The Investor’s Guide to Crypto

Table of content:

Introduction
What Are Cryptocurrencies?
How Do They Work?
The Top 10 Digital Assets?
Who is Investing?
Why Invest?
Investing Strategies
Investing with SMART VALOR
Resources
Glossary

Introduction

Perhaps you’re just learning about cryptocurrencies, or perhaps you’re already an expert. Our goal with this guide is to give you a framework for successful investing in cryptocurrencies.

Did we say “investing”? Yes, investing.

Peel away the hype, and you’ll find that cryptocurrencies are one of the best-performing asset classes of the last five years. Better than stocks. Better than bonds. Better than real estate.

Over the past five years, bitcoin – the best-known cryptocurrency – has delivered an astonishing 8,451% return. This means that $10’000 invested into bitcoin five years ago would now be worth $845’000. In five years.

But wherever there is reward, there is also risk. So you, the cryptocurrency investor, must also understand that bitcoin is an incredibly volatile asset: that bitcoin you buy today may be worth half its price tomorrow. This is an emerging asset class, and it is still young and temperamental.

In the following pages, we will give you a framework for investing in cryptocurrencies. For beginners, we’ll define them using easy examples and user-friendly language. Then we’ll show you how to incorporate them into an overall investment portfolio to build long-term wealth.

Long-term investing, in valuable assets, as part of a balanced portfolio: that's SMART.

What Are Cryptocurrencies?

For you, the crypto investor, it is most helpful to think of them as digital assets.

A traditional asset is easy to understand: cash, stocks, bonds, real estate, and so on. Digital assets are similar, but they exist online, in computer code. Like traditional assets, these digital assets have real-world value. They can be bought, sold, and traded. Or, they can be held as a long-term investment, then sold later, hopefully for a profit.

The word “cryptocurrencies” is a misnomer, as most cannot be actually used as currencies (i.e., as money). Increasingly, we believe the world will move to these digital assets as payment, but the reality is that today there are thousands of cryptocurrencies (also called “tokens” or “coins”), all serving a slightly different purpose.

Broadly speaking, there are five major categories of cryptocurrencies:

The first category of cryptocurrencies act as a store of value. The classic example is Bitcoin: since only 21 million Bitcoins will ever be issued, it is often referred to as “digital gold,” and investors believe it will hold its value (and even gain value) over time
The second category of cryptocurrencies act as a medium of exchange. These are used for fast and cost-efficient global payments: examples are Bitcoin Cash, Dash, and Litecoin.
The third category is decentralized database networks (blockchains) for smart contracts: examples are Ethereum, Cardano, Tezos and Polkadot. Also known as Layer 1 protocols, they enable developers to build new applications and services, such as new digital currencies, P2P lending, and P2P trading (Layer 2 protocols). These blockchains each have a native token, which acts as payment for the usage of the network. If you believe in the future of these networks, buying and holding the token is a bit like investing in the “company” (with some important differences that we’ll discuss later)
The fourth category is central bank digital currencies (CBDCs), which are being issued by governments such as China. Since cryptocurrencies are faster and more efficient, governments are beginning to shift their national currencies to the blockchain, offering additional opportunities for investors who believe first-mover countries may wield a new financial power
Finally, there is a fast-growing number of companies that issue their own cryptocurrenciesIn many cases these are used to crowdfund their launch and later facilitate customer loyalty programs, community engagement, or governance mechanisms. For example, most cryptocurrency exchanges also have their own native cryptocurrency which incentivizes users to be active on their platforms. Again, buying and holding their token is a bit like buying and holding shares of a publicly traded company (with important caveats, below).

So many cryptocurrencies, so many purposes: this is why we prefer to call them digital assets.

Most discussions of digital assets focus on the technical aspect, but we’ll keep it simple. You generally create an account with a digital asset exchange (like SMART VALOR), attach it to your bank account, then put some traditional money into your new digital money account.

Traditional vs Digital money systems X SMART VALOR

From here, you can now buy Bitcoin, Ethereum, or many other digital assets, holding them as an investment. You can also directly participate in the exciting and fast-moving digital economy, a global network of financial products and services that offer new ways to make money.

The takeaway is that there are two parallel financial systems: the traditional financial system and the digital financial system. Digital exchanges like SMART VALOR let you participate in this new digital financial system.

