What Is a Cold Wallet? A Guide to Popular Crypto Terms - The Washington Post

2022-12-09 01:51:50 By : Mr. Michael Wang

The crypto community has a lexicon of buzzwords and slang that can seem like a foreign language to the uninitiated. When digital assets crashed in 2022 and euphoria gave way to dejection, the terminology evolved too. Here’s a guide to some new -- and old -- terms to know. 

This reference to a prolonged decline in crypto markets was used for the 2018 slump that wiped as much as 88% off the market value of all crypto assets. It reemerged in 2022 as digital tokens collapsed again, with Bitcoin falling 76% from its peak in November 2021 to mid-November 2022. Double Plus Chain

What Is a Cold Wallet? A Guide to Popular Crypto Terms - The Washington Post

Cautious crypto users keep their coins in so-called cold storage, typically on a hard drive that isn’t connected to the internet, so they are harder for hackers to steal. Hot wallets are where funds are kept online or with an exchange and ready for trading. When crypto exchange FTX filed for bankruptcy in November, it moved some customers’ digital assets into cold storage to safeguard the accounts.

Decentralized finance platforms allow people to lend or borrow crypto assets, bet on changes in their value or trade them. Unlike crypto exchanges run by companies with offices and paid employees, DeFi typically functions via automated contracts designed by users. The collapse of the TerraUSD stablecoin and its related DeFi venue, 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 onto yield farming platforms to make a profit. A typical strategy involves lending a token, borrowing another and earning yet another token. At one point, investors were earning triple-digit returns from such complex combinations. All that lending and borrowing of different tokens means that if one yield-farming arrangement has problems and depositors start to pull funds, it could take several others with it.

These are software platforms connecting crypto services that can’t otherwise talk to each other. They allow users to move tokens from one blockchain, or digital ledger, to another. These links make it easier for crypto 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. 

Crypto transactions tend to be quite transparent as long as they’re carried out on publicly visible blockchains. For those who prefer a cloak of anonymity, platforms have been developed that blend tokens deposited by several users to obscure their transaction history and ownership. These mixers are hated by regulators and law enforcement bodies as they make it harder to track down cybercriminals and money launderers. 

These crypto investors believe the original digital coin is the only one the world will ever need. They’re sticking with that vision and dismiss concerns over its volatility and vast 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 issuers of stablecoins 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 customers when it claimed the token’s value was “fully backed” by fiat assets. Interest in another category, algorithmic stablecoins, plummeted when the system used by the TerraUSD token for managing supply and demand failed. 

A nonfungible token confirms unique 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 crypto mania in early 2022, NFT series such as Bored Ape Yacht Club and CryptoPunks were fetching millions of dollars, fired up by endorsements from celebrities such as Paris Hilton and Snoop Dogg. By June, prices of many NFT collections had collapsed.

A vision for a more decentralized World Wide Web built on crypto technology that shifts power back to internet users from giant technology 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 via advertising. Web 1.0 refers to the early days of the internet, when it was simply a way of remotely accessing static pages of text and images. 

Trading slang for the ‘crypto winter’

HODL: A meme traced back to a typo that implores traders to keep “hodling” their nerve through wild gyrations. Today it’s also “hold on for dear life.”

WAGMI: “We’re all gonna make it.” Used by crypto fans to show their support for one another or to inspire confidence in a project. You can guess what NGMI stands for.

Rekt: Shorthand for “wrecked,” this term describes a big loss or liquidation spurred by a bad investment or an ill-advised trade.

Applying to McDonald’s: During periods of decline in crypto assets, traders joke about working instead at the burger chain as they lament their dashed fortunes. 

--With assistance from Muyao Shen and Emily Nicolle.

What Is a Cold Wallet? A Guide to Popular Crypto Terms - The Washington Post

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