by downloading special software. Nodes are distributed computers that make up a larger network. With public blockchains like bitcoin, anyone in the world with an internet connection and a device can run a regular node. Depending on what type of node it is, such as a regular node, a full node or a masternode, the nodes perform varying tasks, including verifying transactions and voting on protocol changes. Find out more in our post, What is a Node on the Bitcoin Network?
A peer to peer transaction simply means it took place between two agreeing parties, with no 3rd party intermediary. For example, when you send money to someone in another country, traditionally you’d have to go through several intermediaries, all of whom charge a fee. With bitcoin, two people can transact together, peer to peer, wallet to wallet, from anywhere in the world. They can send each other bitcoin almost instantly and very cheaply, with no 3rd party standing in their way. Learn all about P2P in our article, Peer to Peer Networks Defined.
A priori probability is achieved when calculating separate circumstances in a logical, objective way that involves deductive reasoning. Oftentimes these probabilities deal in events where the likelihood of each actually happening is independent of each other. One example is the coin toss, where every toss represents a new 50% chance of landing on heads or tails, regardless of all other previous flips. Find out more by checking out our article, What is a Priori Probability?.
When referring to cryptocurrencies, each Bitcoin or altcoin wallet will be associated with two sets of keys, a public key, and private key. A private key is a cryptographic key, which is a string of alphanumeric characters that are required to unlock or access the cryptocurrency wallet. Public keys are publicly viewable on the blockchain and are what you can give out to others to perform transactions. Private keys, however, which can be stored in hardware, software or paper wallets, are a user’s one and only way to securely access their cryptocurrency wallet. If the private key is lost, access to the wallet is lost forever. A private key is somewhat similar to the password to your bank account, while the public key is more like the bank account number. Find out more in our blog post, What is a Private Key?
A protocol token is a token that allows access to the services provided by, an underlying blockchain protocol. Sometimes referred to as a native token, protocol tokens enable participants to use and build upon the underlying protocol. Examples of protocol tokens include Bitcoin, Ether, NEO, Cardano, and Lisk. Find out more in our Ultimate Guide to Protocol Tokens.
Public keys in cryptocurrency work in conjunction with the private keys. The public key can be given to others so they may send virtual assets to your crypto wallet. But only the private key can allow anyone to take assets out of your wallet. That’s why it’s important to keep the private key to yourself, storing it safely offline whenever possible. With public keys however, you can freely give them to others knowing your digital assets are protected; only deposits are enabled. The public key is a bank account number, which can be shared with others without risking compromising the account. Learn more in our article, What is a Private Key?
A put option is simply an option contract that gives the owner the right (but not the obligation) to sell a certain amount of a security at a specific price by a predetermined date. On the other hand, a call option is an exact opposite, enabling a contract in which the owner has the right to buy the asset according to the contractual details. Learn more about buy and sell options in our blog post, What are Call and Put Options?
Quantum computing uses technology that is faster and smarter than the computer technology we use today. Mainly, this is due to Qubits, which improve on the bits that are found in most modern computer processors. Qubits maintain multiple positions at once and have the ability to securely transmit big data sets in an undisturbed fashion and over very long distances. Learn all about quantum computing in our blog post, What is Quantum Computing?
Relative Strength Index (RSI)
The relative strength index (RSI) is a technical indicator of price momentum. It measures the degree of recent price changes and helps traders evaluate overbought and oversold price conditions for a particular asset. RSI is visually represented on oscillating graphs, which compare bullish vs. bearish movements in relation to the asset’s price. The RSI indicator gives readings in percentages between .00% and 100%. If above 70%, it signals an overbought condition. Under 30% signals an oversold condition. The indicator was introduced by J. Welles Wilder, Jr. in his book, New Concepts in Technical Trading Systems.