As an investor, this is exciting. You are looking to not only build wealth but to protect wealth. You are trying to be both offensive and defensive. The ideal strategy would be a handful of investments that have nothing to do with each other – so if one market goes down, you won’t lose it all. This is usually known as diversification (also known as “don’t put all your eggs in one basket”).

Digital assets provide an excellent opportunity for diversification because they’re built in this new financial system. At the same time, they’re most effective when paired with traditional investment classes. (More on that later.)

How Do They Work?

It’s easiest to think about this new financial system of digital assets as a second Internet, which is sometimes called the Internet of Value.

The traditional internet carries information: email, reference material, videos, flight times, and so on. But this new internet — the Internet of Value — carries valuable assets: bitcoin, cryptocurrencies, and much more to come. As we’ve just described, it’s like a parallel world of money

The technology that makes this possible is called blockchain.

How does blockchain work? Again, think back to the Internet, a global network of computers that stay in sync with each other, so you’ll always get the same website, no matter where you are. Just as the Internet of Information keeps websites in sync, the Internet of Value keeps digital ledgers in sync.

In the same way, blockchain technology is like a shared accounting ledger (picture a giant Excel sheet), distributed across a global network of computers that always stays in sync. That means when you buy one bitcoin from someone in another country, the ledger gets updated – and all the other copies remain in sync.

Like the Internet, no one “owns” this Internet of Value: it’s distributed among millions of computers worldwide. (You can’t unplug the Internet.) What’s important is that it works. You’ve probably heard that bitcoin is power-hungry and that people have used cryptocurrencies for criminal behavior. As with the Internet, these things are true. But the larger story is that digital assets are emerging as a true alternative for investors who are willing to do their homework, which is what you’re doing now.

Blockchain – this Internet of Value – is growing at a furious pace, with new products and services launching every week. It can be overwhelming for new investors to know where to begin, so let’s begin with the Top 10.

The Top 10 Digital Assets

As blockchain investors, it can make sense to stick with the biggest projects. This is because digital assets come and go, but those in the Top 10 have generally stood the test of time

Bitcoin

The original cryptocurrency, Bitcoin (BTC), was launched in 2008 by an anonymous creator who went by the name of Satoshi Nakamoto. Considered the “mother of all cryptocurrencies,” it was the first to gain an online following, leading to the proliferation of digital assets today. While Bitcoin was envisioned as digital cash or e-money, few people use it for digital payments. Instead, they hold it as an asset, like digital gold. Bitcoin has provided the best long-term returns for investors (see chart on Page 16).

Ethereum

Ethereum (ETH) was founded in 2013 by developer Vitalik Buterin as a global, open-source platform for decentralized applications. Think of it as a platform for building digital assets, in the same way that Windows is a platform for computer applications or Android for mobile apps. Ethereum has become the de facto standard for developing blockchain apps, making it an extremely valuable opportunity for investors. (While Ethereum is the network, the investable asset is called Ether, abbreviated as ETH.)

Binance Coin

Binance Coin (BNB) is the native token of Binance. Founded in 2017 by Changpeng Zhao, the former OKCoin CTO, it is the largest crypto exchange in the world. The BNB token gives discounts on trading fees on the Binance exchange, as well as being used as a means of payment on several other platforms. While owning BNB is not the same as owning stock in Binance (a private company), investors treat it as such. Given the scale and continued growth of Binance, it is likely to be an excellent long-term investment.

Cardano

Cardano (ADA) was founded in 2017 by Charles Hoskinson, a co-founder of the Ethereum network. Cardano is a competing blockchain network that has focused on alternative use cases like digital identity and traceability of high value items across supply chains. Investors in the ADA token are investing in the future value of the project, and they also have the right to vote on any proposals for changes to the Cardano software (think of this like shareholder voting rights). Cardano is currently making a big push into developing nations such as Ethiopia.

XRP

XRP, often referred to as Ripple, is a digital payment network and protocol run by the privately-held Ripple Labs, Inc. Designed for cross-border payments, financial institutions are able to use the XRP token, which settles faster than traditional payment networks. Much of XRP’s popularity is because Ripple has a consortium of over 200 financial institutions using its payment technology, with more being added each quarter. (However, a pending U.S. SEC lawsuit against the company may dampen investor enthusiasm.)

