Cryptocurrency or crypto-headache?
Get up to speed with our ultimate cocktail party guide to Blockchain Terminology.
Terms like cryptocurrency, crypto assets, crypto-tokens, stablecoins, and crypto-collectibles are essential concepts to understand to converse with heavy hitters in the blockchain industry.
For your next cocktail party, switch up the usual go-to questions with our blockchain conversation starters. Throw out the typical questions, “How are the kids? What do you do? Great event, isn’t it?”
Spice things up by asking attendees what cryptos they are HODL’ing and what cryptokitty they’ll collect next. With this straightforward guide, you’ll be a real hit at your next business social.
An encrypted digital currency; stored on a distributed ledger. Mining is used to verify if funds are transferred and that there was no double-spend of the currency. Cryptocurrency operates independently of any centralized authority, making it a game-changer for security, privacy, and speed.
How many cryptocurrencies exist?
You’ve heard of bitcoin. Bitcoin is both a currency and a protocol. As a currency, it represents a digital, unique ownership… As a protocol, it maintains a ledger of balances purchased in bitcoin the currency. They can be differentiated by a “‘little b’ bitcoin” (the currency) and “‘big B’ Bitcoin”, the protocol.. Bitcoin is unlike today’s current currencies in several ways. It is decentralized, has a limited supply, offers pseudonymity and transactions are non-reversible. A common misconception is that bitcoin must be purchased in 1’s and 2’s. Not so. Bitcoins are nearly infinitely divisible, meaning consumers purchase “amount of USD in bitcoin” not “amount of bitcoins”. The currency can also be converted into microtransactions, which currently dollars, yen or pounds, cannot. (1)
Bitcoin is not the only cryptocurrency. As of today, there are 2,523 cryptocurrencies in use. This is a huge number. However, not all cryptocurrencies are relevant, capturing relevant market share, or even legal. Cryptocurrencies that are not bitcoin or it’s other “base” currency Ether (of the Ethereum network) can also be called altcoins. (2)
Top 5 Cryptocurrencies by Market Cap (3)
- Bitcoin (BTC)
- Ethereum (ETH)
- XRP (Maintained by Ripple)
- Bitcoin Cash (SV or ABC, different forks of Bitcoin Cash)
How to work it into the conversation: “What are you invested in right now?”
A crypto asset is a “digital asset that uses cryptography, peer-to-peer networking, and a distributed ledger to regulate the creation of new units, verify transactions, and secure participation.” (4)
It’s not difficult to get cryptocurrencies and crypto assets mixed up. Note: not all crypto assets are cryptocurrencies, and not all cryptocurrencies are crypto assets. Crypto assets can be described as any financial or derivative product that is secured, created, or traded digitally. Physical things can be represented digitally, like a bar of gold or a barrel of oil. Crypto assets are also intangible items; a partial ownership in a condominium building or a stake in a digital community such as world of warcraft are possible examples. A crypto asset can represent anything.
Give me an example
Ethereum is an app-building platform using Ether as its cryptocurrency. This is a crypto asset network where the token used as a currency is Ether. Each crypto asset network has its own blockchain. In the Bitcoin blockchain, miners earn bitcoin. In the Ethereum blockchain, miners earn Ether. (5)
XRP is a platform to move crypto assets between A and B, usually across borders. For a system as complicated as cross-border payments between banks, there can be upwards of 8 parties involved. In this case, the biggest problem is transparency; one hand often does not know what the other hand is doing. With a distributed ledger, everyone can at least be looking at the same thing.
How to work it into the conversation: “So, what’s the tangible usage behind your currency? Is it backed by something? Let’s talk about token economics.”
Currencies called stablecoins are cryptocurrencies whose value is pegged to a stable currency or wealth instrument such as the Euro or gold. (6) They are meant to provide certainty in the value of cryptocurrencies so they can be used in transactions more readily.
Tether is an example of a stable coin. It’s a blockchain based asset desired to trade for one USD. There are other stable coins on the market today: TrueUSD, Basis, and Saga to name a few. These currencies are tied to the USD, Euro, or a collection of several stable currencies. (7)
One of the main desires with currencies is that they remain stable or predictable. This allows people and governments to make decisions more easily, because they know the value of their currency. Cryptocurrencies like Ether and bitcoin are highly unstable, making them unpredictable, risky, and inconvenient for regular use. Bitcoin and Ether can change value drastically in a day, sometimes by 10-20 percent up or down. (8) Stable coins aim to solve this problem.
Some believe, however, that stable coins won’t be the saviour they intend to be.
How to work it into the conversation: “Did you see the drop in the price of Ether today? Stable coins can’t come soon enough.”
A “cryptographically unique, non-fungible digital asset. Unlike cryptocurrencies, which require all tokens to be identical, each crypto-collectible token is unique or limited in quantity.” (9)
When someone says cryptocurrency collectible, you might immediately think of CryptoKitties. And you would not be wrong. Here’s a fun FAQ for anything you might like to know about Crypto Kitties. In 2017, people had spent over 1 million dollars purchasing CryptoKitties. (10)
A crypto-collectible is not much different from a regular collectible item. Think about a 20-dollar bill. All 20-dollar bills are worth the same amount of money, and all are created equal. That is, until your 20-dollar bill is signed by Barack Obama. Now it’s a collectible. Or non-fungible. Most cryptocurrencies are fungible, meaning they can be traded for one another. Crypto-collectibles, on the other hand, are non-fungible, and thus, collectible.
How to work it into the conversation: “If you could have any non-fungible item in the world, what would it be and why?”
These key terms for blockchain enthusiasts only scratch the surface of the wide lexicon used to talk about this industry and its implications. There are plenty more that we plan to explore in future work. For now, take what you’ve learned — shake, stir, add your own spice — and see how your friends colleagues respond to your new knowledge.
- 1: Acheson, N. (2018). What is bitcoin? Retrieved from https://www.coindesk.com/information/what-is-bitcoin
- 2: Brock, C. (2018). How to explain crypto collectibles to your banker. Retrieved from https://www.coindesk.com/explain-crypto-collectibles-banker
- 3: Reiff, N. (2018). Top 5 crypto currencies market cap. Retrieved from https://www.investopedia.com/news/top-5-cryptocurrencies-market-cap/
- 4: Haeems, A. (2018). What is a crypto asset? Retrieved from https://medium.com/babb/what-is-a-crypto asset-1f0fcc517887
- 5: Blockgeeks. (2018). What is ethereum? The Most Comprehensive Guide Ever! Retrieved from https://blockgeeks.com/guides/ethereum/
- 6: Lee, S. (2018). Explaining stable coins the holy grail of Cryptocurrency. Retrieved from https://www.forbes.com/sites/shermanlee/2018/03/12/explaining-stable-coins-the-holy-grail-of-crytpocurrency/#517f37f94fc6
- 7: Eichengreen, B. (2018). Why ‘stable coins’ are no answer to bitcoin’s instability. Retrieved from https://www.theguardian.com/technology/2018/sep/11/stable-coins-bitcoin-cryptocurrencies-tether
- 8: https://www.forbes.com/sites/shermanlee/2018/03/12/explaining-stable-coins-the-holy-grail-of-crytpocurrency/#517f37f94fc6
- 9: https://medium.com/crypto-simplified/a-simple-explanation-of-crypto-collectibles-8674c4527bd1
- 10: https://techcrunch.com/2017/12/03/people-have-spent-over-1m-buying-virtual-cats-on-the-ethereum-blockchain/