Crypto Glossary — 69 Essential Terms Explained
Your A-Z guide to cryptocurrency terminology. 69 essential terms explained in plain English.
Airdrop #
A distribution of free cryptocurrency tokens or coins sent directly to wallet addresses, typically used as a marketing strategy to raise awareness, reward loyal users, or distribute governance tokens to a community. Airdrops often require recipients to meet certain criteria, such as holding a specific token, completing tasks, or interacting with a protocol.
Altcoin #
Any cryptocurrency other than Bitcoin. The term is short for "alternative coin" and encompasses thousands of digital assets including Ethereum, Solana, Cardano, and others. Altcoins may offer different features, consensus mechanisms, or use cases compared to Bitcoin, ranging from smart contract platforms to privacy-focused currencies.
AMM (Automated Market Maker) #
A type of decentralised exchange protocol that uses mathematical formulas and liquidity pools to facilitate trades instead of traditional order books. AMMs like Uniswap and Curve allow anyone to provide liquidity and earn fees, enabling permissionless token swaps 24/7 without the need for a centralised intermediary.
APY (Annual Percentage Yield) #
The real rate of return earned on a crypto investment over one year, accounting for the effect of compounding interest. APY is commonly displayed on staking, lending, and yield farming platforms so users can compare earning opportunities. A higher APY indicates greater potential returns, but often carries higher risk.
ATH (All-Time High) #
The highest price ever reached by a particular cryptocurrency or digital asset since it began trading. Reaching an ATH is generally considered a bullish signal and often attracts significant media attention. Conversely, ATL (All-Time Low) refers to the lowest price ever recorded.
Bear Market #
A prolonged period where cryptocurrency prices are declining, typically defined as a drop of 20% or more from recent highs. Bear markets are characterised by widespread pessimism, reduced trading volume, and negative sentiment. They can last from weeks to years and are considered a natural part of market cycles.
Bitcoin (BTC) #
The first and most well-known cryptocurrency, created in 2009 by the pseudonymous Satoshi Nakamoto. Bitcoin operates on a decentralised, peer-to-peer network secured by Proof of Work. It has a hard-capped supply of 21 million coins and is widely regarded as digital gold and a store of value.
Block #
A collection of transaction data bundled together and added to a blockchain. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction records. Once confirmed, blocks become a permanent and immutable part of the ledger, creating a chronological chain of all activity on the network.
Blockchain #
A distributed, immutable digital ledger that records transactions across a network of computers. Data is stored in sequential blocks linked by cryptographic hashes, making it extremely difficult to alter past records. Blockchains can be public (like Bitcoin or Ethereum) or private (used by enterprises), and they form the foundation of all cryptocurrencies.
Bridge #
A protocol that enables the transfer of tokens and data between two different blockchain networks. Bridges solve the interoperability problem by allowing assets from one chain (e.g., Ethereum) to be used on another (e.g., Polygon or Arbitrum). They can be centralised, decentralised, or use various trust models, and are a critical piece of multi-chain infrastructure.
Bull Market #
A sustained period of rising cryptocurrency prices, generally accompanied by optimism, increased trading volume, and strong investor confidence. Bull markets can be driven by technological developments, institutional adoption, favourable regulation, or macroeconomic conditions. They are the opposite of bear markets.
CEX (Centralised Exchange) #
A cryptocurrency exchange operated by a centralised company that acts as an intermediary between buyers and sellers. Examples include Binance, Coinbase, and Kraken. CEXs typically offer higher liquidity, faster execution, and fiat on-ramps, but require users to trust the platform with custody of their funds and personal data.
Cold Wallet #
A cryptocurrency wallet that is not connected to the internet, making it significantly more secure against hacking and online threats. Cold wallets include hardware devices (like Ledger or Trezor) and paper wallets. They are the recommended way to store large amounts of cryptocurrency for the long term.
Consensus Mechanism #
The method by which a decentralised blockchain network agrees on the current state of the ledger and validates new transactions. Common mechanisms include Proof of Work (PoW), Proof of Stake (PoS), and Delegated Proof of Stake (DPoS). The consensus mechanism is fundamental to a blockchain's security, speed, and energy consumption.
