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    Crypto Trading Terminology

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    Ilya Krupin
    CEO, HiCoTrading.com

    Crypto trading is an activity the process, during which no new value is created, so someone always wins and someone loses. Therefore, the better you understand the question, the more chances you have to win. In a sense, playing on the stock exchange is similar to playing in a casino – you risk losing all the money. However, unlike a casino, an exchange player can increase their chances of winning using their knowledge.

    The modern internet and specialized websites are overwhelmed with the hi-tech vocabulary terms, and even enjoying some light read on your favorite news resource you often face down the words you never knew before. Don’t waste time each moment you run into such a situation – as we are here to help you. Check out our full list of crypto trading terminology – and engage into any activity being fully ready!

    Let’s take the alphabetic approach for our task:

    Airdrop – distribution of a cryptocurrency token or coin, usually for free, to a large number of wallet addresses. Airdrops are primarily implemented as a way of gaining attention and new followers, resulting in a larger user-base and a wider disbursement of coins.

    AI – Artificial intelligence, sometimes also called machine intelligence – stands for intelligence demonstrated by machines, in contrast to the natural intelligence displayed by humans and other animals. In computer science AI research is defined as the study of “intelligent agents”: any device that perceives its environment and takes actions that maximize its chance of successfully achieving its goals. Colloquially, the term “artificial intelligence” is applied when a machine mimics “cognitive” functions that humans associate with other human minds, such as “learning” and “problem solving”.

    Altcoin – the term has various similar definitions. Stephanie Yang of The Wall Street Journal defined altcoins as “alternative digital currencies,” while Paul Vigna, also of The Wall Street Journal, described altcoins as alternative versions of bitcoin. Aaron Hankins of the MarketWatch refers to any cryptocurrencies other than bitcoin as altcoins.

    Arbitrage-actions of a speculative nature, when a currency is purchased on one exchange, with a lower rate at the moment and sold on another exchange, where the rate is higher.

    ATMs – Jordan Kelley, founder of Robocoin, launched the first Bitcoin ATM in the United States on 20 February 2014. The kiosk installed in Austin, Texas is similar to bank ATMs but has scanners to read government-issued identification such as a driver’s license or a passport to confirm users’ identities.

    Atomic Swaps – a mechanism where one cryptocurrency can be exchanged directly for another cryptocurrency, without the need for a trusted third party such as an exchange.

    Bulls – market players who conduct transactions for the purchase and moving up the market.

    Bears – market players who conduct sales transactions and thereby reduce the rate.

    Blockchain – originally block chain, is a growing list of records, called blocks, which are linked using cryptography.Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data (generally represented as a merkle tree root hash).

    By design, a blockchain is resistant to modification of the data. It is “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way”. For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for inter-node communication and validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without alteration of all subsequent blocks, which requires consensus of the network majority. Although blockchain records are not unalterable, blockchains may be considered secure by design and exemplify a distributed computing system with high Byzantine fault tolerance. Decentralized consensus has therefore been claimed with a blockchain. Blockchain was invented by Satoshi Nakamoto in 2008 to serve as the public transaction ledger of the cryptocurrency.

    Bitcoin – cryptocurrency, a form of electronic cash. It is a decentralized digital currency without a central bank or single administrator that can be sent from user-to-user on the peer-to-peer bitcoin network without the need for intermediaries.

    Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain. Bitcoin was invented by an unknown person or group of people using the name Satoshi Nakamoto and released as open-source software in 2009. Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services. Research produced by the University of Cambridge estimates that in 2017, there were 2.9 to 5.8 million unique users using a cryptocurrency wallet, most of them using the Bitcoin.

    Byzantine fault tolerance – Byzantine fault tolerance (BFT) is the dependability of a fault-tolerant computer system, particularly distributed computing systems, where components may fail and there is imperfect information on whether a component has failed. In a “Byzantine failure”, a component such as a server can inconsistently appear both failed and functioning to failure-detection systems, presenting different symptoms to different observers.

    It is difficult for the other components to declare it failed and shut it out of the network, because they need to first reach a consensus regarding which component has failed in the first place. The term is derived from the Byzantine Generals’ Problem, where actors must agree on a concerted strategy to avoid catastrophic system failure, but some of the actors are unreliable. Byzantine fault tolerance has been also referred to with the phrases interactive consistency or source congruency, error avalanche, Byzantine agreement problem, Byzantine generals problem, and Byzantine failure.

