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25 Cryptocurrency Terms Everyone Should Know

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crypto terms

For those just getting into the realm of cryptocurrencies and trading, the internet may seem like a minefield full of confusing and technical terms. I have compiled a list of 25 words that will help everyone from beginners to even the fairly advanced. These definitions will help you decode the language used in forums, websites, and white papers, so you feel confident while reading and researching your favorite coins.

Address:

An address is the location where you can receive and send coins from. Most of the time, the wallet for your currency will automatically generate one for you. (Example: BTC Address – 1JRsadXBJWtbyVjnznAUqTUBoN4ueSrGXt)

Altcoin:

Altcoin is the term used to identify any coin that is not Bitcoin (BTC). (Example of Altcoins: XRB, IOTA, ADA)

Bearish:

The opposite of “Bullish”. If an investor is bearish, they have negative views of the current and future market. Simply put, they believe prices will continue going down.

Block:

The term block refers to pieces of a public ledger where all data is written. All data there is permanent and can never be altered or deleted.

Blockchain:

In Layman’s terms, a blockchain is a system that allows the creation of a public (decentralized) digital ledger. As previously mentioned, a blockchain is made up of “blocks”, where all the data is written and secured by cryptography.

Bullish:

The opposite of “Bearish”. If an investor is bullish, they have positive views of the current and future market. Simply put, they believe prices will continue going up.

FOMO:

Short for “Fear of Missing Out”. A novice investor might see a coin skyrocketing in price and worry that they will be left behind.

FUD:

Short for “Fear, Uncertainty, and Doubt”. Sometimes used as a tactic to manipulate public ideas.

Fiat:

Fiat refers to any government backed currency. (Example: USD, EUR)

Fork:

A fork is essentially a copy and paste of a specific blockchain network with a shared history. (Example: Ethereum is a fork from Ethereum Classic)

Halving:

Halving is the reduction of the mining reward after a certain number of blocks. (Example: BTC reward is halved every 210,000 blocks)

Hashrate:

It is the rate at which a math problem is solved. Higher = Faster.

Hodl:

Hodl simply means Hold (as in holding a coin). The origin of the word comes from a forum post from December of 2013, where a member accidentally wrote hodl instead of hold, in a drunken rant.

ICO:

Short for Initial Coin Offering. It is a fundraising technique used to accumulate funds for an organization. You are able to buy the coins before they are listed on exchanges. Can be compared to IPO’s in stocks.

Market Cap:

Short for Market Capitalization. It is a way to determine the overall size and ranking of a coin. Market Cap is determined by multiplying PRICE and CIRCULATING SUPPLY. (Example: BTC Market Cap = $7,529 x 16,850,700 = $126,868,920,300)

Mining:

Mining refers to the process of solving blocks on the blockchain. Every time your computer successfully solves the algorithm, you are rewarded with a “mining reward”. (Mining BTC rewards you BTC)

Multisig:

Multisig is short for multisignature. With multisignature enabled in a wallet, two or more parties are required for any outgoing transactions. This may be beneficial for companies worried about rogue employees.

Node:

Simply put, a node is any computer connected to the blockchain of a cryptocurrency. A node supports the network and helps validate transactions.

P2P:

Short for peer to peer. One of the largest benefits of cryptocurrency, decentralization. The ability to send value directly to another person without the need for a 3rd party.

PoS:

Short for Proof of Stake. PoS requires the owner of a coin to show ownership. Very similar to PoW, but uses much less energy and is more efficient to run on your computer.

PoW:

Short for Proof of Work. PoW uses your computer’s resources to validate and secure the network. It’s main purpose is to prevent DDoS attacks on a given network. It is very effective since it is both costly and time consuming to produce. (Example: Bitcoin uses HASHCASH system to mange block generation.)

Seed:

Seed refers to a list of (Mnemonic) words that contain the necessary info needed to recover a wallet. Treat these words with extreme caution. Anyone that has access to these words can access your funds as well. (Example:  witch collapse practice feed shame open despair creek road again ice least)

Signature:

A signature is the mathematical operation required in order to prove ownership over their data or coins.