Cross-chain #
Technology or protocols that enable interaction, communication, and the transfer of assets between different blockchain networks. Cross-chain solutions address the fragmentation of the blockchain ecosystem, allowing users to move tokens and data seamlessly across chains without relying on a single centralised intermediary.
Cryptocurrency #
A digital or virtual currency that uses cryptography for security and operates on a decentralised network, typically a blockchain. Cryptocurrencies enable peer-to-peer transfers without intermediaries like banks. Bitcoin was the first cryptocurrency; today there are thousands, each with different features and purposes.
DAO (Decentralised Autonomous Organisation) #
An organisation governed by smart contracts and community voting rather than a traditional corporate hierarchy. Token holders can propose and vote on decisions including treasury management, protocol upgrades, and partnerships. DAOs aim to create transparent, democratic governance structures for decentralised projects and communities.
DApp (Decentralised Application) #
An application that runs on a decentralised blockchain network rather than a centralised server. DApps use smart contracts to execute logic in a trustless, transparent manner. They span categories including finance (DeFi), gaming, social media, and more. Users interact with DApps through web interfaces connected to their crypto wallets.
DCA (Dollar-Cost Averaging) #
An investment strategy where a fixed amount of money is invested at regular intervals regardless of the asset's price. DCA reduces the impact of volatility and eliminates the stress of trying to time the market. It is one of the most recommended strategies for long-term crypto investors, especially beginners.
DeFi (Decentralised Finance) #
A broad category of financial services built on blockchain technology that operate without traditional intermediaries like banks or brokerages. DeFi protocols enable lending, borrowing, trading, insurance, and yield generation through smart contracts. Popular DeFi platforms include Aave, Uniswap, MakerDAO, and Compound.
DEX (Decentralised Exchange) #
A cryptocurrency exchange that operates without a central authority, allowing users to trade directly from their wallets using smart contracts. DEXs like Uniswap, SushiSwap, and dYdX offer greater privacy, censorship resistance, and self-custody compared to centralised exchanges, though often with different trade-offs in speed and liquidity.
ERC-20 #
A technical standard used for creating and issuing fungible tokens on the Ethereum blockchain. ERC-20 defines a common set of rules that all Ethereum tokens must follow, including functions for transferring tokens, checking balances, and approving spending. Most tokens launched on Ethereum, including USDT, LINK, and UNI, are ERC-20 tokens.
Ethereum (ETH) #
The second-largest cryptocurrency by market cap and the leading smart contract platform. Created by Vitalik Buterin and launched in 2015, Ethereum enables developers to build decentralised applications (DApps) and deploy smart contracts. It transitioned from Proof of Work to Proof of Stake in September 2022 ("The Merge"), significantly reducing its energy consumption.
Fiat #
Government-issued currency that is not backed by a physical commodity like gold, but rather by the trust and authority of the issuing government. Examples include the US Dollar, Euro, and British Pound. In the crypto world, "fiat" is used to distinguish traditional money from cryptocurrencies. Fiat on-ramps allow users to buy crypto with traditional money.
Fork #
A change to a blockchain's protocol that creates a divergence from the existing chain. A hard fork results in a permanent split, creating two separate blockchains (e.g., Bitcoin and Bitcoin Cash). A soft fork is backward-compatible and does not create a new chain. Forks can be initiated for upgrades, bug fixes, or ideological disagreements within a community.
FUD (Fear, Uncertainty, and Doubt) #
A strategy or sentiment that involves spreading negative, misleading, or exaggerated information to influence public perception and drive down the price of an asset. In the crypto space, FUD can originate from media coverage, regulatory announcements, social media influencers, or competing projects. Recognising FUD is an important skill for investors.
Futures #
Financial contracts that obligate the buyer to purchase, or the seller to sell, an asset at a predetermined price on a future date. In crypto, perpetual futures (which have no expiry date) are especially popular and allow traders to speculate on price movements with leverage. Futures trading carries significant risk due to the potential for amplified losses.
Gas #
A unit of measurement for the computational effort required to execute operations on the Ethereum network (and similar EVM-compatible chains). Users pay gas fees in ETH to compensate validators for processing transactions and running smart contracts. Gas prices fluctuate with network demand; high congestion results in higher gas fees.
