This post will be constantly updated. It is an alphabetical list of terms I use and abbreviations. It is for the layman to understand financial and crypto jargon. If you see a definition here that you think may be incorrect or could be refined. Please leave a comment. I hope to be constantly editing this page. Also if you can think of a term that should be included in this list, comment the term and definition, and if I add it, your account will be permanently credited on this page. Forever.
This post is also separated into Crypto terms, Financial terms, and General Terms.
Crypto
Airdrop - An airdrop is a distribution of a cryptocurrency token or coin, usually for free, to numerous wallet addresses. This can be done for several reasons. New projects can use airdrops to attract attention and hopefully users - this is the spam of the crypto world. Anyone with a Ethereum wallet will have experienced opening it to find they now own an array of ERC-20 tokens they have never heard of, almost all of which will never be worth anything. Some existing protocols, such as Algorand, use airdrops as the distribution mechanism for newly mined tokens, ensuring inflation is proportionally distributed. Airdrops can be used to reward users that have placed tokens within liquidity pools or other DeFi instruments. Any such distribution of tokens is an airdrop. (Provided by user 11279)
CEx - Centralized Exchange; These are crypto exchanges that are run by traditional companies, they have a mailing address, discrete employees, and can be targeted for regulation by governments. They also have a lower barrier for entry and are good starting places for people to turn fiat into crypto. Examples are Coinbase, Crypto.com, Binance, KuCoin, Kraken, etc.
Composable (Composability) - The ability for a token to be utilized in another contract on the same token layer. A stablecoin is considered composable if it can be deployed in DeFi. Creating a new token on a chain is only of value if the token is composable.
Custodial Wallet - A custodial wallet is a 3rd party wallet that takes custody of crypto on your behalf. Your crypto is not actually in your possession if you are using a custodial wallet. Coinbase, Binance, and Crypto.com are all examples of platforms with custodial wallets. You do not possess neither the key file, nor the seed phrase for the wallet, and do not have ultimate control over your coins.
DAO - Decentralized Autonomous Organization; This is an organization that exists entirely on the blockchain. You can consider these to be the LLC’s of the blockchain. DAO’s typically exist to manage governance of decentralized entities. The most common usage of DAO’s right now is to manage Decentralized protocols. So for instance, a Decentralized Exchange will usually have a governance token, and when a user submits a vote to enact a change, all token holders are given a vote. If the vote passes, the DAO usually has a treasury fund which is deployed to pay a developer to code the new changes in. This allows the DAO to function without any discernible leader or head. So long as it operates in this way, it is completely immune to any attack vectors or weakness. Look at how Apple has fallen after the death of Steve Jobs. What will be left of Tesla after Elon is no longer there? A DAO transcends these risks while simultaneously being completely above reach of government regulation or most venues of control. As options for decentralized web hosting rise, they will even soon be outside of the reach of Amazon through AWS. This is the future of freedom, and the future of capitalism.
DeFi - Decentralized Finance; these are activities that occur directly on the blockchain and are coded replications of real financial activities that might be handled by a bank or financial entity in the real world. Some examples are decentralized lending, decentralized leveraged contract trading, decentralized mortgages, Decentralized exchanges, Decentralized collectors items, and there are a lot more. Anything a bank can do, can be replicated with code and the middle man entirely cut out. In a decade, essentially every bank that does not significantly adjust to this reality will find itself in a shallow grave.
Degen - Short for degenerate. Referencing any and all tactics deployed in the crypto space that are not long term disciplined investments based on value propositions but are instead the acts of a man simply trying to extract wealth.
DEx - Decentralized Exchange; These are crypto exchanges that are coded entirely on an L1 blockchain and exist purely in code with no physical address, bank account, or any attack vectors for governments to target for regulation.
EVM - Ethereum Virtual Machine; It's the environment in which all Ethereum accounts and smart contracts live. At any given block in the chain, Ethereum has one and only one 'canonical' state, and the EVM is what defines the rules for computing a new valid state from block to block. When something is EVM-compatible, that means that it can mesh with the EVM fairly simply, which allows for bridges to connect assets in and out to other blockchains.
gWei - gWei is short for gigawei, or 1,000,000,000 wei. Wei, as the smallest (base) unit of ether. It takes a great many wei to make an ETH; 10^18 wei, to be exact; and 10^9 wei is a gwei. 1 ether = 1,000,000,000 gwei (109). 1 gwei = 0.000000001 ether. gWei is typically the smallest denomination of Ethereum that is discussed because gas prices for Ethereum can be much more easily understood in terms of gWei than in ETH, or at least that may have been true prior to 2020.
