- Centralised Exchanges
- Crypto Asset Volatility
- Crypto Correlations
- Crypto Governance
- Crypto in the Portfolio
- Crypto Valuations
- Investment Highlight
- Security and Privacy
- Social Media Influence
- Stable Coins
- Traditional Finance and Crypto
- Web 3.0
Crypto Glossary Terms
by David Angliss
Crypto Glossary Terms
Much like in traditional finance, there is no shortage of crypto jargon that can make the average crypto newbie feel confused. Today we wanted to help define a few of these crypto native terms to educate readers. Unlike in the movie “The Big Short”, we were unfortunately unable to obtain A-list celebrities to explain these terms in exotic places.
Crypto Finance Terms
AMM – Automated Market Maker
- AMM’s allow digital assets to be traded in a permissionless and automatic way by using liquidity pools rather than a ‘traditional market of “asks and bids”. AMM users supply liquidity pools with crypto assets. Other users can then enter those liquidity pools and swap one asset for another.
- Moving crypto assets from one blockchain to another. This process usually involves locking the crypto asset on the original chain and then minting the equivalent on the destination chain.
- Centralised Finance – Refers to crypto finance that relies on third party intermediaries to function e.g. centralised exchanges and centralised lending platforms like BlockFi & Nexo
- Decentralised Finance – Refers to a subset of crypto projects that aim to build financial applications on top of blockchains using smart contracts
CDP – Collateralised Debt Position
- A CDP is created when an asset is borrowed (on Aave/ Compound) or minted (DAI, MIM) against funds locked in a smart contract. The value of the locked funds must be greater than the debt position.
- The term ‘Flippening’ is given to a crypto asset that surpasses another crypto asset in market capitalisation terms. ‘Flippening’ is most commonly used to anticipate Ethereum overtaking Bitcoin in market capitalisation.
- Gas is the common term given to the amount of a native token used on smart contract platforms to buy and sell goods and services. Gas costs can be variable depending on the demand for the smart contract platform.
ICO / IDO / IEO
- Initial Coin Offering (ICO), Initial DEX Offering (IDO) and Initial Exchange Offering (IEO) are names given to public fundraising rounds. They are the final round of raising a project team will perform before releasing their token to the market. ICOs are typically conducted privately with whitelisting of investors, whereas an IEO takes place on a centralised exchange and an IDO, on a permissionless decentralised exchange (DEX).
Impermanent Loss (IL)
- Impermanent loss can occur when providing liquidity to an Automated Market Maker (AMM) due to the constant product function that liquidity pools utilise. As prices fluctuate, the total balance of each asset in the pool also changes, resulting in liquidity providers owning a different balance of coins compared to what they initially deposited. Impermanent loss is when this change in balance results in less returns than what could be achieved if the users just held the assets. It is “impermanent” because IL is mitigated if prices return back to what they were when the assets were deposited.
- A Liquidity pool can be thought of as a pot of cryptocurrency assets locked within a smart contract, which can be used for exchanges, loans and other applications.
Perpetual Futures (Perps)
- A crypto-native derivative contract pioneered by crypto derivatives exchange, BitMEX. This contract uses an intra-day funding rate to push the derivative price towards the spot price. Long and short traders either pay the funding rate or get paid the funding rate depending on the difference between the spot price and the derivative’s price.
- Play-to-Earn (P2E) refers to the concept of gaming in which a platform provides its players the chance to earn any form of in-game assets that can be transferred to crypto assets or liquidated into fiat as a tangible asset. Play-to-Earn was made most famous by the well-known blockchain game ‘Axie Infinity’.
- The difference between the current/expected price of a trade and the executed price of a trade. Slippage can be a significant problem for AMM liquidity pools pool with low liquidity.
The Funding Trade
- The funding trade is a derivatives strategy to take advantage of the Perpetual Future’s funding rate. Usually, this strategy involves shorting the Perpetual Future while holding the equivalent amount in spot in order to collect the funding rate paid by long traders of the Perpetual Future.
- Traditional Finance – Refers to legacy financial infrastructure and institutions such as Banks.
- Whitelisting is the act of reserving the right to participate in a crypto investments or minting of an NFT for particular crypto addresses. The owners of these addresses may be required to perform certain activities such as KYC, answer questionnaires and promote projects on social media to achieve the whitelisting. Similar to a ‘Cap Table’ in traditional finance, a list of whitelisted addresses will be the addresses guaranteed an investment.
- Yield farming involves locking capital into DeFi smart contracts in order to earn yield in the form of fees/interest and governance tokens. Check out our report ‘Yield in Crypto’ for more information.
Non-Fungible Token Terms
- The floor price is the lowest ask price for a given collection e.g. the lowest price you can instantly buy a Bored Ape Yacht Club (BAYC) for.
- Floor sweeping refers to the act of buying multiple lowest ask price NFTs in a given collection e.g. buying the 3 lowest ask price BAYC’s.