Governance #
The system by which decisions are made within a blockchain protocol or DAO. Governance tokens (such as UNI, AAVE, or COMP) grant holders the right to propose and vote on changes to the protocol, including fee structures, treasury allocations, and technical upgrades. On-chain governance ensures transparency and community-driven development.
Halving #
An event programmed into Bitcoin's code that reduces the block reward given to miners by 50%, occurring roughly every four years (every 210,000 blocks). Halvings reduce the rate at which new Bitcoin enters circulation, increasing scarcity over time. Historically, halvings have preceded significant price appreciation. The most recent halving occurred in April 2024.
HODL #
A slang term in the crypto community meaning to hold onto your cryptocurrency rather than selling, regardless of market volatility. The term originated from a misspelled forum post in 2013 and has since been backronymed to "Hold On for Dear Life." HODLing reflects a long-term investment strategy and conviction in an asset's future value.
Hot Wallet #
A cryptocurrency wallet that is connected to the internet, offering convenience for frequent transactions and trading. Examples include browser extensions (MetaMask), mobile apps (Trust Wallet), and exchange-hosted wallets. While more accessible than cold wallets, hot wallets are more vulnerable to hacking and phishing attacks.
ICO (Initial Coin Offering) #
A fundraising method where a new cryptocurrency project sells tokens to early investors before the token is listed on exchanges. ICOs were hugely popular in 2017-2018 but attracted regulatory scrutiny due to numerous scams. Modern alternatives include IDOs (Initial DEX Offerings) and IEOs (Initial Exchange Offerings), which offer more investor protections.
Impermanent Loss #
The temporary loss of value that liquidity providers experience when the price ratio of tokens in a liquidity pool changes compared to when they deposited. The loss is "impermanent" because it can be recovered if prices return to the original ratio. However, if a provider withdraws while prices have diverged, the loss becomes permanent. It is a key risk in DeFi yield strategies.
KYC (Know Your Customer) #
A regulatory process that requires financial institutions and exchanges to verify the identity of their users. KYC typically involves submitting government-issued identification, proof of address, and sometimes a selfie. While KYC helps prevent money laundering and fraud, it conflicts with the privacy-focused ethos of some crypto communities.
Layer 1 (L1) #
The base-level blockchain network that processes and finalises transactions on its own. Examples include Bitcoin, Ethereum, Solana, and Avalanche. Layer 1 blockchains provide the foundational security and decentralisation upon which Layer 2 solutions and applications are built. Scalability is a common challenge for L1 networks.
Layer 2 (L2) #
A secondary framework or protocol built on top of a Layer 1 blockchain to improve scalability and reduce transaction costs. Layer 2 solutions process transactions off the main chain and then post compressed proofs back to L1 for security. Examples include Arbitrum, Optimism, and zkSync for Ethereum, and the Lightning Network for Bitcoin.
Leverage #
The use of borrowed funds to increase the size of a trading position beyond what would be possible with the trader's own capital alone. Leverage is expressed as a ratio (e.g., 10x means a trader can open a position ten times their deposit). While leverage amplifies profits, it equally amplifies losses and can result in liquidation of the entire position.
Liquidity #
The ease with which a cryptocurrency can be bought or sold without significantly affecting its price. High liquidity means an asset can be traded quickly in large volumes with minimal price impact (low slippage). Liquidity is influenced by trading volume, the number of market participants, and the presence of market makers.
Liquidity Pool #
A collection of cryptocurrency tokens locked in a smart contract that provides liquidity for decentralised exchanges and DeFi protocols. Users who deposit tokens into a pool (liquidity providers) earn a share of trading fees generated by the pool. Liquidity pools are the backbone of AMM-based DEXs and enable permissionless, decentralised trading.
Market Cap #
The total value of a cryptocurrency, calculated by multiplying the current price per token by the total circulating supply. Market cap is the primary metric used to rank and compare cryptocurrencies. Categories include large-cap (above $10B), mid-cap ($1B-$10B), and small-cap (below $1B), each with different risk and return profiles.
Memecoin #
A cryptocurrency that originated from an internet meme or cultural joke, often lacking fundamental utility or technology. Notable examples include Dogecoin (DOGE), Shiba Inu (SHIB), and PEPE. Memecoins are driven primarily by community enthusiasm, social media hype, and speculation. They are considered extremely high-risk, high-volatility assets.
