51% Attack

When one or a group of miners control more than 50% of a cryptocurrency's network mining hashrate or computational power.

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Address

String of text that designates the location of a particular wallet on the blockchain. 

 

Airdrop

The distribution of digital assets to the public, either by virtue of holding a certain other coin or token or simply by virtue of being an active wallet address on a particular blockchain.

 

Altcoin

A crypto-currency that has its own blockchain, but is not Bitcoin.

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Application Programming Interface (API)

A set of functions and procedures allowing the creation of applications that access the features or data of an operating system, application or other service. Usually a way for two or more computer programs to communicate with each other. 

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Asset

A resource with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide a future benefit.

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Atomic settlement 

Instant exchange of two assets that are linked such that the transfer of one occurs only upon transfer of the other one and this without the need for intermediaries. Settlement is both simultaneous and instant.

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Automated Market-maker (AMM)

Autonomous trading mechanism, ,powered by smart contracts, that eliminates the need for centralised exchanges and related market-making techniques with all transactions viewable. 

 

Blockchain technology

A distributed database i.e the data is stored across different physical locations over a network of multiple interconnected computers or nodes. Additions to this database are initiated by one of the members (i.e the network nodes), who creates a new 'block' of data, which can contain all sorts of information. This new block is then broadcast to every participant in the network in an encrypted form (utilising cryptography) so that the transaction details are not public.

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Centralised exchange (CEX)

A type of cryptocurrency exchange that is operated by a company that owns it as a centralised entity.

 

Coin

A cryptocurrency built on its own native blockchain and that acts, primarily, as a medium of exchange, a unit of account or a store of value.

 

Cold storage

Offline cryptocurrency storage not connected to the internet, typically on a hardware wallet. This protects the wallet from unauthorised access, cyber hacks and other vulnerabilities that a system connected to the internet is susceptible to. 

Cryptoasset

An asset that is a digital currency, a virtual currency or a cryptocurrency. 

 

Cryptocurrency

A type of virtual currency that is both decentralised and unregulated and uses blockchain (a specific form of distributed ledger) and cryptography for its operation.

 

Cryptography

Any of various mathematical techniques for encrypting and decrypting data in order to keep it private when transmitted or stored electronically.

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dApps

Apps that are built and function on a blockchain. Unlike mobile phone or web apps, these have no single point of failure and are designed to be as resilient as the underlying blockchain they are built on.

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Decentralised Autonomous Organisation (DAO)

A self-governing entity that uses smart contracts to manage itself, without any human oversight or interference. 

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Decentralised exchange (DEX)

A type of cryptocurrency exchange which allows for direct peer-to-peer cryptocurrency transactions to take place online securely and without the need for an intermediary.

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Decentralised Finance (DeFI)

A blockchain-based system that uses smart contracts, built largely on Ethereum technology, that allows anyone to invest in projects or raise capital without third parties like brokerages, exchanges, banks, etc.

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Delegated Proof-of-Stake (DPoS)

A consensus mechanism which allows users to vote for delegates who will validate transactions on their behalf.

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Dematerialisation

The move from physical certificates to electronic bookkeeping which is a more accurate form of record-keeping. Dematerialisation is designed to offer more security and increased speed of financial trades.

 

Digital currency

The blanket term for all money that is intangible and only available in digital or electronic form. It is either centralised or decentralised and either regulated (for example a Central Bank Digital Coin or CBDC) or unregulated (for example virtual currency or cryptocurrency).

 

Distributed-Ledger Technology (DLT)

A database that is consensually shared and synchronised across multiple sites, institutions and geographies and accessible to multiple people. The participant at each node of the network can access the records shared across that network and can own an identical copy of it. Any changes or additions made to the ledger are reflected and copied to all participants in a matter of seconds or minutes.