It was Satoshi Nakamoto who published the Bitcoin white paper, unleashing this public, censorship-resistant, decentralized, immutable system of money to the world. It was the first instance of blockchain technology to emerge in our era of modern business. The identity of Satoshi is still unknown at this time. It could be an individual or a group of people. But there are many theories and even some claiming to be Satoshi. However, until the Bitcoins that are in Satoshi’s original wallet actually move, there will not be widespread belief in any of the theories. Learn more in our article, Who is Satoshi Nakamoto?
Segregated Witness is a protocol upgrade that provides protection from ‘transaction malleability.’ In addition, it aims to increase block capacity. It is a process whereby the block size limit on a blockchain increases by removing signature data from transactions. By removing parts of a transaction, this makes enough space/capacity to add more transactions to the block. Find out more in our article, What is Segregated Witness?
A sell wall is a large block of sell orders that a trader sets at a certain price. They create the wall in order to sell a large holding of a specific asset. With the big block of sells in place, other traders will not be able to sell their assets at a price higher than the wall until the sell wall has been filled. As a result, there is usually downward price action as other sellers will place orders below the sell wall driving the price down. Learn more about sell walls in our informative Guide to Sell Walls and Buy Walls.
Scaling solutions try to resolve the slow transaction per second rate to make crypto payments more viable for business. In blockchain technology, sharding refers to a scaling solution involving a partitioning of the blockchain ledger. With sharding, the blockchain ledger is divided into horizontal rows. Each of these ‘shards’ has its own server. So every node on the blockchain does not load data to the entire blockchain; instead, it maintains a shard of the ledger, creating more efficiency and faster transactions. Learn all about sharding and some of the projects involved with scalability solutions in our article, Sharding Explained.
Smart contracts are essentially contracts that are carried out for two parties by a computer protocol with no 3rd party intermediary. All terms for the agreement between the two parties can be written into lines of code. That will cause the smart contract to self execute based on the predetermined parameters of the contract, as set by those two parties. Smart contracts essentially enable any two parties to carry out transactions without a central authority, legal system or oversight by regulatory entities. Additionally, smart contracts are traceable, immutable and transparent. Read more about smart contracts in our blog post, What is a Smart Contract?
Social trading is a phenomenon whereby investors can begin trading without expertise by following and sometimes copying the trades of expert traders. It’s called social to differentiate it from traditional trading, mainly because social trading platforms are often similar to social media platforms in that the sharing of information is encouraged and people can also network with each other.
Social trading has also effectively made trading available to almost anyone, while trading stocks, bonds, etc. were traditionally relegated to professional traders. Because of the social media-like user interface, trading can be a more enjoyable and ‘social’ experience that may exceed that of the lone trader. Moreover, in blockchain social trading projects like HedgeTrade, the data from all previous trades and predictions are stored publicly and used in analytics, giving all users better trade information. Learn more in our blog post, What is Social Trading?
Staking coins such as PIVX, ADA and XSN enable users to hold aside their crypto coins in a special wallet. In return for ‘staking’ the tokens, they enjoy certain benefits depending on the cryptocurrency. For instance, they may have voting power and earn crypto dividends. All those who stake coins are helping the network (of each respective cryptocurrency) to maintain consensus and keep the protocol running according to the rules. Find out more in our blog post, How Staking Coins Works.
Stocks are a form of security that enables its holders to have proportionate ownership in the company issuing the stock. Also knowns as shares or equities, stocks are issued by corporations for raising money to use in business operations. They can be sold privately, but by and large are traded on stock exchanges. Because stocks have historically shown strong performance in relation to other types of investments, they are integral to modern investment portfolios. Learn more about stocks in our Guide to Stocks and Bonds.
A stop-limit order is a conditional trade that is used to mitigate risk by combining a stop loss with a limit order. When the security being traded reaches a predetermined stop price, it triggers a limit order which automatically executes a buy or sell at the predetermined price. By using the stop-limit order, traders can have more control as to when an order is filled. But the execution of the trade is not guaranteed if the security doesn’t reach the stop price in that timeframe. Find out more in our article, What is a Stop Limit Order?
