Stacking sats, golden nonces & hard forks.
That may sound like the latest chapter in the Harry Potter saga, but the above terms are commonly used in the world of Bitcoin, crypto currencies and blockchain. The workings of this new universe can be devilishly difficult to grasp but also immensely rewarding when the penny finally drops.
For newcomers — sometimes referred to as noobs — the vocabulary can be overwhelming and even off-putting.
The list below should help beginners navigate through this mysterious new digital landscape without looking a fool🦸♀️:
Blockchain: A block is simply a list of transactions (think of a bank statement with all incomings and outgoings) that have taken place on the network. Each block (page) is connected by code, referred to as the chain (a staple holding the pages together).
DeFi: Decentralised Finance. The unruly younger sibling of traditional finance looking to usurp her big brother. Based on smart contracts, decentralisation (obviously) and blockchain technology.
Diamond Hands💎: an investor who doesn’t react to short-term dips and upswings. They’re in it for the long term and don’t let emotion change their investment strategy.
Double spend: since electronic money is digital, if Alice buys a bike from Bob using BTC, what’s to stop her ‘sending’ the money and also keeping it for herself? This is known as the double spend problem.
DYOR: Do Your Own Research. Self-explanatory, really.
Example: Don’t follow the crowd or innocently follow advice from one Youtuber. DYOR.
FOMO (v.): short for Fear Of Missing Out. As blockchain-based assets have received more news coverage, and as inflation continues to rise, more and more retail investors have dipped their toes into the blockchain sphere. A classic trap for beginners is to invest when everyone is talking about a certain asset, with a view to getting aboard the rocket ship before it takes off. The opposite of the old TradFi adage buy the rumour, sell the news. Example: He saw Musk’s tweet and FOMOed in
Fear and Greed index: an invaluable source of information on how other investors are feeling and therefore whether they are likely to buy or sell. See for yourself here.
Flippening: This refers to the possibility that Ethereum may one day replace Bitcoin as the largest cryptocurrency by market cap. No connection to everyone’s favourite TV dolphin.
Golden nonce💸: the golden ticket to getting paid for work on the blockchain. NONCE means number only used once and a golden one is, obviously, special.
For a (much) more technical explanation, click here.
Hard fork: an update to the software, meaning the original blockchain splits in two. An example is Bitcoin Cash, which split from the original Bitcoin blockchain. For a deeper dive🤿, click here. See also: Soft fork below
HODL (v.): the act of holding on to crypto assets through thick and thin. Origin: an alcohol-inspired misspelling of hold in a 2013 post which went viral. Many memes ensued.
Moon 👩🚀(v.): when a digital coin’s price skyrockets, occasionally making millionaires out of students and shop assistants, assuming they don’t HODL for too long… Example: Bitcoin mooned last year but I missed out because Elon said Dogecoin was better
Paper hands: an investor who panics at the sight of a red candle on the charts and flogs all their crypto holdings.
Proof-of-stake:
Rather than using lots of energy to solve a slightly pointless challenge, PoS involves users locking in (staking) some of their cryptocurrency. The more they stake the more likely they are to be chosen to validate a block and then be rewarded. More here.
Proof-of-work (PoW):
If Bitcoin is a hedge against inflation, it would defeat the purpose to just create BTC and hand it out, willy nilly.
With this in mind, Satoshi added a complex mathematical puzzle to proceedings. To be rewarded, participants (miners) need to solve this puzzle using a computer👩💻 and, in doing so, they also produce new blocks on the chain. For a deeper dive, check out this article.
PoW has come in for significant criticism because of the cost of mining and the environmental impact, and this has led to the development of proof of stake…
Rekt: when an investor loses all or most of their money by buying at the top of a bull market and incurring huge losses. Example: I arrived late to the party in 2017 and got rekt
Sats: short for Satoshis, the smallest division of Bitcoin. There are 100 million sats. in a BTC. Typical expression: stacking sats, meaning to gather more BTC in a portfolio
Satoshi: The creator(s) of Bitcoin back in 2008. His/ her/ their real identity is unknown, which is possibly for the best. Inspired by the bank bailouts of 2008, Satoshi set about creating an alternative system inspired by technology, decentralisation and game theory. Read his original white paper here.
Shitcoins: small-cap new digital currencies that are generally thought to have no intrinsic value or use case.
Soft fork🔧: arguably a safer way to upgrade the software than a hard fork. This method is less vulnerable to attack. There is, as always, much more to it and you can find out more here.
a 51% attack: although blockchain-based solutions are highly secure, they are not entirely bullet-proof. If a malicious actor (a group of hackers) wanted to take over a blockchain they would need to take control of 51% or more of the computing power of the blockchain.
There are, of course, many more acronyms and expressions to learn, but if this list has piqued your interest, it may be time to DYOR.
Enjoy the rabbit hole!🐰