    Bounty campaign – advertising campaigns that are carried out with the involvement of users of thematic forums and groups in social networks. The main task of the bounty is to increase awareness of the brand being promoted and to involve investors in the process of buying tokens. Participants in bounty campaigns receive rewards from the company for their actions, most often in the same tokens.

    Buy back – the redemption of the token Issuer with the holders of tokens. Terms of redemption may be different and must be agreed in advance.

    Decentralization – the process by which the activities of an organization, particularly those regarding planning and decision-making, are distributed or delegated away from a central, authoritative location or group. Concepts of decentralization have been applied to group dynamics and management science in private businesses and organizations, political science, law and public administration, economics, money and technology.

    Decentralized exchange – or (DEX), is a cryptocurrency exchange which operates in a decentralized way, i.e., without a central authority. Decentralized exchanges allow peer-to-peer trading of cryptocurrencies.

    DAICO – A DAICO is an alternative to the ICO fundraising framework, and it includes several aspects of Decentralized Autonomous Organizations (or DAO’s). Proposed by Vitalik Buterin in January 2018, the idea is aimed at increasing an ICO’s security while increasing the involvement of investors in the actual development process of the project. Moreover, token holders have the capability of voting for a refund if progress is not being made within expected bounds. This increases the level of accountability for developers, who have very few or no formal obligations in the established ICO model.

    The three basic elements of a DAICO are:
    1. The concept is decentralized – decisions are made within the democratic system of voting.
    2. The funding mechanism is implemented not at once, but over time.
    3. There is an opportunity for a refund.

    Digital currency (digital money, electronic money or electronic currency) – a type of currency available in digital form (in contrast to physical, such as banknotes and coins). It exhibits properties similar to physical currencies, but can allow for instantaneous transactions and borderless transfer-of-ownership. Examples include virtual currencies and cryptocurrencies and central bank issued money accounted for in a computer database (including digital base money). Like traditional money, these currencies may be used to buy physical goods and services, but may also be restricted to certain communities such as for use inside an online game or social network.

    Distributed ledger – also called a shared ledger( or distributed ledger technology or simply DLT) is a consensus of replicated, shared, and synchronized digital data geographically spread across multiple sites, countries, or institutions. There is no central administrator or centralized data storage.

    Darknet markets – A darknet market or cryptomarket is a commercial website on the web that operates via darknets such as Tor or I2P.They function primarily as black markets, selling or brokering transactions involving drugs, cyber-arms, weapons, counterfeit currency, stolen credit card details, forged documents, unlicensed pharmaceuticals, steroids, and other illicit goods as well as the sale of legal products. In December 2014, a study by Gareth Owen from the University of Portsmouth suggested the second most popular sites on Tor were darknet markets.

    Dom – a list of current orders from market participants. The glass allows you to assess the supply and demand in the market at a given time.

    Dump – the collapse of the course, which is provoked by individual market participants in their trade.

    Cap:

    (hard cap) – the maximum amount of funds that will be collected in the process of crowdfunding.

    (soft cap) – the amount of funds that will be enough for the development of the main products and services of the startup.In cryptocurrency, the plug is defined differently, as

    Crowdfunding – is the practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the Internet.Crowdfunding is a form of crowdsourcing and alternative finance. In 2015, a worldwide estimate totaling over US$34 billion was raised by crowdfunding.

    Crowdsale – another way of raising funds in the blockchain the project through the sale of coins or tokens in the system. Unlike ICO, buyers of tokens do not plan to receive profit from them, but buy tokens for further use in the project system for work. These tokens are not regulated by the SEC, as it does not fall under the securities Law of the United States.

    Cryptography – Cryptography or cryptology (from Ancient Greek: κρυπτός, translit. kryptós “hidden, secret”; and γράφειν graphein, “to write”, or -λογία -logia, “study”, respectively is the practice and study of techniques for secure communication in the presence of third parties called adversaries.More generally, cryptography is about constructing and analyzing protocols that prevent third parties or the public from reading private messages; various aspects in information security such as data confidentiality, data integrity, authentication, and non-repudiation are central to modern cryptography. Modern cryptography exists at the intersection of the disciplines of mathematics, computer science, electrical engineering, communication science, and physics. Applications of cryptography include electronic commerce, chip-based payment cards, digital currencies, computer passwords, and military communications.

    Ethereum – an open-source, public, blockchain-based distributed computing platform and operating system featuring smart contract (scripting) functionality. It supports a modified version of Nakamoto consensus via transaction-based state transitions.