Polkadot

Polkadot (DOT) was created in 2016 by Gavin Wood, a former Ethereum developer, with the goal of allowing different blockchains to communicate with each other. In other words, digital assets created on one blockchain can be sent to another blockchain if both are operating on the Polkadot protocol. Its current popularity has been attributed to a growing community and the relentless pursuit of its vision: “any type of data across any type of blockchain.” Think of it as a “universal connector” between Ethereum and all its competitors.

Uniswap

Uniswap (UNI) solves a simple problem: letting users easily exchange one cryptocurrency for another. In contrast to centralized exchanges like Binance or Coinbase, Uniswap is a decentralized protocol that lets users “swap” tokens (say, from ETH to LINK) using an easy web-based interface. On the back end, other users provide “liquidity” by depositing their own tokens to facilitate these trades, and receiving a commission for each transaction. Founded in 2018, Uniswap has quickly grown both sides of its marketplace (users and liquidity providers), and today has nearly 2.5 million users and over $5 billion in liquidity.

Bitcoin Cash

Bitcoin Cash (BCH) is a fork — or copy — of the original Bitcoin. Because Bitcoin is open-source (free to copy), many spinoff Bitcoin projects have been tried. Its leader, Roger Ver, wanted to create a better version of Bitcoin that could act as a payment system but at higher speeds and with lower fees. They have largely succeeded in this goal, with Bitcoin Cash processing up to 100 transactions per second (tps) while Bitcoin can only process 7 tps. In addition, the average transaction fee for BCH is around USD $0.0064, while Bitcoin is around USD $5.10.

Litecoin

Litecoin (LTC) was founded in 2011 by Charlie Lee, a former Google developer. Lee forked Bitcoin’s blockchain and vowed to make it a better Bitcoin, shortening the time it took to confirm a block and lowering transaction fees. While Bitcoin generates a block every 7-10 minutes, Litecoin generates a block every 2.5 minutes. Despite being built for payment, it’s not exactly ubiquitous: about 2,000 online merchants accept Litecoin. (Bitcoin, in contrast, is accepted by about 15,000 merchants worldwide.)

Chainlink

Chainlink (LINK) was founded by CEO Sergey Nazarov and CTO Steve Ellis in 2017. Chainlink’s technology allows information to travel from the outside world into a blockchain (and vice versa) without jeopardizing data security or integrity. (Imagine a temperature sensor that automatically triggers a payment to an irrigation company when the weather gets too hot.) Chainlink’s popularity is attributed to both a growing community as well as partnerships with companies in the crypto community and traditional technology conglomerates like Google.

You can see that some of these Top 10 investments have a clear value proposition; others, less so. Understand that not all blockchain investments are created equal. Like investing in a company, do your homework on why the digital asset was designed and whether it’s delivering on that promise.

Who is Investing?

Once the domain of a tiny group of hackers, bitcoin investing has now spread around the globe, from individuals to institutions. This is because bitcoin has outperformed other investment classes, sometimes by a factor of 100x. As a result, digital assets provide exposure to another asset class that isn’t correlated with traditional investments like stocks and bonds despite their volatility.

Here’s a look at the different types of investors.

Retail Investors

The Global Crypto Adoption Index shows Venezuela, Russia, and Ukraine lead the world in crypto adoption. Only two developed economies are in the top 10: China and the U.S. This indicates that cryptocurrency activity is more concentrated in developing nations. Bitcoin is “crossing the chasm” from early adopters to mainstream investors as they become educated on the asset class.

null — Source: https://blog.chainalysis.com/reports/2020-global-cryptocurrency-adoption-index-2020/

Institutional Investors

Amid the Coronavirus pandemic, many large institutional investors began to look more seriously at Bitcoin and cryptocurrencies as global economies began to show signs of strain.

In 2020, more than $20 billion USD flowed into the crypto ecosystem from financial institutions, privately-held firms, and publicly-traded companies. Today, Grayscale Investments, a cryptocurrency asset management company, is the largest Bitcoin holder, holding more than 2.5% of Bitcoin’s total circulating supply.

Here is a look at large institutions that hold Bitcoin:

Why Invest?

Before you begin investing, it is helpful to understand a bit more about how digital assets can help balance an overall investment portfolio.

