Glossary of terms in Cryptonomics

  • Airdrop

This process is mostly carried out by blockchain based startups to create awareness on their new token or coin. An airdrop occurs when ​ ​a​ ​blockchain project distribute​s ​free​ ​tokens or​ ​coins ​to the wallets of some of ​ ​the members of its cryptocurrency ​ ​community. There are two types of airdrops; announced and unannounced airdrops.

  • Alt coin

An Alt coin is another name for a cryptocurrency other than Bitcoin. Bitcoin, created in 2009, was the first cryptocurrency. An Alt coin has its own blockchain which records transactions that take place (e.g. Ethereum, Neo). Some alt coins however, are derivations of Bitcoin (e.g. Litecoin) and are also known as meta coins. Such coins may make slight modifications to the main characteristics of a Bitcoin but mainly rely on the Bitcoin blockchain. The first Alt coin created was Namecoin in April 2011.

  • Arbitrage

This occurs when there’s a difference in price of coins on exchanges. It involves buying and selling on different exchange platforms to earn profit- difference in the variance. Arbitrage opportunities occur due to differences in exchange reputation, community coin preferences and ease of bank funding.

  • ATH

All Time High. This refers to the highest price or value a cryptocurrency has ever reached.

  • Bag Holder/ Bag Hodler

This is a term used in the cryptocurrency community for those who buy and HODL (hold ) cryptocurrencies in large quantities, hoping to make profits in the future, when they should actually be selling cryptocurrencies (SODL- Sell for dear life).

  • Blockchain Technology

In its simplest form, a blockchain is a distributed ledger containing a record of all transactions which have taken place in the past and in the present. A blockchain is based on cryptography, computer science, economics and network theory. The record of transactions is arranged in sequential order (blocks), with all individual blocks linked together. Transactions on the blockchain are secured because they are decentralised and distributed i.e. everyone on the network has access to the information and to make any changes to transactions stored on the blockchain, one needs to takeover of the computing power of a network. Blockchain technology has been applied to food supply, healthcare, banking and finance, among others.

  • Circulating supply

The total amount of a cryptocurrency presently available and in circulation.

  • Cryptocurrency or coin

Currently, the most important product of a blockchain is the cryptocurrency. A cryptocurrency or coin, is a digital asset, in this case, digital money that allows you to make transactions in the cryptoeconomy. Therefore, a cryptocurrency is a means of exchange and a unit of account. There are currently over 1,000 cryptocurrencies available throughout the world, although just a few are relevant. The best known example of a cryptocurrency is Bitcoin. Others are Ethereum (Ether), Ripple, Litecoin, Dash, IOTA, Zcash and Neo. Cryptocurrencies have no intrinsic value and are largely unregulated by governments.

  • Cryptocurrency Exchanges  

Exchanges are also known as digital currency exchanges (DCE). They are websites that allow customers to trade cryptocurrencies, tokens and fiat money. Exchanges require users to verify their identities when opening an account and there are four types of exchanges: ‘Traditional’ Cryptocurrency exchanges, Direct trading, Trading platforms and Brokers. They mainly differ in how they interact with account holders and fee structure.‘Traditional’ cryptocurrency exchanges allow buyers and sellers to trade cryptocurrencies and fiat money at current market prices. They exchange acts as a middleman between buyers and sellers and charges a commission for services rendered. Direct trading allows peer-to peer trading between buyers and sellers i.e. the exchange does not act as a middleman. Interactions are managed by softwares and account holders set their own transaction fees. Trading platforms simply match buyers to sellers and charge transaction fees while brokers have a set price at which to buy or sell cryptocurrencies. Exchanges can and have been hacked, resulting in total loss of currencies held by account holders.

  • Crypto token

A token is a digital asset which may represent both tangible and intangible assets and operates on top of an existing blockchain. Unlike a cryptocurrency, which is usually a medium of exchange only, tokens have multiple uses. Tokens are defined by smart contracts i.e. a software programmed to execute a command when certain rules and conditions are met. Tokens are created and shared through an Initial Coin Offering (ICO). Not all blockchains allow for the generation of tokens. For example, the Ethereum blockchain allows the generation of tokens but the Bitcoin blockchain does not.