A glossary of Bitcoin jargon you need to know before you invest

bitcoin terminologies banner

If you have stepped into the Nigerian and global crypto space, you might have heard online users say something confusing like HODL, blockchain and Proof of Work. These terms may seem puzzling to a beginner but if you want to invest in crypto, you will need to be familiar with them and other niche jargon.

As time passes and the crypto industry evolves, more terms will only be created. But before you can understand them, you need to know the most basic and used terminologies used in the crypto world. Here, we will explain 15 commonly used Bitcoin jargons 

Bitcoin jargon you need to know before you invest

Most people stay away from crypto because of confusing jargon they’re not familiar with. To help, here are some terms and phrases along with their definitions you will most likely encounter in the world of crypto investing:

Bitcoin relies on a peer-to-peer network which means there is no intermediary needed such as a bank when making transactions. This is possible through the use of the Bitcoin blockchain which is a digital and decentralized ledger that contains sequential blocks of data about each transaction within Bitcoin’s system. Each block relies on the previous one, forming a chain of transactions that is difficult to alter and corrupt.
This term is often used to distinguish between normal currency and cryptocurrencies. Fiat is any form of currency that is backed and issued by a government. Examples of fiat money are the US dollar (USD) and Euro (EUR).
A fork is an alteration of the current blockchain which happens when someone is changing or upgrading the rules. For example, if a community changes its rules, some members may not agree with it. As a result, those who want to follow the new rules will split from those who want to maintain the old rules, creating two sets of communities. When you apply that same idea in the world of crypto, that separation within the community is called forks.

In Bitcoin’s case, the first coin created from a fork was the Bitcoin Cash which was released back in 2017. Since then, numerous coins have been forked from Bitcoin’s blockchain such as Bitcoin Gold and Bitcoin Diamond.

There are various changes that users can make to create a successful fork. For instance, in Bitcoin Cash, the block size was increased from 1 MB to 8 MB to include more transactions in each block. Users who supported this change switched to the new coin while others stuck with the original Bitcoin.

Soft fork
There are two types of crypto forks: hard and soft. Soft forks allow original or old versions of blockchain to function independently while still abiding by the new protocols. To explain further, it means that those who still do not update their blockchain can push and process new transactions as long as they do not break the new rules.

For example, a soft fork makes a new rule of lowering the size of each block from 5 MB to 3 MB. Old users who have not updated their blockchain can still process transactions that are 3 MB or less, but if it tries to add a block that is greater than 3 MB, it will not be considered valid since it violates the new rules.

Hard fork
The hard fork, on the other hand, is not compatible with the original version and requires all participants in the system to upgrade to the new version to continue participating in the blockchain. Otherwise, new transactions will be rejected and will not be added to the blockchain.

A hard fork can be either planned or controversial. In a planned hard fork, all users voluntarily upgrade their software. You may still refrain from updating and stay with the old chain instead but there will only be few people left to use it. If the hard fork is controversial, it means not all users have agreed upon the new protocol, creating two different coins both having their community.

When forking happens, you will have the original coin as well as a new coin that is now running on new rules. You can either decide which one to use or use both. However, make sure to check the validity of the forked cryptocurrency before claiming it. Some forks can be a scam that is done to steal users’ real coins during the process of claiming them.

FOMO buy
The acronym FOMO stands for fear of missing out which is one of the reasons why crypto investors buy coins while in the middle of fluctuations. For instance, if the value of Bitcoin rises rapidly, you will buy it in fear of missing out on the profit growth.
FUD is another term used when investing in Bitcoin which stands for fear, uncertainty and doubt. The crypto community has embraced this acronym since it is often used when certain market fluctuations make nervous investors doubt the value of the coin. Sometimes, Bitcoin holders will say ‘HODL on your Bitcoins despite the FUD you are feeling.’
There is a finite supply of Bitcoin which is set at 21 million. To make it last longer, the creator of Bitcoin, Satoshi Nakamoto wrote on the blockchain code that the mining reward will be cut in half every 210,000 blocks or roughly every 4 years.

The first Bitcoin halving event happened back in 2010 while the final halving event will take place in 2140. Halving is done to maintain scarcity which can create a huge impact on Bitcoin’s value.

HODL is simply a misspelling of the word ‘hold’ from a Bitcoin forum post of a drunk trader in 2013. Due to the humorous post, people in the crypto community turned it into an acronym meaning ‘Hold on for Dear Life’. It soon became one of the most popular crypto jargon which reassures nervous traders whenever they see a slump in the current market, urging them to HODL and not sell for profit.