 

Fiat currency 

Government-issued currency that is not backed by a physical commodity, such as gold or silver, but rather by the government that issued it. Its value is derived from the relationship between supply and demand and the stability of the issuing government, rather than the worth of a commodity backing it as is the case with commodity money. Most modern paper currency is fiat currency, including the U.S. dollar, the euro, and other major global currencies.

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FOMO

Crypto jargon. Acronym for 'Fear Of Missing Out'. The expression refers to the fear that a trader or investor has of missing out on a potentially lucrative investment or trading opportunity. The FOMO feeling is particularly prevalent when an asset rises in value significantly over a relatively short period of time.

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Fork

An update to the software governing the specific cryptoasset that makes existing rules either valid or invalid, sometimes resulting in a spin-off version of that cryptoasset.

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FUD

Crypto jargon. Acronym for 'Fear, Uncertainty and Doubt'. The expression refers to the act of spreading dubious or false information about a business, startup, or cryptocurrency project. The term is also used to describe negative sentiment that spreads around traders and investors when bad news on a particular cryptocurrency project comes out or when the market presents a strong bearish downtrend.

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Gas fees

The cost of carrying out a single transaction on the Ethereum blockchain. Gas fees are dynamic, based on the supply and demand of computing resources and the number of transactions that need to be validated. 

Governance tokens

Cryptocurrencies that allow holders to participate in on-chain governance of a crypto project or protocol, giving them the right to propose and vote on key changes. Typically, each governance token a person holds equates to one vote on upcoming proposals, but there are also other ways of exercising rights. 

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Halving

When the block reward of a cryptocurrency, like Bitcoin, drops to one-half of what it was before.

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Hashrate

The speed at which a cryptocurrency mining device operates. To be successful at mining, speed is of the essence since the miner is trying to solve a question, add a block to the chain and reap the rewards before anyone else does. The more answers suggested over the shortest period of time will increase the chances of solving that block. 

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HODL

Crypto jargon. Acronym for 'Holding On to Dear Life'. The expression refers to the decision by a cryptocurrency investor to hold on to the cryptocurrency over the long-term regardless of market conditions or sentiment.  

 

Hybrid cryptocurrency

A cryptocurrency which can serve more than one purpose (i.e as a currency, as a security and as a commodity or utility). It may also have characteristics that change during the course of its lifecycle.

Impermanent loss

When the price of assets locked up in a liquidity pool changes after being deposited and creates an unrealized loss (in dollar terms) versus if the liquidity provider had simply held the assets in a crypto wallet. 

 

Initial Coin Offering (ICO)

A fundraising mechanism in which new projects or businesses sell underlying crypto tokens or coins, normally in exchange for fiat currency or established cryptocurrency such as Bitcoin.

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Layer 1

A set of solutions that improve the base protocol itself to make the overall system a lot more scalable.

 

Layer 2

A secondary framework or protocol that is built on top of an existing blockchain system to provide increased scalability.

 

Ledger

A physical book or digital computer file where monetary and financial transactions are tracked and recorded.

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Lightning network

A second layer operating on top of a blockchain, enabling increased transaction speed among participating nodes and viewed as a

possible scaling solution.

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Liquidity-aggregator

A platform that enables participants to simultaneously obtain streamed prices from several liquidity providers/pools and bring them into one location. Computer algorithms allow customisation of the price streams for both the liquidity provider and the receiving counterparty meaning a trader can view order prices at different exchanges simultaneously.  

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Liquidity-mining 

A process in which crypto-holders lend assets to a decentralised exchange (through liquidity pools) in return for rewards. These rewards include both a share in trading fees earned by the protocol and additional cryptocurrency or tokens. 

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Liquidity pool

A pools of tokens locked in smart contracts that provide liquidity in decentralised exchanges in an attempt to lessen the problems caused by the illiquidity typical of such systems.

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Margin-trading

A method of trading assets using funds provided by a third party. When compared to regular trading accounts, margin accounts allow traders to access greater sums of capital, allowing them to leverage their positions.

