Cryptopedia
Glossary of crypto terms
Alghotimic stablecoin
Under-collateralized stablecoins that use an algorithm to maintain parity with another currency.
In general, they are considered riskier than fully collateralized stablecoins, especially after the loss of value of UST, which was backed by the LUNA token instead of dollars.
Altcoin
Is how all crypto tokens are called except for Bitcoin. They began to be created in 2011.
They tend to be more volatile than Bitcoin, showing more gains in moments of euphoria but having bigger drops in bear markets. Examples: ETH, BNB.
Airdrops
Free distributions of new tokens to the public, usually focosing on users of a project's DApp.
The aim is to distribute the token to a wide user base in order to form a broad market. In general, tokens tend to drop in price shortly after this distribution due to selling pressure.
AMM
The mechanism of most DEXes, where orders are executed against a liquidity pool, in which prices are automatically determined. Thus, they allow these exchanges to function without an order book and for a transaction to be made by a buyer or seller, even without a person on the other end. Example: Uniswap, Pancakeswap.
Bear market
Low markets, where expectations are generally of price drops. The crypto market tends to go through these moments every 4 years, with the most recent one starting in 2022.
Bull market
The phase in crypto market cycles when the dominant expectation is for price increases. It reaches its peak in the so-called bull run when prices start to rise rapidly, detached from real fundamentals.
Blockchain
It is the core technology in crypto. It is a network similar to the internet, but for the exchange of assets. Transactions are grouped in a sequence of blocks in a decentralized and immutable way. So, there is a record of all transactions executed since the emergence of the blockchain, allowing for the balance of each wallet to be known.
Blockchain Trilemma
It is the name given to a problem that claims the theoretical impossibility of a blockchain solving three central issues at the same time: decentralization, scalability, and security.
Bridge
It is a solution that transports tokens between different blockchains. Originally, each token would only be compatible with the blockchain on which it was created. Bridges freeze the token in an address on the original blockchain and release an equivalent asset, with the same name and characteristics, but in another contract, on the destination blockchain. Since they deal with different blockchains, they end up having additional vulnerabilities, and therefore are frequent targets of hackers.
Burning
It is a deflationary mechanism in which tokens are sent to a null address. Thus, these tokens are permanently removed from circulation. It is used in assets such as BNB to increase scarcity over time. It can be done with tokens bought with profits from the company or protocol, posing an alternative to the distribution of dividends.
CDP
The collateralized debt position is the position of collateral deposited by the user to issue a stablecoin. The user is liquidated if the market value of that collateral falls below the value of the stablecoin issued. It was introduced by MakerDAO.
CEX
Centralized exchanges are exchanges ruled by a company. They have trades executed through order books, like traditional stock markets. Many people refer to these exchanges as brokers, as they also take custody of users' assets, combining two functions that are separated by law in traditional markets. Examples include Binance and Crypto.com.
Consense mechanism
These are the ways in which a blockchain is able to make agents cooperate with each other without the need for mutual trust. They use Game Theory to create mechanisms that make it economically rational for agents to cooperate with each other, and economically irrational to attempt to sabotage the network.
Crosschain
They are various solutions that connect different blockchains through bridges. For example, a crosschain DEX allows for the exchange of crypto assets even if they are on different blockchains, which previously required an institution such as a CEX with different wallets for each blockchain.
DAG
Directed acyclic graph is an alternative solution for asset transfer to the blockchain. Validation is done through different branches (graphs) instead of blocks, and each transaction is confirmed by the following one. This theoretically allows for fee-free transactions, but their confirmation can be slow when the network is underutilized. This happens since the next transaction, necessary to confirm the previous one, can take more time. Examples: Hedera Hashgraph (HBAR) and Iota (MIOTA).