Those willing to ride Bitcoin’s volatility are called ‘hodlers’ who use the new passive trading strategy where investors buy and hold onto Bitcoin instead of selling and profiting from short-term trades. To HODL, you need to hold on to your Bitcoins regardless of any positive or negative fluctuations that may happen in the market, in hopes of an increase in their value in the future.

There are two common approaches when it comes to HODLing. One way is to hold your coins until you reach a certain target amount before you sell them. Another way is to hold on to your Bitcoins until it becomes a widely accepted medium of exchange.

KYC is an acronym that stands for Know Your Customer which is a process that involves verifying your identity before you can transact within the system. When you register for an account in exchange platforms, you have to provide personal information such as your ID and social security number to prevent illegal activities such as money laundering and tax evasion.
Bitcoin mining is the process of creating and distributing new coins as well as updating the blockchain by solving complex mathematical problems with the use of powerful computers. Miners will race to perform these various computational processes and upload the block to the chain. The first miner to successfully do so will be rewarded with newly minted Bitcoin as a payment for the work they have done.
Proof of Work
Proof of Work (PoW) is the basis of the blockchain on who gets the block rewards for the newly mined block. It requires a miner to solve for a difficult variable instead of an easy computational problem which makes the process become a competition. With this, the successfully mined block is considered Proof of Work and the first miner who is responsible for mining it gets the reward in the form of new Bitcoins.
Satoshi Nakamoto is a pseudonym for the person or persons who created Bitcoin. Apart from that, the name also refers to the smallest fraction of Bitcoin that can be bought and sold, which is at 0.00000001. Expert traders look at Bitcoin in terms of sats or satoshis instead of converting its value into dollars.
Wallet (cold and hot)
The only way to store your crypto is through the use of a crypto wallet which is encrypted storage that can be either cold or hot. Cold wallets, also known as hardware wallets or cold storage are physical devices that look like a USB flash drive. It can help you protect your crypto from cyberattacks because they’re not connected to the internet which is easily accessible to hackers

A hot wallet on the other hand is connected to the internet which makes it more convenient if you want to quickly access your crypto and use crypto exchanges. It is called ‘hot’ since you can access your coin and payout withdrawals almost instantly.

Weak hands
‘Weak hands’ is a phrase used for people who panic-sell their coins as a response to the market jitters. This is often used to describe nervous crypto newbies that can’t handle the volatility of the coin. Some weak hands even switch to altcoins or cryptocurrencies other than Bitcoin amid a tumble in its value, thinking it will never go up again.
Whales are crypto investors who hold huge amounts of assets and have the power to move prices for every large transaction they make. For example, whenever whales buy huge amounts of a certain coin, its price skyrockets but if they sell a large amount, the price will drop just as steeply. They can buy large coins enough to incite panic buying or sell coins large enough to make other investors panic sell.
bitcoin trading image

Useful Bitcoin trading tips you should know

If you are interested in buying and selling Bitcoin, there are some key steps you should follow as you venture into the world of Bitcoin trading. Check them out below:

Pick the trading platform that works for you
One of the reasons why cryptos are so popular is due to the various crypto trading platforms to choose from. Picking the best platform for you depends on various factors such as your country, preferred method of payment, fees and so on. Some of the top crypto exchanges in the world are Binance, Coinbase, eToro and Gemini.
Get the best crypto wallet
Getting a crypto wallet is vital since this is where you will store your coins as well as transfer your coins back and forth. You can use the wallets offered by crypto exchanges or get your separate crypto wallet instead. However, make sure that the crypto wallet you will get is secured and reliable.
Deposit fund you are not afraid of losing
Once you have signed up to your chosen crypto trading platform and have gotten your crypto wallet, you now have to fund your account. Most crypto exchange platforms such as Coinbase and Gemini offer bank funding through wire transfer and debit cards. However, remember that investing in crypto does not guarantee large profits so make sure you only deposit funds you are not afraid of losing.
Pick a strategy
Since the crypto market is highly volatile, having a trading plan is vital to highly profit from your investments. Following a certain trading strategy or creating one yourself is one of the best ways to become a successful trader.

Learn more about Bitcoin here at Bitcasino

There are key steps you should take before you dwell into crypto such as what we have mentioned above. The most important is that you deeply understand the ins and outs of the crypto market, including the jargon often used in buying, selling and analyzing digital assets. If you are interested in learning more about cryptocurrency, check out more crypto articles here at Bitcasino.

Cryptocurrency Centric English