30 Common Cryptocurrency and NFT terms you need to know about
NFTs and cryptocurrencies have become hugely popular, but understanding the terminology can be intimidating for newcomers. Hence, familiarity with the terms used in the blockchain industry is a good start.
Here are some common NFT and cryptocurrency terms to help you in your crypto journey.
30 Common Cryptocurrency and NFT terms you need to know about
1. Airdrop
It is a marketing strategy that involves distributing new blockchain-based tokens to the public. It aims to generate brand awareness about a project and build a community.
2. Altcoin
Every cryptocurrency or token other than Bitcoin is called an altcoin. It is short for an alternative currency. Ethereum is the most popular altcoin.
3. Annual Percentage Rate (APR)
The annual percentage rate is the amount of interest a crypto investor earns by lending cryptocurrencies and other tokens in a year. It considers the interest rate and other fees but excludes the compound interest.
To calculate APR, multiply the periodic interest rate by the number of periods in a year:
APR = Periodic Rate x Number of Periods in a Year
4. Annual Percentage Yield (APY)
Annual percentage yield is the actual interest rate earned by lending cryptocurrencies and other tokens in a year. APY includes the compound interest, which is calculated monthly. Annual Percentage Yield is also known as the absolute interest.
5. Arbitrage
It is a trading strategy that takes advantage of price variations on exchanges by buying an asset from one market and selling it at a higher price on a different market.
6. Block
A block is a record that stores information such as transactions and other assets on the blockchain. A block is analogous to a page on a blockchain.
Blocks are also immutable meaning, blocks added on a blockchain cannot be removed or manipulated. It is a fundamental part of a blockchain network.
7. Blockchain
A blockchain is a digital ledger that is duplicated and distributed across an entire network of computers (also known as nodes). The information is stored in blocks linked with each other creating a chain of data.
Blockchain technology creates cryptocurrencies like Bitcoin.
8. Burn/Burning
Burning is the process of permanently removing an amount of crypto from circulation by sending it to an unusable account.
It is a common practice typically done to control the inflation of a cryptocurrency.
9. Consensus Mechanism
Consensus mechanisms are pre-defined rules followed by each node in a blockchain network. These algorithms validate the authenticity of a transaction and keep the blockchain network secure.
10. Cryptocurrency
Cryptocurrencies are decentralized digital money that enables secure payments without a third party to manage transactions. Such parties include centralized authorities like banks or governments.
Cryptocurrencies are created using cryptography. It is a technique to secure communication and blockchain technology.
11. Decentralized
It is the transfer of power and control from a single decision-making entity to a distributed network.
12. Decentralized Automated Organization (DAO)
A DAO is a decentralized blockchain protocol with automated operations through smart contracts. No entity controls a DAO. The token holders of the protocol or those elected by the community members govern the decision.
13. Decentralized Applications (DApps)
DApps are automated open-source software programs or applications that run on blockchain and smart contracts. DApps are decentralized. No single authority can control it.
14. Ether (ETH)
Ether is the main currency of the Ethereum blockchain. It serves as the fuel for the Ethereum network by being the medium of exchange. It is the second most popular crypto in terms of market capitalization.
15. Flash Loans
It is a Defi product in which the funds are borrowed and returned in the same transaction. Flash loans allow users to borrow funds directly without the interference of any third party.
16. Fork/Forking
It is a set of agreed-upon updates by the community for a blockchain protocol or a blockchain network.
A fork can be a backward-compatible soft upgrade or a complex upgrade resulting in a new blockchain.
17. FUD
It is a crypto slang that stands for “Fear Uncertainty Doubt.” It is a tactic to influence a negative perception of a cryptocurrency or the crypto market by spreading misleading information.
A person or group spreading FUD is called FUDster.
18. Fungible
It is the property of a token or a blockchain asset to be readily interchangeable with another of the same value.
19. Gas
Gas is the term used on the Ethereum network that refers to the fee paid on the blockchain network for computation power. It fuels the Ethereum network.
20. Governance
It is a decentralization method of allowing people or organizations to have decision-making powers for the project. Most projects introduce governance tokens to facilitate a decentralized voting process.
Community members or developers buy and stake governance tokens to gain voting rights and take part in the crucial decisions concerning the project.
21. HODL
It is a crypto slang that refers to holding cryptocurrencies for an extended period. The term became famous in the Bitcoin forum and now stands for “Hold On For Dear Life.”
22. Initial Coin Offering (ICO)
It is a way of raising funds for a blockchain-based project by offering tokens or coins. An ICO is like Initial Public Offering (IPO) done by centralized entities.
23. Metaverse
A metaverse is a digital reality that contains all aspects of the real world. In metaverse, people can interact in real-time through digital representation or avatars of themselves.
24. Mining
It is a process used by the Proof-of-Work consensus algorithm to validate and record blockchain transactions. It also results in the creation of new cryptocurrencies.
25. Non-Fungible Token (NFT)
These are a type of crypto assets that are unique and not interchangeable. NFTs can represent all virtual or real-world items such as photos, videos, music, land, and more.
26. Smart Contract
These are computer programs stored on the blockchain that can self-execute when the terms in the code are met. They are immutable, meaning that no one can manipulate them once deployed. Smart contracts can also send, receive and store funds.
27. Staking
It is a method used by the Proof-of-Stake consensus algorithm to validate transactions and add blocks on the blockchain. Participants need to lock their tokens on the platform to serve as validators. Staking is also used for governance.
28. Token
Tokens represent both fungible and non-fungible tradable assets or services on a blockchain.
29. Token Swap
The token swap is a direct exchange of a cryptocurrency with another type of cryptocurrency.
30. Wallet
These are software applications or hardware devices that allow sending and receiving blockchain-based assets. These wallets keep assets safe and accessible.
Cryptocurrencies and NFTs are slowly becoming mainstream with continued global adoption. Hence, it’s essential to learn these terms to stay updated.
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