ICO - Initial Coin Offering; This is similar to an IPO, just in the crypto space instead of stock markets. ICO’s typically announce a fixed price and fixed quantity to be sold after which the coin will either follow a fixed emission/inflation/release schedule.
IDO - Initial DEx offering; These projects launch their coin or token via a defined sale period on a decentralized liquidity exchange. IDOs are generally considered a "more fair" way to launch a new project as they avoid pre-mining and are more decentralized. Tokens launched this way have immediate liquidity because they are already on the DEx, whereas tokens purchased via ICO will typically have a period of months to years without liquidity while investors wait for them to be listed on a CEx or DEx. (provided by user 11279)
Layer 0 - Layer 0 is the underlying architecture that a blockchain can be coded upon. It isn’t an actual blockchain per se, more an agreed upon toolbox that everything coded on this Layer 0 will use. $DOT and $ATOM are examples of this. Anything coded on a Layer 0, can by definition interact with everything else coded on the Layer 0 because they already have agreed upon how to interact and communicate with each other. Abbreviated as L0
Layer 1 - Layer 1 is an actual blockchain that settles transactions. Bitcoin, Ethereum, Solana, Binance Coin, are all examples of a Layer 1. Protocols on Layer 1 are typically referred to as “coins.” Layer 1 is the final settlement layer for transactions. Abbreviated as L1
Layer 2 - Layer 2 is a protocol coded on top of a Layer 1. Protocols on Layer 2 are typically referred to as “tokens.” A Layer 2 is best considered as an overlaying network that settles all of its final transactions on the Layer 1. This can be done for almost an infinite number of things. Maybe the Layer 1 is congested, and the Layer 2 aggregates all of its transactions into only a single transaction on the layer 1 allowing for extremely cheap activities. Or maybe, the Layer 2 has functions to enable smart contracts and has a final settlement transaction on the Layer 1 which does not have smart contracts. Layer 2’s can be created for all sorts of reasons, but they are best understood as a protocol that has been coded on top of an existing Layer 1 and resolves its changes in status into a single transaction on the Layer 1. Abbreviated as L2
Mercenary Capital - Investors with no allegiance to anyone else but themselves and their own profit.
Non-Custodial Wallet - A wallet that you as the owner have ultimate control over with no 3rd parties able to perform any action on coins currently assigned to your wallet address unless you mistakenly give them access to your wallet. You will either have the key file saved on a device or on your computer, or you will have possession of the seed phrases and ability to mirror the wallet and access it from any device.
Rug - Short for Rug-pull. This is when promises are made about what a crypto project will do in order to attract investment and then the developers siphon funds out of the protocols treasury/wallet and abandon development. Some rug-pulls take the form of a new token launch on ETH or another platform, and users are incentivized to buy the new token with their ETH. Once enough ETH has been accumulated by the devs, they disappear. They have your ETH, you have their worthless token and empty promises.
Satoshis - A satoshi is the smallest unit of a bitcoin, equivalent to 100 millionth of a bitcoin. Abbreviated as “Sats.”
Stablecoin - Typically an L2 that is coded to have a fixed value that is pegged against a known asset. The most common stablecoins are pegged against currencies such as a the dollar, pound, or Euro. Other stablecoins exist to be pegged against the price of Gold, silver, or other assets as well.
TVL - Total Value Locked; this is the total dollar value of all assets locked on a DeFi protocol. This is one variable that can be used to measure the health of a DeFi protocol. It is also a measure for how widespread DeFi usage is across the entire sector. Some helpful charts exist. Compared to how much money is currently deployed across the entire banking sector, we can see that we are still very early.
Financial
Arbitrage - Sometimes shortened to arb. When an investor is arbitraging, it is usually to take advantage of a price discrepancy for a single asset across two markets. An example would be if wBTC trades for $32,000 on a DEx (Uniswap), and $34,000 on a CEx (binance.com). If you were to buy one wBTC on the DEx, and then send it to binance.com and sell it, you would be pocketing the $2,000 difference and this trade can be said to be an arbitrage trade. Another type of Arbitrage that occurs in crypto can occur across time for a stablecoin that has fallen below or risen above its peg. You know what price it is supposed to cost because its value is fixed, you can simply arbitrage the algorithm by buying it cheaper or selling it higher, and then closing your position when it returns to its peg.