Historic high returns

Most cryptocurrencies are volatile, rising and falling in price relatively quickly. This is for a number of reasons — supply, demand, regulatory news, rate of adoption, tokenomics, and inflation — but suffice it to say that this is still a young asset class, and with youth comes volatility (as the parent of any teenager will tell you).

As a counterpoint to this volatility, however, the commonly accepted narrative around Bitcoin in the press and media is its status as “digital gold,” which arguably can be used as protection against inflation and money printing in a broader sense. According to studies of the U.S. Federal Reserve, around 20 percent of all U.S. dollars in circulation were printed during 2020 alone! This led many sceptics of such monetary policy to look for alternative stores of value, which cannot be deflated in the same way.

Thus, we have digital assets that many investors agree are valuable, but no one can agree quite how valuable. Despite the volatility, the long-term returns of Bitcoin vs. other assets are quite impressive:

Bitcoing Performance — Source: SMART VALOR data

Hedging

Hedging is a strategy that protects an investor’s portfolio by investing in non-correlated asset classes, also known as “not putting all your eggs in one basket.” Bitcoin and digital assets are ideal for hedging because they have a low correlation with traditional investments like stocks, bonds, and gold.

In simple terms, this means that despite bitcoin’s volatility, it happens on a different cycle than traditional investments. They each “do their own thing.” This is good for investors who wish to protect their portfolio from market swings, as digital assets are essentially a separate market.

Fiat devaluation

With the U.S. Federal Reserve printing 20% of the total U.S. dollars in circulation in just the last year, some economists predict that the dollar will steadily lose value in the years ahead. Indeed, quantitative easing – or increasing the money supply – inherently lends itself to inflation, which is increasingly a topic of concern.

Bitcoin and many other digital assets, on the other hand, have a fixed supply. You can’t simply print more of them. This makes digital assets an attractive proposition for those who believe the U.S. dollar is being devalued.

A store of value

Some see digital assets as a store of value, like gold. Indeed, it is common to hear people refer to bitcoin as “digital gold”: it is a scarce asset with a fixed supply and can only be generated through “mining” or solving complex mathematical puzzles using high-speed computers.

According to customer behaviour data on the SMART VALOR exchange, we see this investment thesis playing out. For example, we listed PaxGold in March 2020, the only digital asset backed by physical gold. Our data reveals that when bad news about the economy emerges, the number of PaxGold purchases by investors over the age of 35 rises. Likewise, the number of bitcoin purchases made by investors in the 20-35 age range also rises.

The implication is that younger investors consider Bitcoin to be a store of value like gold, whereas the older generation still feels more comfortable buying physical gold stored in London vaults. It is not hard to imagine that future generations will hedge their risk primarily in digital assets.

Betting on the future

Finally, many see digital assets as the future of finance. Perhaps this is why companies like Square, MicroStrategy, and Grayscale Investments are making big bets on Bitcoin. Of course, this comes with a host of risks, and these optimists may all turn out to be wrong. However, Bitcoin’s historical return on investment, as well as the increasing availability of digital assets, are giving investors reasons to consider including Bitcoin and cryptocurrencies in their portfolios.

According to JPMorgan, there is considerable upside for the price of bitcoin. Their comments come in the wake of PayPal allowing its users to buy and sell cryptocurrencies, and they make three key points.

First, there is still a vast discrepancy between the valuation of gold and Bitcoin: gold bars and gold exchange-traded funds (ETFs) are valued at just over US$2.6 trillion, but the Bitcoin market cap is currently just over US$250 billion.
Second, Bitcoin has greater utility than gold. That means it can be sent electronically, with minimal fees, safely and securely. Compare this to gold, which needs to be delivered physically and stored in vaults.
Third, bitcoin is more appealing than gold to millennials, who represent the key demographic for future buying trends. Even within millennials, there’s still plenty of room for mainstream adoption of digital assets.

Investing Strategies

Just like investments in traditional assets, such as stocks and bonds, the type of investment you make will largely depend on your appetite for risk. Because digital assets are volatile, never invest more than you are willing to lose.

Buy and Hold

Perhaps the best strategy for most investors, the simplest way to invest is to buy Bitcoin and hold it for the long term. You can buy any amount through an exchange like SMART VALOR and hold it in your online wallet (like a bank account).

