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Explore Crypto Terms & Definitions
Cold Wallet
A cryptocurrency wallet that by default is offline (not connected to the internet) and therefore minimises the threat of hacking. Examples are Hard Wallets or Paper Wallets.
Collateralised Debt Position (CDP)
Locking cryptocurrency in a smart contract as collateral against the issue of a stablecoin. For example locking ETH in a MKR DAO smart contract to generate DAI. The ETH can be released once the DAI has been paid back plus interest and a stability fee paid in MKR.
Composability
The chaining together of Defi primitives to create new services, building upon their codebase and combining it with a user-friendly interface.
Confirmation Time
The time taken for a new block of transactions to be confirmed and added to the end of a blockchain. The time taken will depend on the Consensus Mechanism employed. A Bitcoin block confirmation takes roughly 10 minutes, while for Ethereum it is around 15 seconds.
Correction
The term given to a significant decrease in price that abruptly halts a period of prolonged price appreciation.
CPU Mining
The process of adding transactions to a blockchain by performing and solving algorithms using a Central Processing Unit (CPU).
Cryptocurrency
A new kind of internet money with no controlling central authority which is instead uses blockchains to record transactions and issue currency. Blockchains are secured by cryptography and consensus mechanisms, hence the term crypto-currency
Cryptography
The use of codes to ensure information is only accessible by a sender and an intended recipient. Cryptography is a central element of cryptocurrency design, providing security in the absence of a central authority.
Day Trading
A type of trading strategy where all positions are closed before the market trading day to avoid unmanageable risks that can occur between one day’s price close and the next day’s price open. As crypto never closes Day Trading has a slightly different meaning, closer to Swing Trading, taking advantage of short term price fluctuation using Technical Analysis.
Decentralised
The characteristic of a network or organisation that has no central point of authority, decision making is instead delegated to smaller groups or shared across network points (aka nodes). The Bitcoin blockchain enables a money system to be decentralised, taking banks out of the picture, and enabling users to interact directly with each other (P2P).
Collateral
Funds pledged as security against which a crypto loan can be made through a CEFI or DEFI platform. Crypto loans tend to be over-collateralised, meaning the value of the collateral is greater than the loan amount.
Colored Coins
Methods for representing and transacting real world assets on the Bitcoin blockchain.
Confirmation
The process by which new blocks are added to a blockchain, with all nodes confirming the transactions within the block as valid. Confirmations happen as set time intervals which vary depending on the Consensus Mechanism. One Bitcoin confirmation generally takes 10 minutes.
Consensus Mechanism
Describes the process by which a blockchain reaches agreement on the validity of new data being added to the existing chain of information. Examples are Proof-of-Work, Proof-of-Stake and Delegated Proof-of-Stake.
Counterparty Risk
Is the risk that one or more sides in any agreement won't fulfil their obligation. Counterparty risk specific to crypto increases with custodial storage, trading and DEFI, which all require interaction with at least one other party.
Cross-chain
An interaction between different cryptocurrency networks or blockchains. For instance, between the Bitcoin network and the Ethereum network.
Cryptocurrency Exchange
An online service, usually website, mobile app or API, that facilitates for a fee, the exchange of fiat currencies for cryptocurrencies, or the exchange between different cryptocurrencies. There are two exchange models CEX (Centralised Exchange) or DEX (Decentralised Exchange).
Custody
The term used to describe who controls the Private Keys for a cryptocurrency wallet., giving them control over funds. Custodial - Controlled by a 3rd party; Non-custodial - controlled by the individual.
Dead Cat Bounce
A dead cat bounce is an analogy used in trading to describe a quick temporary reversal of an asset that is falling in price. After price bounces temporarily the down trend then resumes. The analogy is based on the notion that even a dead cat will bounce if falling fast enough.
Decentralised Application (Dapp)
An application built on a blockchain, using Smart Contracts to perform the business logic. They have no single point of authority or control, and rely on the consensus mechanism of the underlying blockchain to process transactions.
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