AML - Anti-Money Laundering; the laws, regulations, and procedures intended to prevent criminals from disguising illegally obtained funds as legitimate income. This should be understood in parallel with KYC as these laws typically restrict what you can and can’t do with your money at financial institutions.
APR - Annual Percentage Rate; The rate of interest earned or charged, does not take compounding into affect.
APY - Annual Percentage Yield; The actual earnings rate over the course of a year taking into affect compounding. Please note the difference, and be wary of platforms that show you the APY return without similarly showing the APR.
Backtesting - This is a method of validating a theory about the price movements of a security or trading pair by looking at its past price movements and seeing if your theory is predictive of the past. Typically if a theory cannot predict what the past has already done, then it probably can’t predict the future.
Backwardation - This is an occurrence on a futures contract where you can buy the underlying asset for more than you can buy the futures contract for. This implies that traders in the futures market expect the current price to fall.
Balance sheet - The total assets and outstanding debts any entity holds. I often use this to describe the assets held by central banks, and more specifically I am usually referring to the amount of treasuries held specifically as of late these have been purchased with printed money. A balance sheet of a healthy central bank would be a mix of foreign currency, precious metals, foreign treasuries
Bid to Cover Ratio - When an auction is being done for a group of fungible assets, the health of the auction can be measured by the ratio of total bids, compared to total assets for sale in the auction. So if there are $100 of treasuries in the auction, and the total volume of bids that comes in is for $300, then the bid to cover ratio is 3:1. And similarly if only $50 of bids came in, then the bid to cover ratio is 0.5:1. Any ratio under 1 would represent a failed auction.
BLS - Bureau of Labor and Statistics; This is the US government entity that puts together most of the financial statistical data that the markets react to.
BoC - Bank of Canada; The central bank of Canada.
BoE - Bank of England; The central bank of the UK
BoJ - Bank of Japan; The central bank of Japan.
Blue Chip - A term used to refer to a well-established asset within whatever sphere is being discussed. These are the speculative assets within the sphere being discussed that present the least risk.
Bretton Woods - An agreement made post WW2 that lasted until the late 70’s that set the conversion rates to gold for many western currencies. I typically use the term to refer to this period of time from 1944 to around 1978. US participation in Bretton Woods was ended in 1971 by President Nixon, and over the next decade western European currencies that were participating slowly began moving away from convertibility to gold.
Central Bank - These are often quasi-governmental entities that work in hand with the executive branch to exercise control over the local currency. Central banks usually set the price of money by controlling the base lending rates.
Comex - Commodity Exchange. This is essentially the international commodity market.
Contango - This is an occurrence on a futures contract where you can buy the futures contract for more than the price of the underlying asset. This implies that futures traders expect the underlying asset to rise in price in the future.
CPI - Consumer Price Index. This is an often manipulated index that the US government will use as a rough measure of inflation.
DCA - Dollar Cost Average; This is an investment strategy where instead of making timed large purchases into an asset, one instead makes regular purchases at a fixed dollar amount over a period of time.
Dry Powder - Cash reserves ready to be used for investment purchases that are not needed to cover immediate living expenses.
ECB - European Central Bank; Central Bank of the Euro.
Federal Reserve - The Central Bank of the USA. Abbreviated often as “The Fed.”
FOMC - Federal Open Market Committee; The committee within the Federal Reserve that determines forward looking interest rate policy and asset purchases.
Forex - Foreign Exchange. Essentially this is the international currency market. Abbreviated as FX
Fundamental Analysis - A type of market analysis done on a trading pair or security. This type of analysis looks at the underlying value proposition and tries to assess which direction the market should move to reflect the underlying value.
GDP - Gross Domestic Product; the monetary value of all finished goods and services made within a country within a specific period of time.
Inflation - Often mis-attributed to whatever number is printed in the CPI. Inflation is however much the supply of money has increased over the supply of goods and services available to buy with that money. Its very obvious then how inflation is directly detrimental to people that trade time for money, it is at their expense and to the benefit of those who own productive assets.
IMF - International Monetary Fund; essentially the UN of money. Its a multi-national organization focused on ensuring the western hegemony on international settlements after the end of Bretton Woods.
KYC - Know Your Customer; Practices carried out by financial entities to verify the identify of their customers. This is typically done in compliance with legal regulations and law.
Long Position (Long) - A long position is when an entity purchases an asset or a security and holds it with the intention of selling it for more in the future.