    Escrow – wallets of intermediaries that are used to store funds collected at the ICO. The company can receive funds in parts, according to a developed and approved roadmap, and only after the full implementation of the previous stage. Keeping funds in Escrow accounts is an additional guarantee for ICO participants against fraud on the part of the creators of the project.

    Fiat-traditional money, national, world currencies (USD, EUR, etc.).

    Cryptocurrency – a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets. Cryptocurrencies are a kind of alternative currency and digital currency (of which virtual currency is a subset). Cryptocurrencies use decentralized control as opposed to centralized digital currency and central banking systems.

    Crypto Exchange – Cryptocurrency exchanges allow customers to trade cryptocurrencies for other assets, such as conventional fiat money, or to trade between different digital currencies.

    Candle– symbol of price movement for a certain period of time. Used on charts to display rates. The most informative method compared to other types of charts.

    Hash function – is any function that can be used to map data of arbitrary size to data of a fixed size. The values returned by a hash function are called hash values, hash codes, digests, or simply hashes. Hash functions are often used in combination with a hash table, a common data structure used in computer software for rapid data lookup. Hash functions accelerate table or database lookup by detecting duplicated records in a large file. One such application is finding similar stretches in DNA sequences. They are also useful in cryptography. A cryptographic hash function allows one to easily verify that some input data maps to a given hash value, but if the input data is unknown, it is deliberately difficult to reconstruct it (or any equivalent alternatives) by knowing the stored hash value. This is used for assuring integrity of transmitted data, and is the building block for HMACs, which provide message authentication.

    Hamster – a newcomer to the cryptocurrency exchange, who understands the situation a little, makes decisions rashly, trades at random without taking into account the main features of the market, analysis and any forecasts.

    Haircut – an event where funds from the” hamsters ” go to experienced players. Most often, this drain funds hamsters owing to provocations, false movement prices.

    Fork – different parties must use common rules to maintain the history of the blockchain. The forks (in the sense of Protocol change) were used to add new features to the blockchain, reverse the effects of hacking or catastrophic blockchain errors, as was the case with the bitcoin fork on August 6, 2010, or the fork between Ethereum and Ethereum Classic. It is noteworthy that blockchain forks were widely discussed in the context of the bitcoin scalability problem.

    Forks can be random or intentional. A random fork occurs when two or more miners find a block almost simultaneously. The fork is allowed when subsequent blocks are added and one of the chains becomes longer than the alternative. The network drops blocks that are not in the longest chain (they are called lost blocks).

    Intentional forks that change the rules of the blockchain can be classified as follows:

    Hard fork

    Hard fork-this is a change in the rules, in which the program, checking the old rules, will be considered blocks created by the new rules, invalid. In the case of a hard fork, all nodes designed to operate under the new rules must update their software.

    If one host group continues to use the old software while other hosts use the new software, a split can occur. For example, Ethereum had a hard time “gathering” investors in the DAO who had been hacked using a vulnerability in its code. In this case, the fork led to a split, creating the Ethereum and Ethereum Classic chains. In 2014, the Nxt community was asked to consider a hard fork that would roll back blockchain records to mitigate the consequences of stealing 50 million NXT from a major cryptocurrency exchange. The hard fork offer was rejected, and part of the funds were returned after negotiations and payment of the ransom.

    Alternatively, to prevent permanent partitioning, most nodes using the new software may revert to the old rules, as was the case with bitcoin partitioning on March 12, 2013.

    Soft fork

    Unlike hard forks, soft fork is changing the rules that creates the blocks, validated the old software, i.e. backwards compatible. As for the hard fork, the soft fork can also split the blockchain when non-updated software creates blocks that are not considered valid under the new rules.

    Futures (futures contract) – a special instrument that is used on the exchange. This tool allows you to quickly buy or sell any asset. At the conclusion of this kind of transaction, both parties agree only on the level of prices for the future

    ICO – initial coin offering or ICO is a type of funding using cryptocurrencies. Mostly the process is done by crowdfunding but private ICO’s are becoming more common. In an ICO, a quantity of cryptocurrency is sold in the form of “tokens” (“coins”) to speculators or investors, in exchange for legal tender or other cryptocurrencies such as Bitcoin or Ethereum. The tokens sold are promoted as future functional units of currency if or when the ICO’s funding goal is met and the project launches. In some cases like Ethereum the tokens are required to use the system for its purposes.

    An ICO can be a source of capital for startup companies. ICOs can allow startups to avoid regulatory compliance and intermediaries such as venture capitalists, banks and stock exchanges. ICOs may fall outside existing regulations, depending on the nature of the project, or be banned altogether in some jurisdictions, such as China and South Korea.