MetaMask #
One of the most popular cryptocurrency wallets, available as a browser extension and mobile app. MetaMask allows users to store, send, and receive Ethereum and ERC-20 tokens, as well as interact with DApps on Ethereum and EVM-compatible blockchains. It serves as a gateway to DeFi, NFTs, and the broader Web3 ecosystem.
Mining #
The process of using computational power to validate transactions and add new blocks to a Proof of Work blockchain. Miners compete to solve complex mathematical puzzles; the first to find the solution earns the block reward (newly minted coins plus transaction fees). Mining secures the network but requires significant energy and specialised hardware (ASICs or GPUs).
Moon #
Crypto slang for a rapid and dramatic increase in a cryptocurrency's price. When someone says a coin is "mooning" or going "to the moon," they mean its price is rising sharply. The phrase "When moon?" is a common tongue-in-cheek question in crypto communities asking when a token's price will skyrocket.
NFT (Non-Fungible Token) #
A unique digital token on a blockchain that represents ownership of a specific item, such as artwork, music, collectibles, in-game assets, or real-world assets. Unlike cryptocurrencies which are interchangeable (fungible), each NFT is one-of-a-kind and cannot be replicated. NFTs are primarily built on Ethereum using the ERC-721 or ERC-1155 standards.
Node #
A computer that participates in a blockchain network by maintaining a copy of the ledger and validating transactions. Full nodes store the entire blockchain history and independently verify all transactions against consensus rules. Nodes are essential to a blockchain's decentralisation, security, and resilience; the more nodes, the harder it is to compromise the network.
Oracle #
A service that provides external, real-world data to smart contracts on a blockchain. Since blockchains cannot natively access off-chain information (such as asset prices, weather data, or sports scores), oracles act as a bridge between the on-chain and off-chain worlds. Chainlink is the most widely used decentralised oracle network.
Order Book #
A real-time, dynamic list of buy orders (bids) and sell orders (asks) for a particular asset on an exchange. The order book displays the price and quantity of each order, enabling traders to gauge market depth and liquidity. Traditional centralised exchanges and some decentralised exchanges (like dYdX) use order-book models for trade matching.
Private Key #
A secret cryptographic key that proves ownership of a blockchain wallet and allows the holder to sign transactions and spend funds. A private key must never be shared; anyone with access to it has full control over the associated wallet and assets. Private keys are mathematically linked to public keys but cannot be derived from them.
Proof of Stake (PoS) #
A consensus mechanism where validators are chosen to create new blocks and confirm transactions based on the amount of cryptocurrency they have staked (locked up) as collateral. PoS is significantly more energy-efficient than Proof of Work and is used by Ethereum, Cardano, Solana, and many other blockchains. Validators risk losing their stake (slashing) if they act maliciously.
Proof of Work (PoW) #
The original consensus mechanism used by Bitcoin and other blockchains where miners compete to solve computationally intensive puzzles to validate transactions and create new blocks. PoW provides robust security through its energy expenditure, making attacks prohibitively expensive. The trade-off is high energy consumption and specialised hardware requirements.
Public Key #
A cryptographic key that is derived from a private key and can be shared publicly. It is used to generate wallet addresses where others can send cryptocurrency. Think of a public key as analogous to a bank account number: safe to share for receiving funds, but it does not grant the ability to spend them. Public and private keys together form the basis of blockchain security.
Rug Pull #
A type of crypto scam where the developers of a project abruptly abandon it and withdraw all investor funds from the liquidity pool. Rug pulls are common in the DeFi and memecoin space and can happen by removing liquidity, exploiting smart contract backdoors, or conducting a massive token dump. Thorough research (DYOR) and code audits help investors avoid rug pulls.
Seed Phrase #
A series of 12 or 24 randomly generated words that serve as the master backup for a cryptocurrency wallet. The seed phrase can be used to recover access to all the wallet's accounts and funds if the device is lost or damaged. It must be stored offline in a secure location and never shared digitally, as anyone with the seed phrase has full access to the wallet.