Wallet:

Wallets are software programs that are used to “store” and secure your bitcoin. It is an interface between you and the blockchain. Since your Bitcoin can’t be stored anywhere, your wallet lets you easily access your coins by using your private keys and addresses.

Whale:

A whale is an investor with a lot of buying power. If “whales” collaborate, they sometimes have the ability to manipulate prices based on buy and sell orders.

 

Spencer is a Co-Founder of The Hodlr. He is currently studying at California State University of Northridge and has been involved in the crypto space since January of 2017. His portfolio is currently comprised of BTC, ETH, IOTA, LTC, PHR, and REQ. He can be reached at: spencer@thehodlr.com

Bitcoin

Do like the Winklevoss Twins: Learn How to Keep your Cryptocurrency Assets Safe.

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The Winklevoss twins are pioneers in the modern day bitcoin space. They not only started their own bitcoin exchange, but they were also instrumental in creating the public adoption of the title of gold 2.0 for bitcoin. They also were worth an estimated 1.3 billion dollars in bitcoin as of December 2017, giving them the title of bitcoin billionaires. Having such a large fortune in digital asset begs the question, how do the Winklevoss twins keep this safe from most conceivable negative eventualities.

Cold storage is the answer to this question. They use an ingenious system that is more complex than simply writing down their private key on a piece of paper for safe-keeping. Their system, according to Investopedia, is as follows:

“To protect their bitcoin holdings, the brothers distributed snippets of a printout of their private keys across multiple safe deposits around the United States.”

This division of responsibility, of dividing their private keys up amongst multiple parties, makes it increasingly difficult to have a breakdown in their system because many collaborators, in this case not just multiple people but multiple banks, would have to get together in order to perpetrate theft.

Whether or not you have a large fortune in cryptocurrency, there is still due diligence that can be done to keep even your smaller investments, or fractional coins that remain on exchanges, as safe as possible. Whether or not you have a system of cold storage set in stone, it is still a good idea to verify and do research into the brokerage website or App of your choosing.

Agency problems are traditionally between the owners and managers of a business, but there is a very similar relationship between bitcoin owners and brokerage site owners. It is important to note that the problem in bitcoin is that owners of these brokerage sites and owners of bitcoin might not always have the same set of interests. Keep in mind, agency sites make money from fees related to trading and other instruments such as leverage rather than on the actual capital appreciation of the asset. This could incentivize the brokerage side to create or allow financial instruments that actually increased volatility of the assets in which they broker trades. The most common example in the last decade would be the financial crisis of 2008 in which banks ignored their responsibility as underwriters in an attempt to package for sale as many mortgage-backed securities as possible. It is important to understand what types of activities your exchange might be partaking in because inherently risky or illegal activities might possibly lead to your exchange declaring bankruptcy or being shut down by the governing body in the country where it originates.

As of the writing of this article, Gemini maintains that “[t]he majority of digital assets are stored offline in our proprietary Cold Storage system.” And Coinbase maintains that “98% of customer funds are stored offline”. Doing your due diligence and looking into the safety measures and policies of an exchange is essential for giving yourself the smallest possible chance of being a victim of fraud or theft.

Historically, the US has some of the strictest laws governing and regulating exchanges. While regulation might seem inhibitory at first glance, digging deeper we reveal some broadly overarching economic patterns. The legendary Walter Wriston, CEO of Citibank, said “Capital will always go where it’s welcome and stay where it’s well treated.” To be well treated any financial instrument must be transparent and free from fraud or potential abuse. Fair and meaningful financial regulation could be one important step toward generating a positive cash inflow into cryptocurrency projects such as bitcoin that propose to solve some of the world’s financial needs.

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Fundamentals

Dollar Cost Averaging, a Useful Strategy for Any Asset Class

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Dollar cost averaging can lead to an effective way of reducing risk in an investment. This technique requires buying an asset over an extended period of time and at different price points, so that the total cost of an investment will be the average cost of the combined prices. It is important to note that reducing risk is another way of saying reducing volatility. So what is volatility in terms of a classical financial definition?