DAO
Decentralized Autonomous Organizations are organizations managed by its token holders. Decisions are made online in governance forums, usually with votes weighted by the amount of tokens held in wallets. Examples include Curve and Aave. They are presented as alternatives to centralized companies, although in many cases the team behind the project limits the scope of the votes, vetoes proposals, makes unilateral decisions, or retains the majority of the tokens.
DApps
Decentralized applications are applications that use blockchain and smart contract technology to execute tasks and provide services automatically. Users of a Dapp maintain ownership of their tokens, with no need to rely on the custody of a company or any other entity. Examples: Axie Infinity, PancakeSwap.
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Ddos atack
It is a hacker attack which try to bring down a blockchain or DApp by overloading them with useless traffic. One known case is that of Solana, which underwent several such attacks in 2022.
DeFi
Decentralized finance is the segment of the financial market that uses blockchain and smart contracts to eliminate traditional intermediaries and allow users to trade directly, maintaining custody of assets. They emerged in the Ethereum network from 2017 and experienced an adoption explosion in 2020.
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DeFi 2.0
A variant of DeFi that was popular during the end of 2021, in which projects promised yields of thousands of percent per year on their tokens with a practice that basically consisted of manipulating asset liquidity. Examples are Olympus (OHM) and KlimaDao (KLIMA). The assets in the sector have since then experienced drops of over 99%.
DEX
Decentralized exchanges are a segment within DeFi in which asset trading is done through smart contracts and remains under the custody of the user. They are a decentralized alternative to CEXes that do this by holding custody of the user's assets and byy using order books.
ERC
Ethereum Request for Comments are the standards used by tokens on the Ethereum network. They must be adopted for the token to be compatible with this blockchain. The most well-known are ERC-20, for simple tokens, and ERC-721, for NFTs.
Ethereum Killer
It is a term used for blockchains that pose alternatives to Ethereum, and which could surpass its market value by being more scalable. It is often used as marketing by these networks, but generally they sacrifice security or scalability to execute cheaper transactions. So far, no other blockchain focused on smart contracts has come close to surpassing Ethereum in liquidity, market cap or number of developers.
EVM
The Ethereum Virtual Machine is the system responsible for executing smart contracts on the Ethereum network. This allows the network to host DApps that perform functions automatically. Other blockchains, such as Avalanche and Fantom, are also compatible with the EVM, allowing a simple integration with Ethereum.
Fan Token
These are tokens that use the image of sports teams and bring utilities to holders. They are generally considered poor investments as they are only associated with a well-known brand but offer low utilities. The most well-known platform is Socios.com, which operates with the token Chiliz (CHZ).
Farming
The production of tokens by users who use a platform. It is used in DEXes like Pancakeswap, in which users deposit liquidity to produce the CAKE token.
Fully Diluted Market Cap
The market capitalization of a crypto asset considering the total supply of tokens that can be issued. Investors should pay attention, as a very high FDMC in relation to the current market cap indicates prospects of a high token dilution in the future, with is likely to bring pressure on its price.
GameFi
A sector in crypto that combines gaming with decentralized finance. It introduces decentralized markets for in-game characters, items, and currencies. This allows players to have custody of these elements, which in traditional games ultimately belong to the company behind the game. It also allows games to be a source of income through the so-called play-to-earn model.
Gas fees
The fees paid by users to perform transactions on the blockchain. As these transactions require processing power, they are paid to compensate validators and nodes for processing them.
Giveaway
A distribution of tokens to users, similar to airdrops. The difference is that giveaways are manually done with tokens already in the market, and can be done in traditional currencies such as the US dollar. They are generally distributed as part of marketing campaigns for users who help promote the project on social media.
Halving
A mechanism to cut rewards in half, usually for miners, but it can also be directed towards token farming. It was introduced by Bitcoin and is applied in other projects such as Litecoin as a way to gradually reduce initial incentives.
Hard Fork
A split of a blockchain, leading to the creation of a new network independent of the original one. In other words, the blockchain is divided into two. The hard fork occurs when an update does not have the consensus of all network participants and some nodes choose to continue running the old version of the program. An example is Ethereum PoW, which recently emerged when some Ethereum miners did not adhere to the Ethereum update to a Proof-of-Stake network.