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Meme Coins

Cryptocurrencies inspired by internet memes, jokes and satire usually supported by enthusiastic online traders and followers but often not designed to have any specific use cases. 
 

(Cryptocurrency) Mining

The process in which transactions for various forms of cryptocurrency are verified and added to the blockchain digital ledger. 

Modern Portfolio Theory (MPT)
An investment ethos based on the premise that mean and variance of future outcomes are sufficient for rational decision-making under uncertainty, to identify the most optimum portfolio mix where returns are maximised for a given level of risk or risk minimised for a given level of return.

 

Moon

A term that is often employed as a verb (mooning) to describe a cryptocurrency that is under a strong upward market trend. Another common use of the expression is in the phrase “to the moon,” which refers to a strong belief that a certain cryptocurrency is soon going to rise significantly in price.

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Open-source

Software for which the original source code is made freely available and may be redistributed and modified.

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Payment token

A type of token that serves as a means of exchange or payment. Unlike a coin, which will be derived from its own native blockchain, a payment token will be derived from an already existing blockchain outside of itself.

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Phishing

The fraudulent practice of sending emails or other messages purporting to be from reputable companies in order to induce individuals to reveal personal information such as passwords, private keys and credit card numbers. 

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Ponzi scheme

A fraudulent investing scam promising high and guaranteed returns with little risk to investors, having secretive and complex strategies with returns for earlier investors being generated with money taken from later investors.

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Private key

A sophisticated form of cryptography (in the hexadecimal numeral system) that allows a user to access their cryptocurrency. A private key enables them to spend, withdraw and transfer coins or tokens or carry out any other transaction from their account. The private key is known to the user alone and serves as the user’s digital ID. See example here.

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Proof-of-Concept (PoC)

Evidence, typically deriving from an experiment or pilot project, which demonstrates that a design concept, business proposal, etc is feasible.

 

Proof-of-Reserves (PoR)

The process of verifying that the customer assets held by a cryptocurrency exchange correspond to the number of assets the company holds in reserve on behalf of the customers in a 1:1 ratio. It provides a way to prove that the exchange is solvent and that it has enough assets to cover trades and withdrawals. 

Proof-of-Stake (PoS)

A consensus mechanism which requires holders to stake a certain amount of the cryptocurrency in order to participate in the network and validate transactions, thereby, becoming validators. The blockchain protocol, therefore, generates new blocks depending on how invested the user is in that particular protocol. This means the rate of validation of transactions on the blockchain occurs according to how many coins the user holds.

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Proof-of-Work (PoW)

Blockchain protocol involving solving complex algorithms to confirm user transactions and produce new blocks to the blockchain. With PoW, miners compete against each other to confirm transactions on the network and get rewarded.

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Public key

A sophisticated form of cryptography used to encrypt content which only the intended recipient can decipher and read by using the associated private key. The key pair is mathematically related so that whatever is encrypted with a public or private key can only be decrypted by its corresponding counterpart. As a result, public keys can be shared freely while private keys are kept secret, ensuring only the owners of the private keys can decrypt content and create digital signatures. See example here.

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Reserve Ratio
A measure of financial strength, the ratio between a firm's existing funds (assets) and user funds (liabilities). At a 100 percent, this indicates that cryptoassets held on behalf of clients are safe.

Risk Terms and Definitions

Risk aversion. The inverse of risk tolerance.

Risk capacity. An objective evaluation of an individual’s financial ability to withstand a financial loss.

Risk composure. An individual’s propensity to behave in a consistent manner; sometimes called risk appetite.

Risk need. The amount of risk an individual needs to take to reach a financial objective; typically based on a predetermined required rate of return.

Risk perception. A subjective evaluation, based on a cognitive appraisal, of the riskiness of a decision outcome.

Risk preference. An individual’s general feeling that one situation is better than another.

Risk profile. An amalgamation of factors that help shape an individual’s risk-taking behavior.

