Dictionary of the most important crypto terms
Understanding the terminology and processes behind the trading of cryptocurrencies is not at all easy. To bring you concepts and phrases related to bitcoin, we have prepared a dictionary of basic crypto terms. Here you will find definitions of both shortcuts such as ath, ask, ICO, and expressions related to the order trading, markets, wallets.
ALTCOINS – alternative cryptocurrencies
The name altcoin is a combination of the words “alt” (alternative) and “coin” (currency). Altcoins are all cryptocurrencies, excluding bitcoin. The most popular altcoins are ethereum, ripple, monero, litecoin, dash. High volatility rates characterize less popular altcoins – they can be a source of serious profits and painful losses.
ASK – sale offers
Part of the order list on the cryptocurrency exchange, in which there are current sales proposals. Those who have a given cryptocurrency issue an order with the price and quantity they would like to receive. This is the part of the orderbook that people interested in buying look at. Ask are the higher prices.
ARBITRAGE – buying HERE, selling THERE
A method of investing in cryptocurrencies using exchange rate differences between exchanges. The whole operation is based on buying at a lower price, transfer, and then sell at a higher price, where the difference in the purchase and sale price is your profit. It is a method that is characterized by a high probability of gain with minimal risk of incurring losses. The low efficiency of the cryptocurrency exchange creates perfect conditions for arbitrage and earning much money.
ATH (All Time High) – the highest price in history
ATH is an important indicator of cryptocurrencies. It shows what the maximum price the cryptocurrency came before it was corrected. The media love ATH – after every bitcoin price record, we have an explosion of articles. Of course, each cryptocurrency has its ATH.
BID – purchase offers
The second part of the orderbook in which the purchase offers are located. People who plan to buy a cryptocurrency issue an order here stating what price they can pay and what quantity they intend to buy. People who have decided to sell their cryptocurrencies look at this part. A bid is the lower prices.
Bitcoin (capital letter) is a payment system – bitcoin (lower case) is a cryptocurrency, a digital token. Satoshi Nakamoto designed the system in such a way that direct transactions between users are possible, i.e., without the mediation of the so-called third party (e.g., bank). Network nodes verify transactions which are saved in a decentralized public register called blockchain.
Currently, bitcoin is the most popular digital currency in the world.
CRYPTOCURRENCY – virtual money
Cryptocurrencies are a type of digital token based on cryptography used for digitally signing transactions and for controlling the growth of the supply of tokens. Some of the cryptocurrencies meet selected monetary functions such as divisibility, value retention, convertibility, transferability. They have not been widely recognized as fully legal currency so far. It is a pity because they have many features better than traditional money.
EXCHANGE – a cryptocurrency exchange platform
A platform where one can buy and sell cryptocurrencies. The transaction is made on its own. The cryptocurrency exchange is the most popular place where users buy and sell their virtual assets. Cryptocurrency exchanges differ significantly – the selection of the best crypto exchange is very important in the investment process. See our ranking of the best cryptocurrency exchange in Europe.
FIAT – traditional money
Currencies such as the euro, pound, or dollar. Fiduciary money, the currency used in a given area as a legal tender. Its issuer is the central bank of the state, which also controls the amount of money on the market. To purchase the first bitcoin, you must first make a deposit on your trading account with the chosen FIAT currency.
ICO – Initial Coin Offering
The original public offer of the coin. The form of financing the start-ups debuting on the blockchain crypto-mechanics market to raise money for the development of a given project. Their behaviour and function depend entirely on who and for what purpose it emits them. Investing in ICO is much riskier than in cryptocurrency available on the cryptocurrency exchange.
INSTANT BUY – the easiest way to buy a crypto
A popular sales/purchase system for bitcoins and other cryptocurrencies. The user only provides what amount of the currency one wants to buy and selects the payment method. Often it is possible to maintain full anonymity. These platforms are competition for cryptocurrency exchanges. See the list of the best crypto money exchange platforms with “Instant Buy” option.
A maker is a person who creates a new offer to buy or sell. The full name is Market Maker. If the order that Maker inserts into the Orderbook will be fulfilled, it will be charged with the so-called Maker Fee. The amount of commission charged can be fixed or variable depending on the turnover value in the last 30 days.
Unlike normal trading in the cryptocurrency exchange, trading with leverage allows achieving many times higher profits (or losses) compared to the amount invested. For a small handling fee, it is possible to obtain funds from another exchange user. The amount of the so-called “leverage” regulates how much capital the investor lends – e.g., leverage 1:10 means that one-tenth of the means that the investor operates is owned by him, while the remaining part, or nine-tenths, is borrowed.
Markets are trading pairs of cryptocurrencies and fiat currencies in various configurations. Markets may be two cryptocurrencies, a currency fiat, and a cryptocurrency or two fiat currencies. For example: BTC/PLN, ETH/USD, LTC/BTC, EUR/GBP.
ORDERBOOK – a list of orders
We meet two types of record: Orderbook and Order Book. A list of orders on which sales offers (Ask) and purchase offers (Bid) is presented. The most important element of every cryptocurrency exchange.
OTC (over-the-counter) – OTC market
This offer is for people with a thick wallet. If someone has, e.g., $100,000 and would like to buy bitcoins for it at one time, this may be difficult to implement. Such transactions are possible but usually take place outside the cryptocurrency exchange, not in front of all users. One should contact cryptocurrency exchange managers (very often in person) and set business terms with them. We wish all our users the opportunity to implement over-the-counter trades.
The smallest decimal bitcoin, 1 Satoshi = 0.00000001 BTC
The name „Satoshi” comes from the pseudonym of the mysterious creator of the Bitcoin network (Satoshi Nakamoto).
It is a person who uses the offer to sell or buy on the cryptocurrency exchange. A successful transaction is usually charged with the so-called Taker Fee. The amount of the fee may depend on the level of turnover and decrease as the larger volume is realized.
The fee is collected from you at the time of sale or purchase of cryptocurrencies. The main source of exchange earnings. Different schemes are functioning – some exchanges have the same commission for both buyers and sellers, other exchanges offer lower rates for offers and higher pickers, and still, others do not charge a trading fee.
WALLET – safe storage
A cryptocurrency wallet is a device, program or service which stores the public and/or private keys. It can be even a piece of paper containing a given value of cryptocurrencies. Often it is also commonly called the bitcoin wallet. See what the types are and what is the best cryptocurrency wallet.
XBT – bitcoin abbreviation
XBT is interchangeably used with BTC. Often you can hear the question, “Is there any difference between BTC and XBT?”. There is none. Both abbreviations refer to bitcoin. BTC marking is more popular, however, on some crypto exchanges (Kraken, Coinfloor), there is an XBT marking.