Hashrate
A measure of the amount of computational power used by a blockchain to process transactions. It is an indicator of the security of Proof-of-Work networks, as direct attacks on the network require control of more than 50% of the network's hashrate.
Hodling
A jargon in the crypto market in reference to "hold", written with a spelling mistake. It is used by investors who trust in the medium and long-term price increase of a token and recommend holding onto it.
ICO
Initial Coin Offering, referring to IPOs in the traditional stock market. It is the initial sale of a cryptocurrency to the public with the goal of raising funds to finance a project. There are several variants such as IDO (for DEXs), IGO (for games), INO (for NFTs), IEO (for CEXs), and IFO (for farms).
Impermanent Loss
A risk associated with liquidity pools, in which users may incur greater losses or smaller profits due to price divergence between both assets in the pool.
IPFS
InterPlanetary File System, a protocol introduced by Filecoin that allows for the decentralized sharing of digital files through the blockchain. It is an alternative to HTML, making content immutable and uncensorable.
Launchpad
Platforms where new tokens are launched to the public. A portion of the total supply is sold, generally with a requirement to hold a certain amount of tokens from the launchpad where the launch takes place, which must be maintained for a certain period of time.
Layer 1
The main base layer of the blockchain, where peer-to-peer transactions take place. It functions as a network for the transfer of values validated by some decentralized consensus mechanism. Smart contracts, dapps, tokens, and NFTs can also be built on top of it. Examples include Bitcoin, Ethereum, and Solana.
Layer 2
Solutions that bring scalability to the main blockchain. Often, these blockchains have a limited capacity to process transactions, which can be alleviated by a more agile layer built on top of it. Examples include Lightning Network (Bitcoin); Polygon; Optimism (Ethereum).
Layer 3
Basically apps built on top of a blockchain, whether it is Layer 1 or Layer 2. They can be DeFi platforms, games, and other various solutions for Web3 built on smart contracts. Examples include Axie Infinity and Uniswap.
Layer 0
Multichain solutions that present themselves as a base layer on top of which other blockchains can be built in an interconnected way to generate more scalability. Examples: Cosmos; Polkadot.
Lending
Segmento de DeFi voltado para empréstimos. Usuários depositam um colateral para tomar emprestado outro token, permitindo alavancar posições. As ataformas mais conhecidas são a Aave e a Compound.
Liquid Staking
A staking modality where the liquidity provider receives a tradable token in exchange for their deposit. This way, the user holds a liquid asset while also earning rewards on the original locked asset. An example of platforms that practice this form of staking is Lido, which provides users with the stETH token in exchange for their deposited ETH.
Liquidity Pool
Pools, where users deposit two and in some cases three different tokens, and receive earnings for providing liquidity for transactions between these pairs in DEXes. They are an interesting alternative for holders to obtain additional earnings on the tokens in their portfolio, but they carry risks such as impermanent loss.
Marketplace
Online markets associated with NFTs, where they are listed by users and artists. The most well-known are OpenSea and Blur.
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Mempool
A kind of waiting area where blockchain transactions remain registered while waiting for confirmation in the next blocks. A large mempool means that the network is congested and the user will have to wait longer for their transaction to be confirmed.
Memecoin
Coins that are born as jokes or memes. Generally, they do not intend to have a serious foundation, but in some cases, teams create functionalities to add value to them. Examples: Dogecoin, Shiba Inu.
Mining
It is the mechanism introduced by Bitcoin and used in other Proof-of-Work networks such as Litecoin. It is the production of cryptocurrencies from processing transactions on the blockchain. They give special rewards aimed at incentivizing people to allocate greater computational power on the network, bringing greater security.
Minting
A term that defines the issuance of a crypto asset. It is mostly applied to NFTs, but also used for fungible tokens.
