Liquidity
Examples
- Coin X isn't worth $1.00 anymore because there was insufficient liquidity to maintain its "peg."
- Bitcoin crashed suddenly because traders were hunting for liquidity in that price range.
- Coin X isn't worth $1.00 anymore because nobody was willing to pay $1.00 for it.
- Bitcoin fell suddenly because traders were willing to sell anyway at a far lower price, and saw any extra money they earned between the start of the crash and now as a bonus.
CEOs of cryptocurrency companies and coordinators of coin projects love to use this term to hide uncomfortable truths about their products. In its original use, the term "liquidity" usually referred to how much money was flowing through stock markets. In a market with high liquidity, a lot of people are willing to trade that stock.
It's easy to blame "liquidity" for all sorts of unrelated problems. When a coin experiences volatility, it's because there isn't enough "liquidity." When a panic occurs, it obviously wasn't because something was inherently wrong with the product, it was because there was a "temporary condition of insufficient liquidity." To prevent stablecoins from failing, the company doesn't need to actually back them with money, they just need to provide "sufficient liquidity during periods of high volume" (i.e be willing to pay $1.00 to the sellers.) When a company doesn't want to pay for large purchases in bitcoin, it's because there is "insufficient liquidity" to support the purchase.
Whenever the word "liquidity" is used, the actual meaning is always the same: something happened because nobody wanted to buy the coin.
Accredited Investor
Examples
- Celsius began offering payouts in CEL tokens to accredited investors in April 2022.
- The SEC believes that margin trading and interest earning on coins in the US should be limited to accredited investors.
- Celsius will pay CEL tokens at a higher interest rate to rich people starting in April 2022, while poor people earn lower interest rates in other coins.
- The SEC believes that margin trading and interest earning on coins in the US should be limited to rich people.
Overview
The term "accredited investor" has been used in the financial industry for years as a way to limit access to some stocks, funds, and margin trading to people who own more than a specific amount of money - usually several million dollars. For example, Wells Fargo will allow anyone to borrow against stocks at the prime rate, but will allow "accredited investors" with $5m invested at the bank to borrow against stocks at an interest rate 0.5% below prime.
In his recent rampage against cryptocurrency companies, SEC commissioner Gary Gensler uses laws designed to discriminate against non-accredited investors (i.e. poor people), on the grounds that people who are poor are supposedly less able to make financial decisions than accredited investors (i.e. rich people). As a result, many US-based firms now allow rich people to become richer by earning interest on their bitcoins at trusted sites like Genesis and Celsius. Meanwhile, poor people stay poor by earning nothing, or must engage in extremely risky offshare lending. Lobbyists have undoubtedly proposed and continue to support laws limiting access to "accredited investors" so that their returns are not diluted by the increased amount of money that the average person would invest into these high-performing assets.
Whenever the euphemism "accredited investor" appears, a 100% accurate substitution would be "rich person."
Blockchain
Examples
- Company X hired a new team to track their inventory on a blockchain.
- Cryptocurrencies will inevitably be worth zero, but blockchains will be used by 90% of companies by 2030.
- Company X is going to issue layoffs of their team once they figure out it is cheaper and simpler to track their inventory in a database.
- Cryptocurrencies going to be worth zero, and 100% of companies will be using databases in 2030.
Whenever a company wants to do something about their failing stock prices, all they have to do is to mention the buzzword "blockchain," and ignorant stock market traders will buy in, at least temporarily. Riot Blockchain is a cryptocurrency mining firm, and mining makes no innovative use of "blockchains" other than to append blocks to one chain. Naming the company "Riot Mining" would have been a very accurate name. Yet, the company was able to increase its stock price from $1.70 to $71.22 in the course of a year through its name.
Outside of money-oriented applications, "blockchains" are very good for a limited number of purposes, such as tracking NFTs. It is not useful, cheap, or even workable for a company to use a blockchain to track the location of trucks. A blockchain requires a lot of miners to secure it, delays the frequency at which transactions can be recorded to it, and allows anyone to append data to it. You can't start a new blockchain unless it has a valuable currency associated with it to pay miners. Blockchains are only useful when dealing with a large number of untrustworthy people. There is zero benefit, and a large cost, to using a blockchain to track anything internally to a company.
In 99% of the cases where "blockchain" is used, replacing the word with "database" is not only possible, it would result in a better outcome.
Series round
Examples
- Coin Company raised $250m in a Series C round to offer new products.
- Token9000 is a new startup that raised $25m in a Series A round to issue its T9000 tokens.
- Investors gave $250m to Coin Company, so that they can sell their shares in the Ponzi scheme in an initial public offering, leaving a future round of investors to lose money.
- Token9000 investors in the first round of the Ponzi scheme will generate buzz around the product and sell their tokens shortly after launch, leaving future token buyers to lose money.
In the "Silicon Valley" model of investing, small companies raise enormous amounts of money to start or expand companies that are losing enormous sums of money. In the case of Coinbase, the losses are in the realm of billions of dollars per year. When the money from a previous "Series round" runs out, a subsequent round is initiated to stave off bankruptcy until the next round and to continue paying the company's employees.