CEX – Centralised Exchange
- Centralised Exchange – A business which facilitates cryptocurrency trading between users. These are custodial which means users must give up permission to their tokens. Examples are Binance CEX and Coinbase. In the fiat market these are your NYSX, ASX etc…
DEX – Decentralised Exchange
- A DEX is a peer-to-peer marketplace where transactions occur directly between crypto traders. Most common DEXes include Uniswap, Curve and SushiSwap.
FUD – Fear, Uncertainty, Doubt
- FUD is a term that is used to discredit negative news and scepticism towards crypto assets. E.g. saying that Bitcoin can be shut down by the government at any time is FUD.
HODL – Hold On for Dear Life
- What began as a typing error on a Bitcoin forum in 2013 has become a beloved rally cry for long-time bitcoiners. It expresses the belief that long-term value is better obtained by holding a digital asset rather than actively trading it.
- There is debate as to whether this is an acronym or just a typo of the word ‘hold’
MEV – Miner Extractable Value
- Refers to the maximum value that can be extracted from block production in excess of the standard block reward and gas fees by including, excluding, and changing the order of transactions in a block.
NGMI – Not Going to Make It
- Used as an insult, usually at someone who is sceptical of crypto, not invested in crypto or invested in ‘bad’ crypto assets
POAP – Proof of Attendance Protocol
- A POAP is an NFT badge that is given out to prove attendance of an event, whether it took place virtually or in the real world.
WAGMI – We’re All Going to Make It
- WAGMI is a term used to unite investors of the same crypto assets. It is positive in nature and means “we are all going to get rich together”.
Hacking, Scamming & Attacking Terms
- Common term crypto enthusiasts will use to explain a situation whereby they have taken a considerable loss on an investment.
- A dishonest or a fraudulent crypto project whereby the founders or nefarious actors in the project will steal or sell a considerable amount (if not all) of the tokens in a particular crypto asset.
- A ‘Vampire Attack’ is when a project steals users from a rival project by incentivising trading or liquidity with token rewards. The most famous example of this is when SushiSwap vampire attacked Uniswap by incentivising liquidity with SUSHI tokens.
Crypto-Native & General Terms
- Information that is not broadly known and can lead to a profit making investment.
- ‘To Ape’ is an act of investing in a crypto asset with minimal due diligence. E.g How much did you ape into that crypto asset last night?
- ‘Baghold’ is used to describe a crypto investor caught holding onto an investment that has decreased dramatically in value, so much so that you have no choice but to baghold and hope for a rebound in price.
- Refers to holding onto an investment no matter how high or low it goes
Gm & Gn – Good Morning / Good Night
- An endearing way to address a fellow coiner for different times of the day. Any other form of greeting shows that the person has a lower overall crypto knowledge.
- A maximalist for a certain crypto asset. These individuals usually hold extreme views about their crypto assets and are not prepared to compromise. E.g ‘Bitcoin maxi’
- ‘Moon’ is a native to crypto term that signifies significant price appreciation. As you would imagine, it is used commonly in crypto discourse when there is bullish sentiment. For example, ‘Ethereum is going to the moon!’ Fun fact: Apollo Capital was named “Apollo” partly in fun because we aim to help take our investors to the moon!
- Someone who owns no crypto assets
- Refers to someone who does not hold investments for a long period of time and gets panicked into selling easily
- A satoshi is currently the smallest denomination of bitcoin, named after the pseudonymous founder of Bitcoin, Satoshi Nakamoto. A bitcoin is divisible to 8 decimal places.
- A fork occurs when the rules of a blockchain are changed, possibly creating two (or more) distinct digital assets. This may result from an upgrade to the features of the blockchain, a bug in the consensus algorithm, or changes to the node software. Check out our blog post ‘Forking Explained’.
Multi-Sig or Multi-Signature
- Multi-signature, or multi-sig, is a feature of bitcoin and other digital assets that requires multiple private keys to sign a transaction and move funds. Practically speaking, multi-sig can be used to add an extra layer of security to digital asset transactions by requiring additional approval from a third party before a transaction is approved. Digital asset custodians typically use multi-sig wallets and processes to help secure client funds.
- Nodes are software that run on internet-connected computers and function as non-mining transaction validators and digital asset wallets. In Bitcoin, for example, full nodes download the entire blockchain and validate each transaction per the agreed-upon rules of the network and relay transactions and blocks to others.
- Rollups perform transaction execution outside layer one by “rolling up” or aggregating transactions, and then posting the data to layer one where consensus is reached. As transaction data is included in layer one blocks, rollups are secured by native base layer one security.
- Tokenomics is the topic of understanding the supply and demand characteristics of crypto assets. Projects will have specific tokenomic designs to drive particular outcomes for their protocol. Circulating market capitalisation, fully diluted market capitalisation, airdrops, seed round fundraising, ICO/IDO and treasury are all items of consideration when designing a tokenomics model.
- Zero Knowledge Proofs (ZKPs) are an experimental technology that allow one to cryptographically prove a statement, without revealing the input data. For instance, one could prove that a transaction was included in the blockchain without telling you which transaction it is. This technology is currently being used in various layer two projects on Ethereum to enable Ethereum to scale appropriately in the future.
Do you think we missed something? Let us know the terms you’d like explained and we will add them to our list!