Name Services
A service that allows renaming the address of a crypto wallet, which instead of being a long code, becomes a readable and easy-to-remember name.
Nakamoto Coefficient
Measure of the decentralization of blockchains. It is the minimum number of entities that need to collude to take down a blockchain. The higher the coefficient, the more secure the blockchain. While Bitcoin has a coefficient of over 7000, many alternative blockchains have a lower number of 10.
NFT
Non-fungible token. They are unique and non-replicable assets that represent ownership of a particular item, such as artwork, an in-game item, or documents and certificates. They are opposed to fungible tokens, which are all those that can be grouped or divided. For example, I can have 5 Ethereum or 0.01 Ethereum, like the dollar, which is why we say Ethereum and the dollar are fungible. However, a CryptoPunk is a unique digital asset. I can have two CryptoPunks, but they are different assets, for example, CryptoPunk #6754 and CryptoPunk #7832. That is why they are non-fungible.
Node
Computers responsible for validating and recording transactions on a blockchain through a specific program.They are divided into validator nodes an full nodes. Valiator nodes process and approve user transactions. Full nodes store all the historical data of the blockchain and add new blocks with transaction information received from validator nodes.
Onchain/offchain
Expressions that mean inside and outside the blockchain. Onchain is everything that is processed on the blockchain, such as DeFi contracts or transfers on the Bitcoin network. Offchain refers to transactions that do not go through the blockchain, such as trades on CEXes.
Optimistic Rollups
Form of rollup that assumes that the executed transactions are honest instead of verifying them one by one. This makes them more scalable. On the other hand, transactions take longer to have a final confirmation, as they have a time interval in which any user can challenge the network alleging fraud.
Oracle
Solutions to connect diverse information to smart contracts. This way, contracts can be triggered in case of different events. An example is their use by DEXes, which adjust asset prices based on information provided by oracles about prices in other markets. This way, they prevent a larger portion of the pool's resources from being drained through arbitrage with these other markets.
Peer-to-peer
Transactions made directly between people without the need for an intermediary, such as a bank, to execute the transactions. The ability to execute transactions without these intermediaries is one of the greatest advancements introduced by Bitcoin and blockchain technology. This allows for the reduction of risks associated with a third party and, ideally, the elimination or drastic reduction of fees paid to them.
Pegged asset
An asset directly backed by another asset. An example of this are stablecoins that aim to maintain the same price as a currency, usually the US dollar. At the same time, they can be transferred through the blockchain and used in DeFi applications. We can also mention Wrapped Bitcoin, an asset tied to Bitcoin, but can be used on the Ethereum blockchain, with which the "original" Bitcoin is not compatible.
PFP
Profile pictures are the most popular category of artistic NFTs. They are profile images, almost always created through generative art, and released in collections with a base design and variable features. Examples include CryptoPunks and Bored Ape Yacht Club.
Pishing
A type of hacking scam in which a user of a DApp or website is directed to a fake page that looks similar to the original. When they enter their information, the hackers steal the data to move the user's funds.
Play-and-earn
A GameFi modality that aims to counter the play-to-earn model by bringing more focus to the game itself rather than the token earnings. Generally, they are presented as normal games that people would play just for fun, but with the possibility of earning tokens as a bonus.
Play-to-earn
A concept that became very popular during the last crypto boom, reaching its peak in 2021. Play-to-earn games offer tokens and other rewards in the form of tradable cryptocurrencies. These assets have market value mainly because of their ability to be used in the production of more units of themselves, which led many to point out this gaming modality as Ponzi schemes.
Proof-of-Authority (PoA)
A blockchain consensus mechanism in which a node needs to prove its identity to process blocks. It is considered the most centralized of consensus mechanisms.