    ICOs have been prone to scams and securities law violations. Fewer than half of all ICOs survive four months after the offering, while almost half of ICOs sold in 2017 failed by February 2018. Despite their record of failure and the falling prices of cryptocurrencies, a record $7 billion was raised via ICO from January–June 2018.

    IPO – Initial public offering or stock market launch is a type of public offering in which shares of a company are sold to institutional investors and usually also retail (individual) investors; an IPO is underwritten by one or more investment banks, who also arrange for the shares to be listed on one or more stock exchanges. Through this process, colloquially known as floating, or going public, a privately held company is transformed into a public company. Initial public offerings can be used: to raise new equity capital for the company concerned; to monetize the investments of private shareholders such as company founders or private equity investors; and to enable easy trading of existing holdings or future capital raising by becoming publicly traded enterprises.

    KYC – Know your customer, alternatively known as know your client or simply KYC, is the process of a business verifying the identity of its clients and assessing potential risks of illegal intentions for the business relationship. The term is also used to refer to the bank regulations and anti-money laundering regulations which govern these activities. Know your customer processes are also employed by companies of all sizes for the purpose of ensuring their proposed agents, consultants, or distributors are anti-bribery compliant. Banks, insurers and export creditors are increasingly demanding that customers provide detailed anti-corruption due diligence information.

    Longs – trading for long periods, profit is stretched for a long period of time (week, month, etc.).)

    Market correction – price movement directed in the opposite direction from the main trend/trend.

    Merkle Tree – in cryptography and computer science, a hash tree or Merkle tree is a tree in which every leaf node is labelled with the hash of a data block and every non-leaf node is labelled with the cryptographic hash of the labels of its child nodes. Hash trees allow efficient and secure verification of the contents of large data structures. A Merkle tree is recursively defined as a binary tree of hash lists where the parent node is the hash of its children, and the leaf nodes are hashes of the original data blocks.
    The concept of hash trees is named after Ralph Merkle who patented it in 1979.

    Mining – in cryptocurrency networks, mining is a validation of transactions. For this effort, successful miners obtain new cryptocurrency as a reward. The reward decreases transaction fees by creating a complementary incentive to contribute to the processing power of the network. The rate of generating hashes, which validate any transaction, has been increased by the use of specialized machines such as FPGAs and ASICs running complex hashing algorithms like SHA-256 and Scrypt.

    This arms race for cheaper-yet-efficient machines has been on since the day the first cryptocurrency, the Bitcoin, was introduced in 2009.With more people venturing into the world of virtual currency, generating hashes for this validation has become far more complex over the years, with miners having to invest large sums of money on employing multiple high performance ASICs. Thus the value of the currency obtained for finding a hash often does not justify the amount of money spent on setting up the machines, the cooling facilities to overcome the enormous amount of heat they produce, and the electricity required to run them.

    MVP – Minimum Viable Prototype or product minimum viable is a product with just enough features to satisfy early customers, and to provide feedback for future product development.

    Node – a basic unit used in computer science. Nodes are devices or data points on a larger network. Devices such as a personal computer, cell phone, or printer are nodes. When defining nodes on the internet, a node is anything that has an IP address. Nodes are individual parts of a larger data structure, such as linked lists and tree data structures. Nodes contain data and also may link to other nodes. Links between nodes are often implemented by pointers.

    P2P– Peer-to-peer computing or networking is a distributed application architecture that partitions tasks or workloads between peers. Peers are equally privileged, equipotent participants in the application. They are said to form a peer-to-peer network of nodes.

    Reversal -a situation where the movement of the pair changes direction. For example, the cryptocurrency grew and after reaching a certain level of resistance began to decrease.

    Resistance – the price level at which the rate stops growing and a reversal occurs. At this level, there are active sales, the market becomes more supply than demand, and the price falls.

    Roadmap – technology roadmap is a flexible planning technique to support strategic and long-range planning, by matching short-term and long-term goals with specific technology solutions. a plan for the implementation of the planned stages of development of the project with agreed deadlines for the completion of each stage. Investors see when there will be a working version of the project and in what terms it is planned to receive the first profit or the possibility of implementing tokens on the exchanges. It is part of the White Paper.

    Satoshi Nakamoto – is the name used by the unknown person or people who developed bitcoin, authored the bitcoin white paper, and created and deployed bitcoin’s original reference implementation. As part of the implementation, they also devised the first blockchain database. In the process, they were the first to solve the double-spending problem for digital currency using a peer-to-peer network. They were active in the development of bitcoin up until December 2010.