Slippage #
The difference between the expected price of a trade and the price at which it actually executes. Slippage occurs most often in volatile markets or when trading large orders on low-liquidity pools. DEXs allow users to set a slippage tolerance to protect against excessive price deviation. High slippage can significantly erode trading profits.
Smart Contract #
A self-executing program stored on a blockchain that automatically enforces the terms of an agreement when predefined conditions are met. Smart contracts eliminate the need for intermediaries and are the foundation of DeFi, NFTs, and DApps. They are typically written in languages like Solidity (Ethereum) or Rust (Solana) and are immutable once deployed.
Stablecoin #
A cryptocurrency designed to maintain a stable value by being pegged to an external asset, usually the US Dollar. Stablecoins come in three main types: fiat-backed (USDT, USDC), crypto-backed (DAI), and algorithmic. They play a critical role in crypto trading, DeFi, and payments by providing a low-volatility medium of exchange and store of value.
Staking #
The process of locking up cryptocurrency in a Proof of Stake network to help validate transactions, secure the network, and earn rewards. Stakers receive periodic payouts (similar to interest) in return for their commitment. Staking can be done directly (running a validator node) or through delegation to an existing validator, staking pool, or liquid staking protocol.
Token #
A digital asset created on an existing blockchain (as opposed to a coin, which has its own native blockchain). Tokens can represent a wide range of assets and utilities, including governance rights, access to services, in-game items, and more. Common token standards include ERC-20 and ERC-721 on Ethereum, and SPL on Solana.
Tokenomics #
The economic model and design of a cryptocurrency token, including its total supply, distribution schedule, inflation or deflation mechanisms, utility, and incentive structures. Good tokenomics align the interests of users, developers, and investors and are a key factor in evaluating the long-term viability and value of a crypto project.
TVL (Total Value Locked) #
The total amount of cryptocurrency deposited and locked in a DeFi protocol or across the entire DeFi ecosystem. TVL is a key metric for measuring the adoption, growth, and health of DeFi platforms. Higher TVL generally indicates greater trust and usage. TVL is tracked by aggregators like DefiLlama and can fluctuate with token prices and user activity.
Validator #
A participant in a Proof of Stake blockchain network responsible for verifying transactions and proposing new blocks. Validators must lock up (stake) a minimum amount of the native cryptocurrency as collateral and run specialised software. In return, they earn staking rewards. Validators who act dishonestly or go offline risk having their stake slashed as a penalty.
Volatility #
The degree to which the price of a cryptocurrency fluctuates over a given period. Crypto markets are known for extreme volatility, with double-digit percentage swings occurring regularly. While volatility creates opportunities for traders, it also represents significant risk. Factors influencing crypto volatility include market sentiment, regulation, liquidity, and macroeconomic events.
Wallet #
A tool (software or hardware) used to store, send, and receive cryptocurrency. Wallets do not actually "store" crypto; they store private keys that grant access to assets on the blockchain. Wallets come in many forms: hardware (Ledger, Trezor), software (MetaMask, Trust Wallet), paper, and exchange-hosted. Choosing the right wallet depends on your security needs and usage patterns.
Web3 #
The vision for the next generation of the internet built on blockchain technology, emphasising decentralisation, user ownership, and permissionless access. Web3 aims to shift control from centralised platforms (like Google, Meta, and Amazon) back to individual users. Key components include cryptocurrencies, DApps, DAOs, decentralised identity, and tokenised economies.
Whale #
An individual or entity that holds a very large amount of a particular cryptocurrency, enough to potentially influence the market through their trades. Whale movements (large deposits to exchanges, big purchases or sells) are closely tracked by analytics tools, as they can signal upcoming price volatility or market direction.
Whitepaper #
A detailed technical document published by a cryptocurrency project that outlines its purpose, technology, tokenomics, roadmap, and the problem it aims to solve. Bitcoin's whitepaper, published by Satoshi Nakamoto in 2008, was the first of its kind. Reading a project's whitepaper is an essential step in due diligence before investing.
Yield Farming #
A DeFi strategy where users move their crypto assets across various protocols to maximise returns. Yield farmers provide liquidity, stake tokens, or lend assets to earn rewards in the form of interest, fees, and bonus token incentives. While yield farming can generate attractive returns, it carries significant risks including impermanent loss, smart contract exploits, and token depreciation.
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