Proof-of-History (PoH)
A mechanism introduced by Solana to increase the speed of transaction validation. Each transaction on the network is recorded with a hash indicating the moment it occurred in time, allowing for a more agile verification of the sequence of events on the network. Therefore, Solana can execute transactions extremely quickly and efficiently. However, it is not a completely independent consensus mechanism, but rather a mechanism for increasing scalability. Solana uses Proof-of-Stake to validate the sequence of transactions presented through PoH.
Proof-of-Stake (PoS)
A consensus mechanism in which nodes can participate in block processing if they hold a stake, that is, a certain amount of tokens deposited in a contract. They are chosen to process more or fewer blocks based on an algorithm, according to the value of their deposit. Proof-of-Stake is considered an alternative to Proof-of-Work with lower energy consumption. However, critics argue that its mechanism is less secure and a way to artificially inflate the price of cryptocurrencies, which are taken out of the market. It uses the slashing mechanism to discipline the behavior of validators.
Proof-of-Work (PoW)
It was the first consensus mechanism for blockchains, presented in the Bitcoin whitepaper in 2008. To process a block, nodes need to solve a mathematical problem. The first node to solve the problem can generate the next block and receive the fees from the transactions it processes. In addition, it usually receives an additional reward in the network's native cryptocurrency.
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Rebase token
Tokens that aim to control the price of the asset by adjusting the balance of users' tokens. They try to compensate for price drops by issuing more tokens to compensate users. They are used in the DApps of the so-called DeFi 2.0.
Rollups
Scalability technologies that aim to group multiple transactions into a batch before sending them to the blockchain on which they were developed. This way, the blockchain is less overloaded because it only needs to process one transaction, while users can pay lower fees for transactions since the original cost can be shared among hundreds of different transactions.
Rugpull
A type of scam in which token developers attract user liquidity to pools and then dump a large amount of their tokens on the market. This lowers the price of the token to practically zero and allows them to withdraw all the deposited money.
Shitcoin
It is a term used for tokens that do not have good fundamentals and therefore would be worthless.
Sidechain
A blockchain that directly connects to another blockchain through bridges to transfer assets, but at the same time operates independently, unlike Layer 2 solutions. It is a solution mainly used by DApps that want to cut transaction costs and bring more agility to users, usually sacrificing some of the security of the original network. An example is Ronin, a sidechain of Ethereum, created to be used by the game Axie Infinity.
Slippage
A price movement caused by a trader's activity in the market. When placing a large order, the price of an asset is pushed. This effect is more intense when the market has lower liquidity. The term is mostly used in AMMs, where this price adjustment is made automatically and passed on to the user.
Smart Contracts
An innovation brought by Ethereum that allows more complex financial transactions to take place on the blockchain. Smart contracts automatically execute transactions if certain conditions are met, without the need for a third party. For example, if a collateral falls below the value taken in a loan, a smart contract is automatically triggered to liquidate the insolvent position.
Soft Fork
An upgrade to the program behind a blockchain. Unlike hard forks, it does not have problems of divergence between nodes, which all start to function with the update, without splitting the blockchain into two different networks.
Soulbound Tokens (SBTs)
A special type of non-transferable token. An SBT received by a wallet becomes bound to it permanently. They are used, for example, as certificates that associate a crypto wallet with a person. This allows crypto applications to be targeted to specific individuals, which was not possible before, since the same person can have several different wallets. Some point to them as one of the most promising innovations in crypto currently. They can, for example, allow traditional services to be provided by verified individuals through the blockchain, or loans without the need for collateral.
Stablecoin
Blockchain versions of "real" currencies such as the US dollar or the euro. They can be backed in various ways: through algorithms (such as UST); collateralized with other tokens (such as DAI); backed by deposits of the original currency in custody accounts (USDC); or even backed by other stablecoins (OUSD).
Staking
A deposit of tokens into a contract to validate transactions on Proof-of-Stake networks or for other purposes, such as providing liquidity in DeFi pools. The staker gives up custody of their tokens and, in exchange, receives a yield. Some platforms allow users to deposit and withdraw tokens at will, while others have smart contracts that only allow the user to withdraw tokens after a certain period.