Risk tolerance. The willingness to engage in a risky behavior in which possible outcomes can be negative.

 

Rug-pull

An occurrence where project founders raise capital or crypto to fund a project and then suddenly remove all the liquidity—and they themselves disappear, taking investor assets with them, and become unreachable. 

 

Securitisation

The process of taking an illiquid asset or group of assets and, through financial engineering, transforming it (or them) into an investable security or securities.

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Security token

A type of token that represents a claim on its issuer. It provides rights such as ownership, repayment of a specific sum of money or entitlement to a share in future profits to the buyer. (This is also known as an asset token or an investment token).

Series A Funding
Investment in a privately-held start-up company after it has shown progress in building its business model and demonstrates the potential to grow and generate revenue. This represents the first round of venture money a firm raises after seed and angel investor participation.

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Slippage
The difference between the expected price of a trade and the price at which the trade is actually executed.

Smart contract

An agreement between two or more parties that is stored on a blockchain, such as Ethereum or EOS, with every such contract having a predefined set of rules and conditions that are defined by its parties prior to its launch. A smart contract is automatically executed when the conditions that are programmed into it are met.

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Source code

A text listing of commands to be compiled or assembled into an executable computer program.

 

Stablecoin

A type of cryptocurrency or cryptoasset which by design seeks to maintain a stable market value by pegging its value to an underlying asset such as gold or USD. Examples include Tether (USDT), USD Coin (USDC) and Binance USD (BUSD).

 

Staking

“Locking up” a digital asset to act as a validator in a decentralised crypto network to ensure the integrity, security and continuity of the network. As an incentive for helping to secure the network, stakers (validators) are rewarded with newly mined cryptocurrency.

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Tracking error

A measurement of how much the return on a portfolio (typically held in an index fund) deviates from the return on the benchmark index it is tracking. 

 

Token

A programmable asset or access right(s) managed by a smart contract and an underlying distributed ledger like the blockchain. A token is accessible only by the person who has the private key for that address and can only be signed in using this private key.

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Total Value Locked (TVL)

A metric used to measure the total value of digital assets that are locked or staked in a particular decentralized finance (DeFi) platform or decentralized application (dApp). The higher the TVL, the more trustworthy the platform or dApp is perceived to be.6 Sept 2023

 

Utility token

A type of token which can be redeemed for access to a specific product or service that is provided on an existing blockchain platform. Examples include Chainlink (LINK), Huobi Token (HT), Ontology (ONT) and Basic Attention Token (BAT).

 

Virtual currency

A type of digital currency which is unregulated, issued and controlled by its developers, the founding organisation or the defined network protocol and used and accepted among the members of a specific virtual community. Virtual currency runs on distributed ledger, not necessarily blockchain. Virtual currency does not have legal tender status.

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(Cryptocurrency) Wallet

 A software program that stores private and public keys and interacts with various blockchain to enable users to send and receive digital currency and monitor their balance. To use Bitcoin or any other cryptocurrency a digital cryptocurrency wallet is required. 

Wash-trading

A form of market manipulation in which an entity simultaneously sells and buys the same financial instrument(s), thereby, creating a false impression of market activity without incurring market risk or changing the entity's market position or in order to record a trading loss on the sale on their books for tax purposes.

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Wells notice
A notification issued by regulators, typically the SEC, to inform individuals or companies of completed investigations where infractions have been discovered and affording the respondent with the opportunity to submit a written statement. 

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Yield-farming

An investment practice that involves locking crypto in a decentralised application (dApp) for rewards. Yield farmers deposit their tokens into DeFi applications (run via smart contracts) for crypto trading, lending and borrowing and in return earn rewards in the form of interest, governance tokens and a share in trading fees.

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Zero-knowledge proof

A cryptographic method by which one party (the prover) can prove to another party (the verifier) that a given statement is true, without conveying any information apart from the fact that the statement is indeed true.

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