Technical analysis is a type of trading discipline whereby traders evaluate statistical data on price movements and volume. Traders employ this method in order to identify patterns and trends that may signal trading opportunities. Instead of assessing the value of a company as with fundamental analysis, technical analysts focus primarily on past trading activity and price changes to help them gauge future price action. Go into more depth in our Guide to Technical Analysis.
Testnets get their name from the term, Morden A Testing Networks and are the testing grounds for decentralized cryptocurrency projects. A project’s testnet is separate from the mainnet, which houses the main blockchain. On a like but separate blockchain, testnets enable developers to test changes without affecting the main blockchain. Tokens may also be issued for testing purposes, making it an ‘incentivized testnet’. Find out more in our blog post, What is a Testnet?
A timestamp is an encoded digital record of the time that a certain event occurred. For instance, on a blockchain network, each verified transaction is timestamped and forever stored on the distributed ledger. Timestamping helps protect the blockchain from manipulation since timestamped transactions cannot be altered or deleted, and the information is publicly viewable.
A token is generally a representation of value within a blockchain network. The token may be an asset that is traded on crypto exchanges or secured by another asset. It may even be a utility token that people use to access a certain product or service within a blockchain application. Most people consider tokens as cryptocurrencies that are built upon a blockchain project. For example, the HEDG token, which is built upon Ethereum. Learn more in our article, What is a Crypto Token?
Trading bots are software programs that enable traders to set up automatic trading. This is especially useful and helpful in crypto markets, which are volatile and run 24/7. Bots monitor market price movements, volume, and orders and will automatically react to certain, predefined parameters. For instance, if a certain asset reaches a specific price, the bot may be programmed to make a buy automatically at an exchange on your behalf. They generally use APIs as a way of hooking up to data sources such as CoinMarketCap to help them monitor and interpret market movements. Find out more in our article, Bitcoin Trading Bots.
‘Greeks’ is a term in the options market that describes the diverse aspects and risks in an options position. The name stems from the association of risk variables with Greek symbols. Traders employ the use of different Greek values to assess options risks, as well as manage option portfolios. The five most common ‘Greeks’ that traders use are Delta, Gamma, Vega, Theta, and Rho. Learn more in our article, Trading Greeks.
If a computer or programming language is Turing complete, it is designed to be compatible with a Turing machine. Such machines are computational models that, in theory, can perform all the same calculations that other programmable computers can. Features of a Turing complete machine include unlimited memory and no restrictions as to how long a computation can take.
Vitalik Buterin is the Russian-Canadian computer programmer whose interest in economics, math and computer theory began at a very young age. At only 25 years of age today, Buterin is
Co-Founder of Ethereum, arguably cryptocurrency’s 2nd most well-known protocol behind Bitcoin. He’s also Co-Founder of Bitcoin Magazine and is a leading influencer and advocate in the blockchain industry. Learn more in our blog post, Who is Vitalik Buterin?
A virtual machine is a computer that replicates the functions of another computer system.
By using a virtual machine, you can run an operating system as a desktop app on your computer. People can try out a different operating system or run software that isn’t compatible with their main system. For example, the Ethereum Virtual Machine (EVM) is essentially the sum of all the computers worldwide that run Ethereum’s software. Read more in our Guide to the Ethereum Virtual Machine.
A crypto wallet stores the public and private keys that enable you to access your digital assets. Wallets come in different forms, each with their benefits and drawbacks. An online (‘hot’) wallet stores the keys in an online location. A hard wallet stores them on a piece of hardware, similar to a flash drive. And paper wallets mean you have simply written down your keys and stored them physically someplace safe. Hard wallets and paper wallets are known as ‘cold storage’, meaning they are safely kept offline. Hot wallets are not considered as safe but they do offer more convenience. Learn more in our post, What is a Hard Wallet?
