Digital currency terms that will help you in trading

Digital currency has been around for quite some time but a lot of persons still find it hard to embrace the system due to its ambiguity. Even would-be investors are having a hard time exploring many options in digital currency. However, this article will be helpful for traders, beginners, investors and experts who want to learn basic industry terms. It will also explore popular terms and phrases relevant to cryptocurrencies.

Address

In digital currency, an address is basically a destination where a user sends and receives digital currency. In a way, it is similar to a bank account. These addresses include a long series of letters and numbers.

Altcoin

An altcoin is a digital currency other than bitcoin. Alternative protocol asset is another way of describing the term “altcoin.” This means that it follows a protocol (set of rules) that is different from that of bitcoin.

Arbitrage

In crypto, arbitrage refers to taking advantage of the price difference between two different exchanges. For instance, if bitcoin is selling for £8,950 on one exchange and £9,000 on another, a trader can buy the digital currency on the first exchange and sell it on the second for a modest profit.

ATH

“ATH” stands for All-time High. This term is quite helpful to know for tracking the digital currency markets. These assets are very volatile, so keeping their ATH in mind is valuable. A digital currency can potentially hit several local highs before rising to a new all-time high.

Bear/Bearish

“Bears” believe that an asset, a digital currency, will decline in value. Another way of putting this is that if a trader thinks a cryptocurrency will depreciate, their sentiment surrounding the digital asset is “bearish.” In many cases, traders will make use of this expectation by taking a short position on an asset, meaning that they will make a wager that will pay off should the asset in question fall in value.

Blocks

Blocks contain confirmed transactions, which are combined together.

Digital currency

Blockchain

Blockchain is a distributed ledger system which consists of series of blocks. These blocks contain verified transactions. Blockchain is a decentralized, and also immutable system. This means that you cannot erase entries once placed on the distributed ledger. However, the idea of blockchain was first introduced when the bitcoin white paper was released in late 2008.

Bull/Bullish

If a trader believes that an asset will rise in value, he or she is a “bull.” Also, when an investor has an optimistic expectation of an asset’s future bull, this frame of mind is described as “bullish.”

Consensus

The network for a digital currency reaches consensus when the network’s nodes agree that a transaction took place. This agreement is crucial if the varying network participants (nodes) are to have the same information. In other words, consensus is crucial to distributed ledger systems.

Cryptocurrency

Digital currency

A cryptocurrency is merely a currency that relies on cryptography. Bitcoin, for example, leverages cryptography in order to verify transactions.

Cryptography

Cryptography is basically the process of encoding and decoding information so that potential observers are unable to understand a sent information.

DDoS Attack (Distributed Denial of Service)

A distributed denial of service (DDoS) attack takes place when multiple parties work together to overwhelm a system by covering it with either requests for information or malicious data. Basically, the parties who involve in such an attack always do so to prevent a resource, such as a server. Be doing so, it becomes impossible to provide some specific services, such as serving a web page.

Also, most digital currency exchanges suffer DDoS attacks from wicked parties. Their sole aim is to cripple these marketplaces and hopefully take advantage of this vulnerability to steal cryptocurrency. While efforts to steal digital assets may not work, an exchange’s users could become unhappy simply because they cannot make trades through the marketplace.

Distributed Ledger

A distributed ledger is a system of information recording that spreads across many different devices. The blockchain, for example, is a distributed ledger that is originally for keeping track of all bitcoin transactions.

Escrow

Escrow is a third-party that holds financial resources on behalf of other parties. A third-party would hold funds in escrow when the other entities involved in a transaction may not trust each other.

Fiat Currencies

Fiat currencies are currencies that have value because they are minted by a central bank. Simply put, Fiat means “by decree,” and these currencies have value because some central authority has decreed that they have monetary value. Examples of fiat currencies include the British pound, euro and Japanese yen.

Exchanges

Exchanges are basically just marketplaces where traders can make digital currency transactions. If a person wants to buy bitcoin, going to an exchange is the fastest way to accomplish this objective.

FOMO

The term “FOMO” stands for the phrase “fear of missing out.” This happens when investors start buying up a particular asset based on their expectations that it will rise in value. Market participants can easily flock to an asset should that asset experience sharp gains.
Also, being caught in FOMO can be dangerous. More specifically, buying up an asset because it has recently enjoyed some notable upside can cause one to fall victim to market manipulation.

Fork

A fork is a change in a digital currency’s rules or protocol. Developers update a cryptocurrency’s protocol from time to time. A fork can be either a hard fork or a soft fork. A hard fork is a change to a digital currency’s protocol. This makes blocks which were created using the old protocol to become incompatible with the new chain.

FUD

“Fear, uncertainty and doubt” can be summed up using the term “FUD.” The idea behind this is that market participants may spread misleading or inaccurate information in order to cause an asset’s price to decline. A trader may want an asset’s price to fall so they can either short it successfully or buy in at a lower price and increase their chance of generating a gain.

HODL

Cryptocurrency investors developed the term “HODL,” which stands for “hold on for dear life.” The acronym originally came from a misspelling of the world “hold.” Digital currencies can be highly volatile, so when they start experiencing significant price fluctuations, some traders state that they should simply “HODL.”

