Crypto ABC’s Part II

Again, with Special Thanks to Nick Black and the Money Map team!

dApp: Short for decentralized application, a kind of application that runs on a distributed, decentralized network, such as the Ethereum network, rather than a device such as a smartphone or PC.

Decentralization: The concept of having no central authority such as a company, a government, or a central bank in control of a blockchain (only the code governs the system) as well as having dispersed infrastructure (nodes and miners) to prevent any one entity or group from gaining too much influence.

Decentralized exchange (DEX): A crypto exchange that allows for peer-to-peer cryptocurrency transactions (often called “swaps”) without the need for an intermediary. Part of the DeFi ecosystem. See Uniswap.

DeFi: Short for decentralized finance. It’s a catch-all term for a digital ecosystem of smart contracts, decentralized exchanges, and special-purpose tokens built mostly on the Ethereum network.

Deflationary: A condition in which a currency gains value (i.e., buying power) over time. Some cryptocurrencies, most notably Bitcoin, are designed to be deflationary by gradually constricting the supply until it reaches a hard cap, after which no more coins will be created.

Diamond hands: Owners of crypto who refuse to sell no matter what’s happening in the markets. The opposite of paper hands. Also see HODL.

Difficulty: On a proof-of-work network like Bitcoin’s, the difficulty is a number representing how much mining power (hashrate) is required to solve a block. The Bitcoin network adjusts the difficulty every 2,016 blocks to try to keep the rate of new blocks steady at one every 10 minutes. As more mining power is added to the network, the difficulty rises. If mining power leaves the network, the difficulty falls.

Digital Fiat Currency (DFC): See Central Bank Digital Currency.

Discord: A popular communication platform within the cryptocurrency community that gives investors a way to chat with other investors directly or even create a larger community where you can share information instantly through direct messages (DMs).

Dollar-cost averaging: Borrowed from the world of conventional investing, DCA is buying a specific amount of a particular investment at regular intervals. Usually this buying is automated, with the investor setting up the parameters at their brokerage or exchange.

ERC-20: A standard for building new cryptocurrency tokens based on the Ethereum network, ERC-20 tokens are created via Ethereum’s smart contract capabilities. Most ICOs have been ERC-20 tokens.

Ethereum (ETH): A cryptocurrency created by Vitalik Buterin in 2015, Ethereum is second only to Bitcoin in market cap and influence. Built as a platform, Ethereum can run as a global, shared computer, making it Turing complete. That makes it capable of running specialized apps, known as dApps. In addition, hundreds of separate cryptocurrencies based on the ERC-20 standard run on top of Ethereum.

Exchange: A business or website that facilitates the trading of cryptocurrencies for fiat money (such as U.S. dollars), as well as trading between cryptocurrency pairs. Can be centralized (a company like Coinbase) or decentralized (an automated market maker like Uniswap).

Faucet: A website that dispenses tiny amounts of cryptocurrency for free. Visitors earn crypto by playing simple games or performing some other task such as watching videos. Popular in the early days of crypto. Generally not worth the time or the effort now.

Fiat currency: Money created by a central bank, such as the U.S. Federal Reserve (U.S. dollar) or the Bank of England (pound sterling). Many cryptocurrency enthusiasts believe fiat currencies will someday fail and be replaced by crypto.

Five Ts: A framework created by Nick Black in order to evaluate a new crypto investment, the 5Ts include team, technology, tokenomics, timing, and the problem.

Flippening: The unseating of Bitcoin as the dominant cryptocurrency by another crypto. The term became popular in mid-2017, when Ethereum’s percentage of the combined market capitalization of all cryptocurrencies rose to within seven percentage points of Bitcoin’s. Since then, Bitcoin reasserted its dominance. The Bitcoin percentage of the total crypto market cap typically hovers at about 60%.

FOMO: Short for “fear of missing out,” this describes the anxiety investors feel watching the price of a cryptocurrency skyrocket while they sit on the sidelines. Typically leads to poor investment decisions (buying at or near the top), but adds fuel to a strong rally.

Fork: Changes to the software that runs a blockchain – the software run by miners and people operating nodes – that creates a new version of the cryptocurrency. Soft forks tend to be benign, either used to launch a new crypto project (for example, Charlie Lee used Bitcoin’s codebase to create Litecoin) or to fix errors in a cryptocurrency’s codebase (no new crypto is created). A hard fork usually creates a new, competing version of a cryptocurrency, such as the Bitcoin Cash fork from Bitcoin. In a hard fork, the resulting two cryptos share a common transaction history prior to the fork. In addition, people who hold any amount of that crypto before a hard fork own equal amounts of both after the hard fork.