Wash trading is the practice of conducting buys and sells that effectively cancel each other out, as opposed to trades actually taking place between unknown parties. Wash trades appear as automated buys and sells on an exchange that cancels each other out, while the trade volume numbers are falsely reported. It’s done specifically to fabricate trading volume. This practice takes place on many under-regulated cryptocurrency exchanges. CoinMarketCap updated their exchange data so that exchanges could still report their own volume (even if rampant wash trades were evident) but they also devised an “adjusted volume” column that screens for wash trades. Find out more in our article, What is Wash Trading on Crypto Exchanges?
The all-time high (ATH) of a cryptocurrency such as bitcoin represents the highest ever value recorded for that digital asset. It is common to experience a market correction after a new ATH has been achieved. Learn all about ATHs in our blog post, What is an All Time High (ATH)?
CUSIP stands for Committee on Uniform Securities Identification Procedures. Stocks and bonds each have their own CUSIP number, comprised of nine alphanumeric characters. This number is basically an id number for each stock or bond. Canadian and American regulators issue a CUSIP to each stock or bond in order to facilitate clearing and trade settlements. Find out more in our article, CUSIP and Blockchain.
Buying the dip (BTD) refers to the recommended practice of buying crypto assets when the price dips. Generally, traders buy the dip in expectation of a future price increase so they can sell and make a profit. Learn all about it in our article, What Does it Mean to Buy the Dip?
A decentralized application (DApp) is an application that is built upon an open, public, 3rd party-less blockchain network. The back end code of the DApp runs on the decentralized, peer to peer network as opposed to running on centralized servers with a single point of failure. Decentralized applications enable true peer-to-peer transactions. Learn about some of the different kinds of DApps in our article, What is a DApp?
Decentralized autonomous organizations (DAOs) are essentially alternative business structures which are in stark contrast to the corporations we see today. DAOs run themselves using algorithms, cryptography and distributed ledgers, all of which require no central authority or 3rd party intermediaries. No one owns a DAO and DAOs do not have a permanent home in any country. Read a great thought piece that includes in-depth information on DAOs in our article, What is a DAO?
Dollar cost averaging (DCA) is a trading method that entails the buying of incremental amounts of cryptocurrency (or other assets) over a long period of time. For instance, you might set up a recurring crypto buy so that every week you are automatically buying $50 worth of bitcoin. Regardless of the current price of the asset, you always buy-in with the same dollar amount. As prices fluctuate, long term buying in this way helps spread risk and removes emotions from trading as well due to automation. Learn more about the relation of DCA to cryptos in our article, What is Dollar Cost Averaging in Crypto Markets?
ERC20 is an official protocol that is used for proposing improvements to the Ethereum Network. It’s generally considered a standard for tokens which are built off the Ethereum chain. ERC is an acronym for “Ethereum Request for Comments” and it is regarded as being the official system for suggesting improvements that can be made to the Ethereum network. The “20” in the title is the unique proposal ID number.
Exchange-traded funds (EFTs) are investment funds that track a basket (or variety) of assets. In traditional finance, ETFs are traded like stocks on exchanges and historically have included stocks, bonds, and commodities. Since the emergence of cryptocurrencies, ETFs that include bitcoin, Ether and other digital assets have been under development. Learn the latest in our article about the Ethereum ETF.
The Ethereum Virtual Machine (EVM) enables participants worldwide to access the Ethereum blockchain. It is comprised of hundreds of computers, or nodes, which operate Ethereum’s software to help run the network in a distributed fashion. Users can run nodes and earn cryptocurrency with the Proof of Stake system. Find out more in our blog post, What is the EVM?
Fear of missing out (FOMO) is a common psychological phenomenon in the trading and cryptocurrency industries. Folks that see a bull market in full force hear all the media attention and read all the accounts of others making quick money. Then they worry that they won’t have a chance to get in on the opportunity to buy. So they end up buying when prices are high, which is an adverse symptom of FOMO and sometimes referred to as “FOMO’ing in”. Sometimes FOMO can affect a decision to sell an asset, as when a trader believes the price will continue to rise so they are afraid to sell quite yet.