Initial Coin Offering

An initial coin offering (ICO) represents the first time that an organization offers digital tokens to the public in an effort to raise money. Companies frequently hold these offerings so they can finance projects.
These digital token sales have often been likened to initial public offerings (IPOs). This is where companies sell more traditional assets such as stocks and bonds in order to raise money.

Digital currency

KYC

KYC stands for “know your customer.” Many jurisdictions have KYC regulations, which have come to affect startups holding ICOs. These regulations however require companies holding these digital token sales to verify the identity of their investors.

Long/Long Position

Going long, also known as taking a long position, means making a wager that an asset will rise in value. If a trader purchases a digital currency like bitcoin, for example, they are making a bet that the cryptocurrency will appreciate.
While simply buying digital currency is one example of taking a long position, there are other methods available.

Market Cap

Market cap is short form of market capitalization, which is a term for total market value. The market cap of bitcoin, for example, is the number of outstanding BTC which you multiply by the digital currency’s price. You can also use the term to refer to a group of digital currencies.

Mining

Mining is the process for creating new units of a digital currency. For example, the bitcoin network releases new bitcoins every time a block is mined. In this instance, mining involves confirming transactions and combining them into blocks.
This verification requires hardware and electricity, and miners are also get a reward of digital tokens for contributing these needed resources.

Mining Incentive

The mining incentive is a reward that miners get for confirming transactions and mining them into blocks. The verification of bitcoin network transactions requires specialized hardware and substantial electricity, so miners receive compensations with a mining incentive.
Initially, bitcoin’s mining incentive was 50 BTC, but at the time of report, the reward had dropped to 12.5 BTC.

Moon/Mooning

When a digital currency moons, that means it rises sharply in value. For example, a crypto trader could talk about how an altcoin is going “to the moon!”

Noob

Newcomers are frequently described as “noobs” by industry insiders. If you are this person, you may want to sit back and observe before “jumping in with both feet.” Digital currencies are highly volatile, so those who are newer to these assets should keep their risky nature in mind.

POW

POW is an acronym for “proof of work,” which is a system of proving that a digital currency’s transactions have been verified. Many digital currencies, including bitcoin, use POW. Under such a system, miners must do “work” that is difficult for them to contribute, but easy for the broader network to verify. Miners always receive rewards for verifying transactions by receiving units of a digital currency.

POS

POS stands for “proof of stake,” which is another method of confirming transactions. The digital currencies that use this approach of verification frequently provide all their digital tokens up front. Even the selection of miners is based on how many units they have (their stake). In these cases, users who confirm transactions, are sometimes referred to as “forgers,” who receive transaction fees for their contributions.

Private Key

A private key is a piece of information – it is in form string of numbers and letters that an investor can use to access their digital currency.

Public Key

A public key is an address where an investor can receive digital currencies. This public key, like the private key, is also a combination of numbers and letters.

Pump and Dump

A “pump and dump” is a type of investment scheme where one or more market participants work together to inflate the price of an asset so they can sell it when its value is artificially high. This practice may be particularly demeaning when it comes to digital currencies, as traders can easily get together using Telegram groups with the goal of causing specific cryptocurrencies to rise sharply in value.

Rekt

The term “rekt” is crypto trader slang for “wrecked.” Basically, it means that a trader lost substantial amounts of money.

ROI

ROI is short for “return on investment.” Basically, if an investor puts their money into a digital currency, they are doing so with the hope that they will receive a compelling return.

Satoshi Nakamoto

Satoshi Nakamoto is the pseudonym for the creator of bitcoin, and more than one individual has claimed to be Nakamoto. However, none of these claimants have managed to convince the broader cryptocurrency community that they are, in fact, the creator of bitcoin.

Short/Shorting

Shorting an asset, also known as taking a short position, means making a bet that the asset will fall in value. There are several methods that traders can use to short digital currencies, including futures, options and margin trading.
Investors considering this method should know that it involves a lot of risk, especially with cryptocurrencies because of their volatile nature.

Token

A digital token is a unit of a digital currency, such as a bitcoin. It is necessary to know that some of these tokens are used for specific ecosystems. And they are frequently referred to as utility tokens. Other digital tokens are essentially securities.

Whale

The term “whale” is for describing a trader who makes sizable bets. This term is a good one to know because market participants who have the ability to execute very large transactions can potentially manipulate the market or “make waves in the ocean.”

White Paper

These documents generally offer comprehensive information on the digital token in question, as well as its underlying technology. The developers who create digital currencies usually provide white papers for these innovative assets.
For example, the bitcoin white paper provides information on a “peer-to-peer electronic cash system.” Investors who are considering taking part in ICOs can benefit greatly from reviewing any available white papers on the subject.

Conclusion

Both investors and beginners who want to involve themselves with cryptocurrency should keep in mind that industry terminology can be hugely beneficial. By performing the necessary research and learning this information, anyone can increase their chances of meeting their investment objectives.
Take your time to go through this, you can also share to other social media platforms.
Do well to leave your contributions and questions in the comment box.

Also read: Blockchain-the-fundamentals-of-defi

About the author

Agim Amaka is a writer at Dailyngn.com. With vast knowledge in writing, she creates quality content and articles for blogs, websites, and posts for various social media platforms. As an extraordinary writer, she is very much concerned about her audience; readers and clients.