Swap
In crypto, it means the exchange of one token for another in DeFi DApps or through on-chain wallets.
Testnet/Mainnet
A copy of the main blockchain where transactions are simulated. It is usually used to test updates. The "official" blockchain is, in contrast, known as the mainnet.
TGE
The act of creating and registering a new crypto asset on the blockchain.
Token
Crypto assets considered broadly, which includes cryptocurrencies (tokens used to pay for transactions on a blockchain). Every cryptocurrency is a token, but not every token is a cryptocurrency. Tokens are programmatically created by crypto projects from code and are usually associated with some function, such as paying for a service or receiving dividends.
Tokenized Stock
Traditional market stocks in a blockchain-compatible version. The original stock must remain in an account that serves as collateral for the crypto asset. This allows for greater liquidity for these assets, which can now be traded in 24/7 markets and without borders.
TPS
Transactions per second is the primary measure of a blockchain's scalability. Bitcoin can process only 7 transactions per second, while a traditional payment solution like Visa processes over 1800.
Newer blockchains, such as Solana and Fantom, claim to be capable of processing tens or hundreds of thousands of transactions per second, but in return they are considered less secure.
TVL
Total Value Locked is the main liquidity measure of a blockchain or DeFi DApp. It indicates the market value of the crypto assets deposited on a platform. These deposits can be used in liquidity pools of AMMs, security guarantees or other various purposes. Those who deposit these tokens give up custody of them in exchange for returns, much like a bank savings account.
Vampire attack
A type of competitive attack by a platform that seeks to extract the liquidity deposited in another. It consists of offering a product or service that is practically identical and adding greater incentives to users, through the distribution of a token.
Wash Trading
Fake transactions in which tokens are exchanged between wallets in collusion, usually by the same person, without the goal of promoting an exchange that generates real value for the parties involved.
They are made on platforms that offer airdrops or other rewards to their users. This causes individuals to use the platform without really caring about the product or service, but only to receive tokens.
Web1
Refers to the earliest period of the internet, where content was published in a static way. Websites did not function as a means of interaction between users and did not have features such as comments and ratings. There were no social networks, forums, or apps yet.
Web2
Refers to the layer of the internet that brought greater interactivity between users, introducing apps and social networks, but with content and services intermediated by large companies, which use their own servers instead of the blockchain. Therefore, they can go offline in case of problems, require personal data, and can authorize or deny services. For example, Facebook or Twitter are controlled by companies that can censor content published by users.
Web3
Refers to the segment of the internet organized in a decentralized way through the blockchain and DApps that operate based on smart contracts. In it, money and other information can be transmitted peer-to-peer without the need for intermediaries, and without the possibility of censorship.
Whale
Those who have very large positions in assets. Their smallest market move can cause a huge impact on prices, hence the analogy.
Wrapped Tokens
Synthetic assets tied to another asset, to be used on another blockchain. The original asset remains locked in a contract on its original blockchain so that a new equivalent asset can be issued on another blockchain. The best-known example is Wrapped Bitcoin, used on the Ethereum blockchain.
Yield Aggregator
Asegment of DeFi in which users make deposits in a DApp that re-deposits these assets among other DApps through smart contracts, seeking the highest possible yield. Examples include Convex Finance and yearn.finance.
Zero-Knowledge Proof
Consensus mechanism that allows the validation of a transaction without revealing the data of the parties involved to the validators. It is used in blockchains focused on private transactions, such as Minero and ZCash.
ZK Rollups
Zero-Knowledge rollups are a category of layer-two solutions that process transactions off-chain and transmit them to the blockchain in batches to reduce costs. These rollups are currently considered the most efficient way to scale blockchains, as they allow them to be used only to verify the validity of data, without revealing what that data is. This considerably reduces the demand for processing power on the main network, while relying on its security.