Based on investopedia, we find that:

“Volatility is a statistical measure of the dispersion of returns”

Dollar cost averaging will not produce the greatest theoretical return, which normally can only be attributed to perfectly timing the market and is something that is incredibly difficult, if not impossible to do, in an efficiently traded market given a long enough time frame. Dollar cost averaging will also not turn a losing investment into a winning investment and the investment must still be profitable in the long run for dollar cost averaging to produce a positive return. However, it will certainly help smooth out the volatility of returns and ensure that an investor is getting closest to the fairest price possible for a particular investment.

There are various reasons that investments at times might become oversold or overbought, meaning that at certain price points an investor might be paying too much for an overvalued asset or too little for an undervalued asset. Behaviorally, at times people might panic sell due to a fear of losing money or euphorically buy up assets without a rational premise in the hopes that prices will continue to rise.

Luck also can play a role in investment returns as unforeseen news can impact an investment both positively and negatively and to an extent that is hard for anyone to project prospectively. The advent of algorithmic trading sometimes creates periods in which selloffs occur due to a series of stop losses being hit. The most famous stock market flash crash happened on what is called Black Monday in 1987 where the Dow lost 22.6% of its value in a day. This was the largest single day percent price drop in the history of the Dow. After the dust settled, this crash was attributed to both a mass mechanical and behavioral over adjustment having little to do with a fundamental change in the market overnight.

Of course, propensity for risk is always up to the individual, but for an investor looking to reduce the volatility of his or her holdings, dollar cost averaging could be an effective way of doing this across a broad array of securities, commodities and alternative investments alike.

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Fundamentals

Ledger Nano S: 4 Reasons to Get One Now

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new ledger app

The Nano S, built by Ledger, is a cryptocurrency hardware wallet which allows even those of us who aren’t tech-savy to keep our assets safe. It works by isolating your private keys, which are on your hardware wallet device, from your computer. It also forces you to confirm all transactions on the actual device, rather than your computer, which may be infected with malicious software. You generate a 24 word seed to recover your funds in the event that you lose your device. Visit here to learn more about the basics of the Nano S and hardware wallets.

 

Why you should pick up a Nano S

Security:

The Nano S, and competitors such as Trezor, are extremely secure against malicious software on your computer and individuals trying to access your private keys. In the case of the Nano S specifically, your private keys are generated in a secure environment on your hardware wallet. The Nano S uses a secure element to ensure firmware integrity on your device. The only case known to date of a Nano S being compromised is where human error was involved, not because of device failure.

Form Factor:

The Nano S resembles a USB and is extremely light weight and compact. It can easily fit in your pocket or backpack and includes a lanyard so that you can wear it around your neck if you want. The buttons are readily located above the screen and make it simple to control your device.

Cost:

Ledger regularly has capacity issues with producing their devices. Because of this, the prices can fluctuate based on demand and what they are able to supply at the time. Currently, the Nano S costs 79 Euros. I have seen it below 60 Euros, especially during special events such as Black Friday. This price is lower than several competitors.

Variety of Coins:

The Nano S can store the following coins: (note: Fido 2UF is the 2FA app)

Ledger Nano S

 

Where the Nano S falls short

Low Storage Space:

When you want to access your funds on the Nano S, you must open the appropriate application on both your computer and hardware wallet. Unfortunately the Nano S has low storage space so it only allows you to have a handful of apps downloaded at the same time on the device. This does not impact the number of assets you can hold as you can delete and re-download apps without any effects on your money. It is merely an inconvenience.

Applications:

As of right now, most currencies have a separate application on desktop. For example, there are two different applications for Bitcoin and Ether. It would be a lot easier if all the desktop applications were combined into one and you would simply activate individual wallets by opening the appropriate application on your device. This is the way that Trezor does it and that it should be done. I reached out to Ledger’s CEO to ask about the plan to release the new application. He said, “yes,” we are planning to release a new app and “we’ll publish more information this week (blogpost on ledger.fr).” It has now been 3 weeks since he sent that but to be fair Ledger has been busy lately. I would expect the new application to be released soon.

[UPDATE 2/23/2017 – Ledger has released the blog post detailing the new application which is a significant improvement to what they currently have.]

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