Don’t forget to diversify. Instead of putting all your spare cash into Bitcoin, think about it as a small part of an overall investment portfolio, comprised primarily of stocks and bonds. Think of Bitcoin as an “alternative investment,” a slice of the pie—somewhere between 2 and 10 percent of your total investments.

Bitcoin Believer Portfolio — If you want to diversify further, you can buy and hold both Bitcoin and Ethereum – again, no more than 10% of your total portfolio. (This protects you in case the crypto market drops tomorrow: you’ve lost only a fraction of your portfolio.)

Dollar-Cost Averaging (DCA)

This is a simple technique where you invest a fixed amount of money at regular intervals over a long period of time. For example, you might invest $1,000 into Bitcoin and Ethereum at the same time each month, regardless of the price.

Dollar-cost averaging is a strategy that aims to reduce the volatility of crypto: some months, the price will be high, some months it will be “on sale.” Over time, you’re averaging a fair price—and more importantly, you’re not trying to “time the market,” which no one can do over the long term.

Trading

For the advanced investor, you can try trading digital assets, monitoring the market to find great entry and exit points to “buy low, sell high.” This requires significantly more effort, as good traders must constantly keep up to date with price trends, analysis and news. Trading is not recommended for beginning investors.

Investing with SMART VALOR

SMART VALOR AG is the only Switzerland based digital asset investment platform, authorised by financial regulators in Switzerland and Liechtenstein, offering not only exchange but also asset management services such as managed accounts and discretionary mandates. It allows you to safely and easily buy, sell, and trade Bitcoin and top cryptocurrencies offering access to 70 trading pairs or delegate and lean back.

With over 80 years of combined blockchain and cryptocurrency experience behind our team, we are experts at executing investment strategies and building delicious tech for digital assets. This is why the BILANZ (top-tier Swiss financial journal) has put SMART VALOR into top 10 blockchain companies, Thomson Reuters selected us for their TR Labs Grant and Swiss government awarded an innovation grant through Innosuise. The company is backed by leading Swiss investors including Swiss banks and Venture Capital funds. The funds of investors are segregated protecting the investors at any time. The financial security, combined with ease of use, make us the number one choice for new cryptocurrency investors who want to experience the best possible trading, staking and asset management services.

In addition to a powerful exchange matching engine capable of processing one million orders per second, SMART VALOR possesses enterprise-grade security for custodianship of digital assets. SMART VALOR was the first exchange in the region to offer Swiss franc (CHF), pound sterling (GBP), euro (EUR) and U.S. dollar (USD) purchases through our partnership with Liechtenstein Bank. Our partnership with Paysafe allows for instant VISA and Mastercard credit card integration. All of SMART VALOR’s KYC, AML and investor verification processes are conducted in compliance with Swiss and EU regulations.

SMART VALOR is your peer of trust in the fast moving ocean of cryptocurrencies. Getting started with your investment journey is easy.
Click here to sign up.

Resources

Educational videos

How cryptocurrencies work: https://www.youtube.com/watch?v=kubGCSj5y3k
How to buy cryptocurrency for beginners: https://www.youtube.com/watch?v=sEtj34VMClU
CNN interview with SMART VALOR’s CEO Olga Feldmeier about Bitcoin’s energy consumption: https://www.youtube.com/watch?v=Mc_uBd19i8A
Inside the cryptocurrency revolution: https://www.youtube.com/watch?v=u-vrdPtZVXc
What is cryptocurrency? A simple explanation https://www.youtube.com/watch?v=6Gu2QMTAkEU
Staking on the SMART VALOR platform: https://www.youtube.com/watch?v=9tHueu5NvQs&feature=emb_logo
Invest in tokenized gold on the SMART VALOR platform: https://www.youtube.com/watch?v=a6YiAfAHOXI&feature=emb_logo

Bitcoin investing books

Bitcoin: The future of money? https://www.amazon.com/Bitcoin-future-money-Dominic-Frisby/dp/1783521023
Blockchain bubble or revolution: The present and future of blockchain and cryptocurrencies https://www.amazon.com/Blockchain-Bubble-Revolution-Present-Cryptocurrencies/dp/0578528150
Digital gold: Bitcoin and the inside story of the misfits and millionaires trying to reinvent money https://www.amazon.com/Digital-Gold-Bitcoin-Millionaires-Reinvent/dp/006236250X
The Bitcoin standard: The decentralized alternative to central banking https://www.amazon.com/Bitcoin-Standard-Decentralized-Alternative-Central/dp/1119473861
Bitcoin billionaires https://www.amazon.com/Bitcoin-Billionaires-GeniusBetrayal-Redemption/dp/1250217768