Each round of investors is promised that even though the company is losing money now, it has huge growth opportunities that will result in large profits after a major product launch is made, or (in the case of crypto.com) hundreds of millions of dollars in advertising is conducted. Thousands of people are hired, far more than could ever be paid in a profitable business. The goal is to grow useless metrics like "subscriber count" and "revenue" that look impressive. By the way, did I happen to tell you that Prohashing had $33 million in "revenue" last year and therefore, with a standard PE ratio of a 3x multiplier, you should pay $100m for the company?
Everyone in each round knows that there's no way that the business will ever earn back all the money the investors are spending, but they do believe that there are enough suckers to believe the same presentation they heard, which will value their shares higher than they paid for them. Eventually, people realize, often suddenly in a period of days, there never was any hope of making anywhere close to the promised amount of money, resulting in product quality reductions, "cost-cutting," and mass layoffs (see also: Netflix, Coinbase.)
The opposite of "Series round" investing are companies that actually earn money. These companies never make the news, don't do flashy tricks, and invest money they actually earn to make more money (see also: Prohashing, which has never lost money in any quarter, and Microsoft Windows, which is derided as uncool by cell phone manufacturers while Microsoft quietly sells licenses to almost every PC made.)
A 99% accurate replacement for the term "Series X round" is "Ponzi round X," especially in the cryptocurrency industry.
Crypto
Examples
- Crypto exchange FTX recorded record profits last year.
- Crypto.com purchased naming rights to the Staples Center in Los Angeles for tens of millions of dollars.
- Exchange FTX trades cryptocurrencies, but brands their service because coins can never become "currencies."
- Crypto.com trades and pays interest on cryptocurrencies, but brands their service crypto to avoid association with criminals, drug dealers, and thieves.
If the product you're offering isn't being used for its intended purpose, maybe you can sell more of it by calling it something else and creating a flashy marketing campaign around it.
There are concerns about cryptocurrency usage and I'll write another post later about the disappointment of how, 13 years later, cryptocurrencies are still not in general use despite enormous advantages over the banking system. However, using a confusing naming scheme for something is, apparently, a tried and true method of generating sales when the original term wasn't working. For example, instead of naming your product line the "Playstation 1/2/3/4/5," you name it the "Xbox, Xbox 360, Xbox One, Xbox One X, Xbox Series X." Surely nobody unfamiliar with gaming would believe that the Xbox 360 is better than the Xbox One because it has the higher number.
The efforts of exchanges have been so successful over the past few years that I even have to purposely use the inaccurate term "crypto" in some posts because the term ranks higher than "cryptocurrency" in search engine results.
The word "crypto," according to the Oxford English Dictionary, is short for "cryptography," an accurate use of the term. Cryptography is used in cryptographic signatures, encrypted communications, and other things, as well as cryptocurrencies. These exchanges have confused the term so much that someone who stays "I'm changing out the website's crypto for another" could mean that he is either accepting a different currency for payment, or using symmetric encryption instead of asymmetric encryption.
When you see the term "crypto" used as a buzzword in an ad, translating it to "bitcoin" is accurate 50% of the time, because that's the only coin the exchange or fund is actually selling. The rest of the time, "cryptocurrency" works.
Algorithmic stablecoin
Examples
- Terra was an algorithmic stablecoin that lost its peg to the dollar a few weeks ago.
- DAI is an "overcollateralized" algorithmic stablecoin that is backed by coins locked in the Maker protocol.
- Terra was a cryptocurrency backed by the wrong asset that had miraculously remained stable with the dollar until just a few weeks ago.
- DAI is a cryptocurrency backed by the wrong asset that has managed to avoid catastrophe so far because its backing assets haven't crashed yet.
An algorithm to stabilize the value of an asset has not yet been discovered by humanity. If it had, that asset would have become the most perfect form of money that has ever existed, and that asset would become the world currency within days or weeks. Such an achievement would be one of the greatest advances in history, bringing millions out of poverty as the boom-bust business cycle stabilizes and recessions become a thing of the past.
Since a recession is currently starting and accelerating, we obviously see that is not the case, and yet people are tricked into believing that somehow a problem that has existed since the dawn of human civilization has now been solved - over and over - by the next "genius" cryptocurrency CEO. It isn't possible to have a stablecoin track an asset when 100% of that exact asset isn't held in reserve. Furthermore, the only major stablecoin that has 100% backing of the asset it purports to track is USDC. Even "centralized stablecoin" Tether is backed by "corporate debt" and "foreign government debt," rather than in debt owed by the government that backs the currency.
All of the "algorithmic stablecoins" are not actually backed by the assets they claim to be stable against. UST was backed by bitcoins - and a very small number of them at that, the new USDD is supposed to be better because it is backed, in part, by more bitcoins, and DAI is mostly backed by cryptocurrencies that have nothing to do with dollars, which will supposedly hold DAI steady because the value of those is (currently) greater than the value of the DAI. Every one of these "algorithmic stablecoins" will fail the moment that the backing cryptocurrencies crash quickly enough.
An accurate replacement for the term "algorithmic stablecoin" is "an effort to work around US laws or remain anonymous and have no accountability by not actually holding US dollars."
Hopefully, this Crypto Dictionary has helped at least a few people learn how to use fancy language to their benefit. Every time each of us uses one of these terms, we all sound smarter and look like we know what we're talking about. Here's to polluting the media with as much jargon and fluff as possible, because the fewer people who actually know what we mean, the more we can rip everyone who listens to us off. Until next time!
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