Fear, uncertainty, and doubt (FUD) is a marketing strategy employing the use of disinformation. Primarily, the strategy appeals to people’s fear and confusion and manipulates them into certain behaviors. In the crypto world, people who employ FUD are attempting to change the perception of traders with false or misleading information so they make uninformed decisions that ultimately benefit those spreading the FUD.
An Initial Coin Offering (ICO) is a cryptocurrency version of the IPO. The main difference is that instead of a stock being issued as with an IPO, a new cryptocurrency asset is minted and issued. A blockchain-based startup company can raise funds by issuing a token on top of a blockchain such as Ethereum or Waves, or create their own blockchain and coin. The initial prices of the tokens in an ICO are low, incentivizing buyers to get in early. Since ICO regulations have been slow in coming, many ICOs in 2017-2018 made millions of dollars with these token sales. A lot of investors, however, did not, for the most part, get any return on their investment. Many experienced devastating losses. As a result, ICOs are heavily restricted in many countries including the US. Find out more in our blog post, What is an ICO?
An Initial Exchange Offering (IEO) is similar to an ICO. Only instead of a startup issuing a new token to raise funds, hoping they’ll be able to later get listed on some exchanges, an IEO guarantees a listing for the IEO token. For a price. Essentially the exchange hosts the ICO on the exchange. Those exchanges that offer IEOs, such as Binance, also have certain parameters for tokens they accept, since it’s in their benefit to list the tokens of successful projects. Learn more in our article, Pros and Cons of Initial Exchange Offerings.
Know Your Customer laws were first introduced in the Patriot Act following 9/11 in an effort to support the deterrence of terrorist activity. KYC has two major facets. The first involves requirements for financial institutions to uniformly identify all their customers. Secondly, the law mandates that these banking service providers conduct Customer Due Diligence in assessing and reporting any suspicious behavior of their customers. To learn more, check out our article, What is KYC?
Proof of Work PoW) is a consensus mechanism used by the Bitcoin Network. It requires work; in this case, computational work that miners must accomplish in order to compete in the transaction confirmation process. This process adds new blocks to the blockchain and miners earn block rewards in the form or newly minted bitcoins each time a block is added. In general, PoW provides a layer against denial of service attacks or other manipulations. Find out more in our article, Proof of Work vs. Proof of Stake.
Proof of Stake (PoS) is a type of consensus algorithm used by blockchain networks such as Ethereum. Decentralized protocols utilize consensus mechanisms to achieve agreement on their networks, which do not have a centralized authority running the system. With PoS, miners must stake units of cryptocurrency in order to participate. New blocks are granted to stakers through a somewhat randomized selection process that considers the amount and age of the stake. Read more in our article, Proof of Work vs. Proof of Stake.
Return on investment (ROI) is a performance measure that calculates the gains made on a particular investment. Usually, ROI is represented as a percentage and is used by investors to help them make financial decisions. To calculate the ROI, use the following equation:
ROI = (net profit / cost of investment) x 100.
The RSA algorithm was created by Ron Rivest, Adi Shamir, and Leonard Adleman, who were co-founders of RSA Security. RSA enables people to send and receive encrypted messages without having to decode the message themselves. Each party in an RSA encrypted message receives two keys, a public key that is shared between them, and a private key which only each individual may access. Learn more details about the RSA algorithm in our blog post, What is the RSA Crypto System?
A Simple Agreement for Future Tokens (SAFT) represents a form of fundraising for cryptocurrency startups who want to target accredited investors. As part of the Agreement, the project promises tokens to be delivered to authorized investors. As such, SAFTs are considered securities and fall under securities regulations. Learn more in our article, What is a SAFT?
The unspent output from bitcoin transactions, or UTXO, represents the output from a transaction that a user receives and is able to spend later. In a crypto wallet, your balance likely includes one or more UTXO that are in the wallet. When all added together, they make up the total balance of that wallet. A UTXO itself is the evidence of the chain of ownership processed through digital signatures. Ownership of UTXO transfers each time a crypto owner using their public key sends it to a receiver’s public key. Learn more in our blog post, What is UTXO?