NFP - Non-Farm Payrolls; This is an often manipulated index that the US government will use as a rough measure of new jobs.
Open Market Operations - A central bank activity where treasuries are bought and sold on the open market in order to hold the price of that treasury within a certain range.
QE - Quantitative Easing; The process through which a central bank increases the money supply and uses that to buy up securities, assets, and treasuries. This monetary policies stated goal is to stabilize an economy during a crash, but in reality it is used to allow the central banks to finance deficit spending indefinitely at the expenses of the citizens and workers financial well-being. The only ones that benefit from this are the federal government, asset holders, and the ultra wealthy.
RBA - Royal Bank of Australia; the central bank of Australia.
RBNZ - Royal Bank of New Zealand; the central bank of New Zealand.
Risk-on Asset - These are assets that have a positive increase in price when investors tolerance for risk is high. These are assets that might be considered unsafe
Risk-off Asset - These are assets that have a positive increase in price when investors tolerance for risk is low.
SNB - Swiss National Bank; The central bank of Switzerland.
Short Position (Short) - A short position is when an entity borrows an asset and sells it, with the intention of buying it later for less to return it to the entity they borrowed it from. Shorts are typically exposed to a daily or periodical interest charge to hold their position open, and can lose more than they put up as the potential losses of a short position can exceed the capital spent to acquire the short position.
Stop Loss - An automated process that can be added to an open trade position. A stop loss is a specific price point set by the trader where the trade will auto-terminate to either protect from significant losses, or to lock in profits if the trade begins moving against them too much.
Taper - The process by which a central bank slows the rate of money printing and asset purchases.
Technical Analysis - A type of market analysis done on a trading pair or security. This type of analysis looks at technical indicators and tries to assess which direction the market will move in based on these technical indicators. Some examples of technical indicators that peoples use are the Relative Strength Index, Bollinger Bands, or trading patterns like the bull flag, Reversal patterns like the Butterfly or Crab, or Elliot Wave Theory.
Trade Deficit - This is the balance between exports and imports. It is considered a deficit if more is imported than exported, and a surplus if more is exported than imported. The US is always in a deficit since our main export is dollars, so you will always see me refer to the trade balance as a trade deficit.
Treasury Bonds - Government debt securities issued by the treasury. They have a face value they can be redeemed for once they reach maturity, and are typically sold for less than their face value until they have reached maturity. The difference between how much they are sold for and their face value is the interest that you are paid for owning them. Abbreviated often as “Treasuries.”
Wealth Effect - A theory of behavioral economics that presumes that people spend more money when their investments are doing well, even if they have not realized any of the profit yet. This can also mechanically occur in the sense of increased lending. As an example, if your home has doubled in price, you might take out a second mortgage on it to capture some of that equity.
General
Midwit - A derogatory term used to refer to someone in the middle of the IQ distribution. Often too smart to accept common sense, and too dumb to be capable of meaningful insight. The midwit meme often outlines the truth that the left and right ends of the IQ bell curves often come to the same conclusion, while the middle is often ignorant and arrogant in their misguided beliefs.
Null Hypothesis - A null hypothesis is a proof that if it occurred would disprove the initial hypothesis. So you might be looking for positive proof to confirm a hypothesis; consider that a null hypothesis is the negative proof that invalidates the hypothesis.
VPN - Virtual Private network. I further define what they are and how they work in this post.
Airdrop - An airdrop is a distribution of a cryptocurrency token or coin, usually for free, to numerous wallet addresses. This can be done for several reasons. New projects can use airdrops to attract attention and hopefully users - this is the spam of the crypto world. Anyone with a Ethereum wallet will have experienced opening it to find they now own an array of ERC-20 tokens they have never heard of, almost all of which will never be worth anything. Some existing protocols, such as Algorand, use airdrops as the distribution mechanism for newly mined tokens, ensuring inflation is proportionally distributed. Airdrops can be used to reward users that have placed tokens within liquidity pools or other DeFi instruments. Any such distribution of tokens is an airdrop.
IDO - An Initial DEx offering, is an evolution of the ICO for decentralized and permissionless crowdfunding in the crypto space. These projects launch their coin or token via a defined sale period on a decentralized liquidity exchange. IDOs are generally considered a "more fair" way to launch a new project as they avoid pre-mining and are more decentralized. Tokens launched this way have immediate liquidity because they are already on the DEx, whereas tokens purchased via ICO will typically have a period of months to years without liquidity while investors wait for them to be listed on a CEx or DEx.