Cryptocurrency articles

Cryptocurrency podcasts

Hash Power with Patrick O’Shaughnessy: https://podcasts.apple.com/is/podcast/hash-power-ep-1-understanding-blockchains/id1154105909?i=1000392721406
Unchained with Laura Shin: https://unchainedpodcast.com/
The Pomp Podcast with Anthony Pompliano: https://www.anthonypompliano.com/ podcast/
The Breakdown with Nathaniel Whittemore: https://www.coindesk.com/podcasts/the-breakdown-with-nlw
Olga Feldmeier, CEO of SMART VALOR, describes how she first understood Bitcoin’s potential, her upbringing in Ukraine, and her focus on tokenizing real-world assets: https://unchainedpodcast.com/olga-feldmeier-on-why-switzerland-has-welcomed-crypto/
Olga Feldmeier, CEO of SMART VALOR, discusses her role in the early days of Switzerland’s “Crypto Valley”: https://www.stitcher.com/show/untold-stories/episode/olga-feldmeiers-tale-of-jumping-ship-from-her-big-bank-job-for-a-no-pay-crypto-startup-61830931
Olga Feldmeier, CEO of SMART VALOR, explains her move from traditional finance to crypto: https://bankonitpodcast.com/episode-207-olga-feldmeier-from-smart-valor


Want to learn more? Open an account at smartvalor.com now, chat with the team on Telegram, and follow the latest news on Twitter!

Glossary

51% Attack: Synonymous with the term “majority attack”, this occurs when over 50% of a blockchain network’s computational power is controlled by a group of miners.

Altcoin: Any cryptocurrency that is not Bitcoin.

Anti-Money Laundering (AML): The legal and regulatory framework to stop criminal activity regarding the misuse of funds, especially the prevention of using criminal proceeds as legitimate income.

Arbitrage: When you buy and sell an asset on different markets to profit from price differences.

Ask (Ask Price): Often known as the “offer price,” this is the lowest price a seller will accept, much like the reserve price at an auction.

Atomic Swap: A technology that enables people to trade directly with each other, without the need for a centralized intermediary.

Bear Market: A period when a market falls in value.

Bid Price: The price a prospective buyer offers for an asset.

Bid-Ask Spread: The difference between the highest price proposed by a buyer and the lowest price proposed by a seller for an asset on the order book.

Bitcoin: Invented in 2008 by one or more persons using the pseudonym Satoshi Nakamoto, Bitcoin is a decentralized digital currency. The first cryptocurrency to ever be created, it uses blockchain technology to record transactions.

Collateral: Something of value that can be pledged as security for a loan to be repaid which is then forfeited if this does not happen.

Commodity Futures Trading Commission (CFTC): Established in 1974 in the United States of America, this U.S.-based independent agency regulates the U.S. derivatives markets.

Cryptocurrency: A digital asset that is used to exchange value between two parties.

Cryptography: The study of secure communication techniques.

Decentralized Application (DApp): An application used on a blockchain network.

Decentralized Exchange (DEX): A cryptocurrency exchange which does not take custodianship of user funds and no funds need to be deposited before starting trading. Users trade with each other.

Decentralized Finance (DeFi): A term used to describe the financial applications available in the blockchain industry that are focused on disrupting the centralized financial system. Services include lending/borrowing cryptocurrencies, betting on events, and exchanging cryptocurrencies, among others.

Diversification: Distributing funds into a variety of assets to mitigate risk.

Do Your Own Research (DYOR): Always do your own research on what you choose to invest or trade before making any decision.

Dollar Cost Averaging (DCA): Sometimes referred to as the constant dollar plan, DCA is an investment strategy designed to mitigate the effects of an asset’s volatility.

ERC-20: Devised in 2015, the ERC-20 is a standard for cryptocurrency tokens created on the Ethereum blockchain.

Gas Limit: When transacting on the Ethereum network, the gas limit represents the maximum amount the transactor has agreed to spend.

