Understanding Cryptocurrency Terminology
There is an incredible amount of confusion about cryptocurrency terminology out there. Even seasoned journalists and veteran cryptocurrency geeks are totally confused about some of the terms.
This little essay is intended to explain at least some of the terms and to describe some of the methodology used here at Market Mad House. This piece can be considered both a stylebook for this blog and a handy guide to some of the cryptocurrency terms in use today.
Please note that there will be differences between my usage and some of the common practices in the media. The major reason for that is this blog will not follow the common American journalist practice of writing at an Eighth Grade (Year 9 or Form 3 to our British friends) level.
I do not write at an Eighth Grade level because I want to make money. The only money the average Eighth Grader (who is around 12 years old) has is the $10 a week allowance he gets from his mom, or the $20 he makes mowing the neighbor’s lawn. Marketing to such low-income people is a terrible business strategy.
Some Cryptocurrency Terminology Explained
- Altcoin – Short for “alternative currency. “A generic term for cryptocurrency; contrary to popular belief all cryptocurrencies; including Bitcoin (BTC), are altcoins. Can be used interchangeably with cryptocurrency. An alternative currency is any form of money not sanctioned by a government or central bank.
- Bitcoin (BTC) – The oldest, best known, most widely used, and most popular cryptocurrency it is been existence since 2009. Many journalists confuse Bitcoin with cryptocurrency. Bitcoin is simply one variety of cryptocurrency, not a catchall phrase for cryptocurrencies. The term Bitcoin refers only to the official Bitcoin, variants of it such as Bitcoin Cash (BCH) should always be referred by their full names to avoid confusion.
- Blockchain – The digital technology from which cryptocurrency is built. It has many uses that extend far beyond cryptocurrency such as Dapps. A cryptocurrency can be considered an application that operates in a blockchain operating system.
- Coin – an individual unit of cryptocurrency.
- Coin Price – The cost of an individual unit of cryptocurrency. The prices listed on Coinbase and Coin Market Cap are considered the standard Coin Price.
- Cryptocurrency – An encrypted digital currency built from blockhain. Cryptocurrency and not Bitcoin is the proper terminology. The plural is cryptocurrencies, altcoin is an acceptable alternative.
- Crypto Debit Card – A debit card; usually prepaid, that is connected to a digital wallet. The wallet converts cryptocurrency into fiat currency to enable brick and mortar retail transactions and cash withdrawals.
- Cryptocurrency Wallet – See digital wallet and hardware wallet.
- Dapp – an abbreviation for Decentralized Application. The plural is Dapps.
- Decentralized Application (Dapp) – A software solution or application that runs on the blockchain or a specific blockchain operating system. A Dapp can do anything normal software can. The plural is Dapps. Cryptocurrencies can be considered Dapps, but so are smart contracts.
- Desktop Wallet – a digital wallet designed for cryptocurrency storage on an individual computer. The advantage to a desktop wallet is that does not need an internet connection to operate.
- Digital Currency – A very inaccurate term sometimes used as an alternative to cryptocurrency. All cryptocurrencies are digital, but a digital currency does not have to be cryptocurrency. As far as I know, there are no digital currencies that are not cryptocurrencies in use today.
- Digital Wallet – An electronic wallet; usually cloud or desktop based, in which cryptocurrency is based. Some of the popular ones; like Coinbase and TenX have the capability to convert cryptocurrency into fiat currency. All cryptocurrency wallets available today are digital wallets. Most hardware wallets contain a digital wallet.
- Ether – A popular nickname for the Ethereum (ETH)
- Ethereum – A widely used blockchain operating system. Can refer either to Dapps made from the Ethereum blockchain; or the ecosystem based on the Ethereum blockchain.
- Ethereum (ETH) – The official cryptocurrency of the Ethereum system sometimes ranked as the number two cryptocurrency. It is also called Ether. Individual coins of Ethereum are sometimes called Ether. The term Ethereum should always be used to avoid confusion.
- Ethereum Enterprise Alliance (EEA) – A consortium of corporations and other organizations that is creating commercial Dapps for the Ethereum system.
- The Ethereum Project – The official organization that sponsors and maintains the Ethereum ecosystem. Not to be confused with organizations like the Ethereum Enterprise Alliance and the Hyperledger Project which are creating Dapps for Ethereum.
- Fiat Currency – Government-issued paper money such as the US Dollar or Euro. Unlike altcoins, a fiat currency is officially sanctioned by Central Banks and governments.
- Hardware Wallet – An electronic device similar to a flash drive that is used for offline storage of cryptocurrencies. Hardware wallets contain a digital wallet that can only be accessed with special codes. To access the cryptocurrency you usually have to plug a hardware wallet into a computer or smartphone. Some hardware wallets have a built-in digital wallet, others have to be loaded with a digital wallet.
- The Hyperledger Project – An organization associated with the Linux Foundation that is building Smart Contracts and other Dapps in Ethereum.
- The Lightning Network – A proposed payment solution for Bitcoin that is designed to speed up the system and allow for instantaneous and seamless transactions.
- Market Cap – Short for market capitalization.
- Market Capitalization – The price of all the cryptocurrency currently for sale in the market. The Market Cap figures reported by Coin Market Cap are viewed as the standard.
- Market Volume – The price of all the units of a cryptocurrency being traded right now or on a given day. The Market Volume number provided by Coin Market Cap is considered the best.
- Miner – A person or entity that harvest cryptocurrency from the blockchain.
- Mining – The process by which new units of some cryptocurrencies are generated from the blockchain. There are some cryptocurrencies such as Ripple (XRP) that cannot be mined.
- Mining Farm – A commercially-operated facility full of computers designed to mine cryptocurrency. Often owned and operated by mining pools. Usually located in regions where electricity is cheap because the vast amounts of power mining rigs use.
- Mining Pool – An organization of cryptocurrency miners. Sometimes used to refer to companies that mine cryptocurrency on a commercial basis.
- Mining Rig – A computer processor that is built or reconfigured for cryptocurrency mining.
- Paper Wallet – This term is false and misleading – there is no such thing as a paper wallet for cryptocurrency. Instead, the term refers to a piece of paper that contains codes that can be used to access a cloud-based digital wallet. The altcoins are stored in the cloud, not on the paper.
- Privacy Cryptocurrency or Privacy Coin – A cryptocurrency with added layers of security and encryption that is designed to provide a level of privacy and secrecy.
- The Raiden Network – An organization building a sidechain payment solution for Ethereum. It issued a cryptocurrency called the Raiden Network Token (RDN).
- Sidechain – A payment solution designed to bypass the blockchain. Sidechains are intended to speed up cryptocurrency payment processing. Examples of Sidechains include the Raiden Network and the Lightning Network.
- Smart Contract – A document written on blockchain (usually the Ethereum blockchain) that is also a Dapp. As a Dapp; a smart contract can function as an encrypted data-storage mechanism, and perform other functions such as making payments in cryptocurrencies. The plural is Small Contracts. There are plans to create equities, securities, and binding legal documents in Small Contracts. As far as I know, no such instruments are currently in existence.
- Total Volume – A limit on the total amount of a cryptocurrency that can be produced. Some cryptocurrencies like Bitcoin have a Total Volume. Others like Ethereum do not.
This essay is intended to be a layperson’s guide to cryptocurrency; and related technologies, for writers and other non-tech people. Persons seeking a more technical explanation should look elsewhere.