What Is a Cold Wallet? A Guide to Popular Crypto Terms


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The crypto community has a lexicon of buzzwords and jargon that can sound like a foreign language to the uninitiated. As digital assets crashed in 2022 and euphoria gave way to gloom, the terminology evolved as well. Here’s a guide to some old and new terms to know about.

This reference to a prolonged crash in crypto markets was used for the 2018 crash that wiped out as much as 88% of the market value of all crypto assets. It resurfaced in 2022 when digital tokens crashed again, with Bitcoin falling 76% from its peak in November 2021 to mid-November 2022.

● Cold Storage/Hot Wallet

Cautious crypto users keep their coins in so-called cold storage, usually on a hard drive that is not connected to the internet, making them harder for hackers to steal. Hot wallets are where funds are held online or with an exchange and are ready to trade. When cryptocurrency exchange FTX filed for bankruptcy in November, it moved some clients’ digital assets into cold storage to safeguard accounts.

Decentralized finance platforms allow people to lend or borrow crypto assets, bet on changes in their value, or trade them. Unlike company-run crypto exchanges with offices and paid employees, DeFi typically works through automated user-designed contracts. The collapse of the TerraUSD stablecoin and its related DeFi headquarters, Anchor, in May raised broader questions about whether some crypto products may be fraudulent schemes luring investors with unsustainable returns.

Risk taking crypto investors put their coins on yield farming platforms to make a profit. A typical strategy is to lend one token, borrow another, and earn another token. At one point, investors were earning triple-digit returns on such complex combinations. All that lending and borrowing of different tokens means that if one yield farming deal hits a snag and depositors start withdrawing funds, it could take several others with it.

These are software platforms that connect cryptographic services that cannot otherwise communicate with each other. They allow users to move tokens from one blockchain to another. These links make it easy for cryptocurrency users to invest in a multitude of different projects. They also make the ecosystem more interconnected and more vulnerable if weaker entities run into trouble.

These crypto investors believe that the original digital currency is the only one the world will ever need. They stick to that vision and dismiss concerns about its volatility and high energy consumption.

Some crypto tokens aim to peg their value to another asset to make them more stable than highly volatile currencies like Bitcoin. Most stablecoin issuers say they maintain their stability by buying safe assets like US dollars. However, the largest stablecoin project, Tether, was fined by the US Commodity Futures Trading Commission in 2021 for misleading clients when it claimed the token’s value was “fully backed” by trust assets. Interest in another category, algorithmic stablecoins, plummeted when the system used by the TerraUSD token to manage supply and demand failed.

A non-fungible token confirms sole ownership of a digital asset. NFTs have been most popularly used for digital art or collectibles, such as video clips, memes, or items used in online games. At the height of cryptomania in early 2022, NFT series like Bored Ape Yacht Club and CryptoPunks were raking in millions of dollars, buoyed by endorsements from celebrities like Paris Hilton and Snoop Dogg. By June, the prices of many NFT collections had crashed.

A vision for a more decentralized World Wide Web based on cryptographic technology that returns power to Internet users from giant tech companies. Proponents say the current model, known as Web 2.0, gives too much control to a handful of platforms that track our online activity and monetize the information through advertising. Web 1.0 refers to the early days of the Internet, when it was simply a way to remotely access static pages of text and images.

Business slang for ‘crypto winter’

HODL: A meme dating back to a typo imploring traders to continue to “hold” their nerve through wild swings. Today is also “wait for your life”.

WAGMI: “We will all make it.” Used by cryptocurrency fans to show support for each other or to inspire confidence in a project. You can guess what NGMI means.

Rekt – Short for “wrecked”, this term describes a large loss or liquidation caused by a bad investment or ill-advised trade.

Apply to McDonald’s: During periods of crypto asset decline, traders joke about working at the burger chain while bemoaning their ruined fortunes.

–With the help of Muyao Shen.

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