As a new user in the crypto world, you might have encountered much jargon on blogs and forums when talking about crypto. This article gives you all the DeFinitions of the terms you were afraid to ask users on the forums!
What is DeFi?
DeFi (Decentralized Finance) is a financial system desired to record, store, transfer, and manage assets using ledger technology and the blockchain network. The system differs from the traditional banking system, which is centralized and controlled by a single group. The DeFi system is a combination of traditional banking and cryptocurrencies using blockchain. The system allows users to easily access digital assets, eliminating barriers to entry and intermediaries through distributed ledger technology.
The system’s main feature is the use of blockchain and distributed ledger technology to provide users with control over their assets. DeFi is also used to refer to the protocols that operate on the underlying blockchain, such as cryptocurrency exchanges, lending protocols, insurance products, or stablecoins.
The system is not controlled or owned by a single institute or person because of its decentralized nature. The system uses blockchain to distribute digital assets through a peer-to-peer distribution network. The blockchain network is designed to store financial data for financial transactions, while the trading platform will utilize blockchain technology to improve its financial services. The DeFi system allows users to create their Blockchain and share their tokens with the automated market maker (AMM) on a blockchain.
What is an NFT?
NFT is an acronym for a non-fungible token. It represents specific data that can be accounted for in a digital ledger. This data is typically tied to an asset. This asset can be an art piece, a movie, music, or another digital file. Even projects on the horizon look to tie NFTs to physical assets such as documents, commodities, and property.
You will purchase a token (NFT) to exercise full ownership of an asset. This can be stored or transferred to your digital wallet. The blockchain stores that proof of ownership.
What is FUD?
FUD is an abbreviation for fear, uncertainty, and doubt. This abbreviation is usually used to describe a situation where fear controls the user or fear-based factors associated with mining cryptocurrencies.
In the world of crypto, FUD is not your friend. China is said to have the highest Bitcoin FUD in the world. This effect is often a rumor on social media platforms not based on study or proof. The fear is often a result of bad news spread across social platforms with no substantial evidence, such as the widespread talk about Bitcoin being a scam. All the negative rumors causing fear for crypto users passed around on social media can be referred to as FUD.
What is FOMO?
FOMO is the fear of missing out. This is the fear of missing out on opportunities where others reap huge returns. FOMO can push you into making a significant investment, not withdrawing your gains, or not having a cut-off mark for an increasing coin.
This creates a circumstance of you potentially not doing the right thing at the right time, like not taking your profit or waiting for a reentry point. This fear is why people rush to buy or hold on after making profits when they shouldn’t.
What is Yield Farming?
Yield farming is a protocol that gives high returns to cryptocurrency users for their assets. The profits are earned on investments made on a lending platform from trading fees. Investors from the centralized token earn extra tokens. Yield farming is similar to bank loans – the bank lends you money and expects you to pay it back at a specific interest rate.
Yield farming works in the same way. However, the banks are also cryptocurrency users like you. Yield farming uses crypto assets that are not in use, investing them on sites like Uniswap to earn you interest. Instead of these crypto-assets being kept in storage, they are used to keep the system running and scalable.
What is HODL?
HODL is an acronym that started as a misspelling of Hold. This abbreviation is used to represent the process of retaining your crypto assets for a long time, even when the market is profitable.
This stands as an encouraging word for people not to jump into selling their cryptocurrencies even when they are rising continuously, and there is a huge profit from selling them. This acronym is also used for ‘hold on for dear life’. This often encourages investors to hodl for a bit longer to examine the possibility of profiting further.
The internet is a place for new slang and is filled with many new terms. Especially for crypto, which is still new to the industry, you should see a lot of slang popping up on many blogs or websites. You may even inadvertently create your own slang that goes viral when discussing crypto!