    STO – short for Security Token Offering, is a new method of raising funds for startups in which the company issues security tokens to the investor instead of utility ones. These security tokens act as a legally binding smart contract between each investor and the company and chalks out the role each side is expected to play and what are their duties.

    A security token is a token that is issued in a similar setting as an ICO, in the fact that it is bought from the company on a platform during a particular day. But the token is actually a legally binding agreement that ensures the company fulfils its side of the bargain while keeping the investors as involved as possible. Making it more of a responsibility for the investor rather than simply a remote investment.

    Buying of a security token assures the investor the following:

    * Company shares
    * Monthly Dividends
    * Voice in Decision Making

    This means that the investor is a contributing shareholder in the company. And that the company is liable to them and the goals they have promised must be achieved in the stipulated time period provided by the company itself.

    The only downside to the entire STO process is the loss of decentralisation of the environment. The environment loses its decentralisation because there is a large amount of accountability and there are stakeholders and shareholders to answer to. But the other things remain the same and is actually a more scalable and secure way of investing in startups from the cryptocurrency market and blockchain industry.

    Short – in cryptoworld, trading for short periods of time on sharp movements of the rate.

    SCAM – fraud. The Scam in the ICO is called any projects that are not designed for actual work and launch of the product, but for raising funds from investors-victims. Among the companies attracting investment by offering the tokens, the number skalnych greater than 95%. This situation is due to the relative safety of fraudsters in this area and the lack of effective legislation to protect investors in most countries. Even if the investor receives tokens for which he paid, later, when it turns out that the organizers disappeared, and work on the project is not conducted, the cost of these tokens falls to zero.

    SEC (Securities and Exchange Commission) – the Commission on securities and stock exchanges of the USA. The Commission regulates the ICO market in the US, as the tokens placed in this way are equated to securities there. Due to regulation by the SEC, participation in ICO is often prohibited to US citizens.

    Support line – the price level at which the rate falls stops and a reversal occurs. At this level, buyers enter the market, demand increases, and the price increases.

    Trend – indication of the direction of price movement. There are few types of it:

    Uptrend – each next maximum of the price is higher than the previous one – the price is growing;

    Downtrend – each following maximum prices below the previous price falls;
    Sideways trend or flat – shows the balanced state of the market.

    Proof-of-Work – (PoW) system is an economic measure to deter denial of service attacks and other service abuses such as spam on a network by requiring some work from the service requester, usually meaning processing time by a computer. The concept was invented by Cynthia Dwork and Moni Naor as presented in a 1993 journal article.The term “Proof of Work” or PoW was first coined and formalized in a 1999 paper by Markus Jakobsson and Ari Juels. An early example of the proof-of-work system used to give value to a currency is the shell money of the Solomon Islands.

    Pump – pumping the market with volume transactions, which entails the reaction of less informed players who enter the market and support the movement. The pump ends with a dump.

    Token – payment means of the company conducting crowdsale, which can be used to implement various functions. ICO members buy tokens in exchange for different types of cryptocurrencies (most often Ethereum) or fiat currencies. The possession of tokens can give their owners the right to:

    • to receive income (if provided);
    • to vote (if provided);
    • to profit from selling them to other users through various cryptocurrency exchanges.

    Some companies provide the possibility of tokens (buyback).

    To the moon – when the course flies “to the moon”, that is, there is a very sharp increase in the rate.

    Stop-loss-a pending “parameter” of an order placed in the trading terminal by a trader or investor in order to limit (fix) its losses when the price reaches a predetermined level. Fixation of loss (vs. Take-profit.)

    Take-profit – a pending order, with which the trader can specify in advance at what level you want to close a profitable position, the Order (transaction) — the action of buying or selling on the exchange at a certain price.take profit (vs. Stop loss). Support line — the level of supply and demand at which traders and investors believe that price reduction is impossible below this level.

    Volatility – sharp price movements with a large amplitude.

    Wallet – a cryptocurrency wallet stores the public and private “keys” or “addresses” which can be used to receive or spend the cryptocurrency. With the private key, it is possible to write in the public ledger, effectively spending the associated cryptocurrency. With the public key, it is possible for others to send currency to the wallet.

    Whale – the “fat cat” of crypto markets. A professional and experienced market participant with substantial capital to influence the market.

    Whitepaper – the main project document containing a business plan, principles of the product, a description of the token and its capabilities, the role of users and their capabilities, the roadmap and the project team, forecasts and prospects, market niche review.