Figuring Out Crypto

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By Danny Talwar

Cryptocurrencies have completely transformed the way we think about money. But while some businesses are deep into the world of crypto, others are struggling to tell their blockchains from the HODLers. Don’t stress if you find yourself still scratching your head when it comes to crypto, we’ve compiled a handy list of common terminology that will help you figure things out. 

API

API is short for Application Programming Interface, which is a set of rules describing how two applications interact with each other. For cryptocurrency trading, an API allows you to connect with your exchange, giving you access to real-time market data, make trades, and manage your account.

Blockchain

Created in 2009 by Satoshi Nakamoto, the blockchain is a network of independent but connected blocks, copies of which are distributed across a decentralised computer network. 

Coin

A representative store of digital value that lives on a given blockchain or cryptocurrency network. Some blockchains have the same name for both the network and the coin, like Bitcoin, while others can have different names for each.

Encryption

The process by which legible text is converted into illegible text by an algorithm. This process, also known as cryptography, is the origin of the name cryptocurrencies.

FUD

FUD stands for fear, uncertainty, and doubt. It’s the act of spreading negativity about a crypto coin and its future, focussing only on the bad aspects of a project or coin, in an effort to cause a certain coin, or the entire cryptocurrency space to drop in price. 

Gems

Gems are unknown undervalued coins with huge potential. There are no precise attributes that make up a gem, other than the fact that it will eventually do well.

HODL

HODL, short for ‘hold on for dear life’ –  or a misspelling of the word ‘hold’. Depending on who you ask, HODLing has worked out to be a good long-term approach to cryptocurrency investing. Crypto HODLers, like many stock investors, won’t sell their cryptocurrency, no matter what happens in the crypto markets.

ICO

An initial coin offering (ICO) is the cryptocurrency industry equivalent of an initial public offering (IPO). 

JOMO

Joy of missing out (JOMO) is the opposite of having a fear of missing out (FOMO). It is often used by people without coins who declare their happiness that they are not involved in cryptocurrencies.

Ledger

A cryptocurrency public ledger is a record-keeping system. The ledger maintains participants’ identities anonymously, including their cryptocurrency balances, and a record of all genuine transactions.

Mining

Mining is the process by which transactions are verified by a computer or a group of computers. When all the computers on the network accept the transaction, a new block is added to the chain, and new coins are created and added to the new block.

Memecoin

These are cryptocurrencies based on internet jokes, such as Dogecoin or Shiba Inu. They primarily focus on building a community, rather than any underlying technology or utility.

NFT

NFT stands for non-fungible token. It’s usually built using blockchain technology similar to cryptocurrencies, like Bitcoin or Ethereum. Physical money and cryptocurrencies are ‘fungible’, meaning they can be traded or exchanged for one another. NFTs are unique in that each has a digital signature, making it impossible for NFTs to be exchanged for or equal to one another.

Pump and dump

The practice of buying a cryptocurrency in large numbers to drive up its price and encourage others to invest, then selling all of it when the price rises and there is a profit to be made.

Satoshi Nakamoto

Satoshi Nakamoto is the likely pseudonymous name of the person (or perhaps a group) who assisted in the creation of Bitcoin. Fun fact: a satoshi is the smallest fraction of a bitcoin, worth one hundred millionth of a Bitcoin, or 0.00000001 BTC.

Wallet 

A way to store cryptocurrencies. A cryptocurrency wallet doesn’t contain actual currency, it holds the transaction records of your buys and sells. 

Tax

In Australia, cryptocurrency is seen as an asset and attracts both capital gains tax and income tax. Even if you’ve paid income tax on crypto, you’ll still be liable for capital gains tax on any profits or losses if you later dispose of your crypto.  If your business is looking to play in the crypto space, it’s important to fully understand your tax obligations. You might assume that since crypto is global and free of boundaries, you don’t need to tell the Australian Taxation Office about it, this simply isn’t true.  Crypto is gradually becoming a part of our everyday lives, and it’s important that we start treating it just like any other asset. 

About the author: Danny Talwar (pictured above) is the Head of Tax at Koinly. This is an opinion column. The views and opinions expressed in this article are those of the author’s and do not necessarily reflect the official policy or position of this publication.

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