If you are a new to crypto, I’m sure certain words would leave you scratching your head, some might even frustrate you. This short article seeks to explain some terms I use often in my analysis of tokens and coins, in the simplest of way possible. If you are a total newbie, we have a detailed newbie page dedicated to crypto beginners.
A coin is a store of digital value that exists on a and blockchain or cryptocurrency network. Some cryptocurrencies share the same name for both the network and the coin. Take for example, Bitcoin. Others may have different names for each, like the Ethereum blockchain, which has a native coin called ether.
The word token is one of the most popular words in the industry. It has a broad meaning as many people use it, as a matter of context. I don’t want to further bombard you with double meanings of words. So, I’d define it by it most common use case.
Tokens are cryptoassets or cryptocurrencies that run on top of another cryptocurrency’s blockchain. You’ll encounter this usage if you become interested in decentralized finance (or DeFi). While a cryptocurrency like Bitcoin has its own dedicated blockchain, DeFi tokens like Dai and ENJ run on top of, or leverage, an existing blockchain, most commonly Ethereum and recent Binance blockchain.
white paper is an informational document usually issued by a company or not-for-profit organization to promote or highlight the features of a solution, product, or service that it offers or plans to offer.
Crypto market capitalization is the total value of a cryptocurrency. Crypto market capitalization is calculated by multiplying the price of the cryptocurrency by the number of coins in circulation.
A liquidity pool is simply the amount of cryptocurrencies locked into a smart contract by it developers to enable investors or traders trade the assets on a decentralized exchange (DEX).
The word ‘tokenomics’ is a portmanteau, made up of two words: token and economics. Therefore, tokenomics is basically token economics or crypto economics. It is the study of the economics of a particular crypto token – from its qualities to its distribution and production.
Pump and Dump
A pump and dump is a scam usually involving crypto. Scammers create false hype about a stock in order to generate interest. Once investors start buying shares, the price of the stock goes up. When the price reaches a certain point, the scammers behind the fake hype sell all of their shares.
A “rug pull” in cryptocurrency circles, occurs when a token’s creators abandon the project by exchanging many virtual coins for real-world cash.
Shilling is the advertising of a cryptocurrency by someone with either status or reputation or someone who is trying to promote a project. — A shill will want to draw attention to the project so that investors flood to the cryptocurrency, raising the demand and spiking the price.
A honeypot is a smart contract that pretends to leak its funds to an arbitrary user (victim), provided that the user sends additional funds to it. However, the funds provided by the user will be trapped and at most the honeypot creator (attacker) will be able to retrieve them.