Halving: An event that happens every 210,000 blocks on the Bitcoin blockchain, where the number of bitcoins awarded to miners is reduced by half.

Hold On for Dear Life (HODL): Crypto slang for “buy and hold.”

Immutability: The state of not changing or being unable to be changed. This feature is shared by the laws of physics, Bitcoin and blockchain technology in general

Initial Coin Offering (ICO): A process where a blockchain company can raise funds in exchange for tokens used to access the host platform and its services.

Initial Public Offering (IPO): A process through which a private company can issue shares in return for funding.

Know Your Customer (KYC): Crucial in regulated industries, KYC guidelines help to ascertain the risks associated with a business relationship, typically between an exchange and its users.

Layer 2: Designed to improve the scalability of a blockchain network, it is built on top (or the second layer) of an existing blockchain.

Ledger: A place, either online or in physical form, where transactions are recorded and tracked.

Lightning Network: A second layer technological solution to a cryptocurrency’s scaling problems. It is currently used by Bitcoin and Litecoin, among others.

Mainnet: In contrast to a testnet, a mainnet (short for main network) is where actual blockchain transactions take place.

Off-Chain: Transactions that take place outside a blockchain network.

Oracle: Oracles serve as the intermediaries between smart contracts and the rest of the world. They transmit data from real world events to a blockchain for smart contracts to use.

Order Book: A list of all the buy and sell orders for an asset on an exchange

Private Key: A long number that gives users the ability to sign off on transactions and create addresses to receive cryptocurrencies.

Proof of Stake (PoS): An alternative to the Proof-of-Work (PoW) model, Proof of Stake (PoS) creates mining power in a different way. Instead of providing computing processing power, miners engaged in staking (often called stakeholders) stake their tokens.

Proof of Work (PoW): A PoW mechanism is used by some blockchain networks to prevent double spend and achieve consensus. It is called proof of work because for consensus to be achieved, there needs to be proof that work has taken place. This work is undertaken by crypto miners providing computer processing power. The most famous example of a blockchain network run on PoW is Bitcoin.

Rekt: Crypto slang for a catastrophic depreciation in the value of an asset (as in, “wrecked”).

Relative Strength Index (RSI): A technical analysis indicator used by traders to work out whether an asset has been overbought or oversold.

Satoshi Nakamoto: One or more persons who created the Bitcoin white paper, implementing the first blockchain network in the process. The name is thought to be a pseudonym, and the identity has never been confirmed.

Ticker: In the cryptocurrency world, a ticker is used to identify each cryptocurrency. These are abbreviations used to represent a currency on an exchange/trading chart. For example, the ticker for Bitcoin is BTC and the ticker for Ethereum is ETH.

Token: A cryptocurrency that serves as an exchange of value. Typically, a token does not have its own blockchain, and uses another instead.

Trustless: In the cryptocurrency world, “trustless” means that everyone in a system can reach consensus on the truth without needing to rely on trust. This is a common feature of blockchain and cryptocurrencies generally.

Bitcoin Dominance: The term used to refer to the ratio of Bitcoin’s market capitalization against the whole crypto market.

Block: A constituent part of a blockchain that stores data for transactions.

Block Reward: The total number of coins a miner receives as a reward for successfully mining a block under proof of work (PoW) and proof of stake (PoS) systems.

Blockchain: Comprised of blocks that are connected linearly using cryptography, a blockchain is mostly used to record cryptocurrency transactions, but has several other uses. With no central authority, a blockchain is resistant to data falsification.

Bollinger Bands: Used by traders doing technical analysis, these are volatility bands placed above and below a moving average.

Bots: Often present on exchanges, bots are software or programs that make trades automatically.

Bull Market: A period when a market rises in value.

Circulating Supply: The total number of cryptocurrency tokens or coins that are circulating in the market and not locked under smart contract.

Coin: A cryptocurrency that serves as an exchange of value. A coin uses its own blockchain, unlike a token which does not.

ERC-721: Devised in late 2017, the ERC-721 is a standard for cryptocurrency tokens created on the Ethereum blockchain. They represent a unique asset, like a painting or an invoice. It is a non-fungible token which, which means that each token cannot be divided up into smaller parts.

Fear of Missing Out (FOMO): A feeling of anxiety that you might be missing out on an opportunity.

Fear, Uncertainty and Doubt (FUD): A feeling of anxiety that you may have made the wrong decision; often used as a tactic to influence price by spreading fear and insecurity.

Fiat: Money issued by a national central bank or government body. Often used in contrast to crypto.

Fork: When a cryptocurrency forks, this means that a spinoff version of the cryptocurrency is created. A good example is Ethereum Classic (ETC) forking from Ethereum, or Bitcoin Cash (BCH) forking from Bitcoin.

Fundamental Analysis (FA): A method to assess the value of an asset based on its core features and attributes/weaknesses.

Fungibility: Fungible items are those which are interchangeable with each other. For example, dollar bills, commodities, and cryptocurrencies.

Futures Contract: This allows an investor to buy an asset at a predetermined price at a future date. Once it expires, the investor is required to buy the asset at the previously agreed upon price.

Gas: The “service fee” for using Ethereum, or how much you need to pay to execute a contract or transaction on the Ethereum network.

Mainnet Swap: This occurs when a cryptocurrency issuer transfers (or swaps) from one blockchain network to another

Market Capitalization: The number of outstanding tokens/coins, multiplied by the price for each token/coin.

Market Maker: These are either individuals or companies that provide liquidity to a market to profit from the bid-ask spread.

Market Order: These are trades which are entered to be executed immediately at the best possible price.

Maximum Supply: The total number of coins or tokens ever minted by a cryptocurrency issuer.

Merkle Tree: A data structure popularized by Bitcoin and other cryptocurrencies that is used to improve the efficiency and security of the blockchain data encoding process.

Mining: Each transaction on a blockchain needs to be verified. To achieve this, a process called mining is used. There are two mining models – Proof of Stake (PoS) and Proof of Work (PoW).

Moon: Crypto slang referring to the price of an asset rising steeply in price (as in, “going to the moon”).

Node: In blockchain terms, nodes are crucial to keep blockchain networks operating. They are computers which each possess a copy of the entire blockchain. They can create, receive, and transmit data, and are connected to other computers in the network.

Non-Fungible Token (NFT): Unlike coins like Bitcoin, which can be mutually interchangeable, NFTs (often called “nifties”) are a type of token which represent a unique, one-of-a-kind item.

Scalability: This refers to the limitations of certain blockchains when it comes to processing transactions quickly and efficiently

Securities and Exchange Commission (SEC): The U.S.-based SEC is an independent government agency that operates on the federal level and regulates the securities market, protecting investors’ interests in the process.

Smart Contract: A feature of blockchain technology, a smart contract contains lines of code that allow it to self-execute agreements and rules in the absence of a centralized authority.

Stablecoin: Stablecoins are a type of cryptocurrency that are intended to reduce volatility. This is achieved by the stablecoin being pegged in value to a reserve asset or collection of assets. Examples of these would be cryptocurrency, fiat money, commodities, etc.

Staking Pool: A staking pool gives cryptocurrency holders the opportunity to earn shared rewards by collectivizing their computational power and validating blocks on the blockchain.

Technical Analysis: A method of analysis used by traders to predict price movements for assets. Based primarily on historic price and volume data, some popular indicators among traders include Moving Average (MA), Relative Strength Index (RSI), Bollinger bands, Moving Average ConvergenceDivergence (MACD), Fibonacci retracement and extension, and the Ichimoku cloud.

VALOR Token: The native cryptocurrency for the SMART VALOR exchange. The VALOR token’s value is designed to correlate with the scaling of the host platform.

White Paper: For cryptocurrencies, white papers are the equivalent of pitch decks. Created by the founder of a cryptocurrency to raise funds, they explain the purpose and technology behind the idea.

Wrapped Tokens: A wrapped token which runs on the ERC-20 standard and has a value identical to the asset it represents. An example is WETH, which is the wrapped token for ether (ETH).

Zooko’s Triangle: Describes the three desirable properties for participant names in a network protocol: decentralized, secure, and human-meaningful.

Transaction ID (TXID): Used to identify a blockchain transaction. Every transaction has one, and they comprise a sequence of random numbers and letters.

Transactions Per Second (TPS): In the blockchain world, this means the number of transactions that can be processed on a blockchain network every second.Bitcoin Dominance: The term used to refer to the ratio of Bitcoin’s market capitalization against the whole crypto market.