Crypto Glossary

Address

A public identifier derived cryptographically from a wallet's public key, used as the destination for cryptocurrency transactions. Addresses are safe to share publicly.

Airdrop

A distribution of free tokens to wallet addresses, typically used for marketing, rewarding early adopters, or decentralising token ownership. Recipients should treat unsolicited airdrops with caution, as malicious airdrops can be used in scams.

Altcoin

A contraction of "alternative coin." Refers to all cryptocurrencies other than Bitcoin. The category encompasses thousands of assets with vastly different purposes, quality, and risk profiles.

ATH

Abbreviation for All-Time High. The highest price ever recorded for a given asset. ATH is commonly used as a reference point for measuring how far a price has recovered or fallen.

Bear Market

A sustained period of declining asset prices, typically defined as a drawdown of 20% or more from recent highs. Bear markets in crypto have historically been severe (70–90% peak-to-trough) and can last one to two years.

Bitcoin

The first decentralised cryptocurrency, introduced in the 2008 Nakamoto whitepaper and launched in January 2009. Bitcoin operates on a Proof of Work blockchain with a fixed supply of 21 million BTC.

Block

A data structure containing a set of validated transactions, a timestamp, a reference to the previous block's hash, and a nonce. Blocks are added to the chain sequentially by miners or validators.

Blockchain

A distributed ledger comprised of a chronological chain of blocks, secured through cryptographic hashing and maintained by a decentralised network of nodes. Designed to be tamper-evident and resistant to modification.

Bridge

A protocol enabling the transfer of assets or data between separate blockchain networks. Bridges have been the target of significant hacks, representing some of the largest losses in DeFi history.

Bull Market

A sustained period of rising asset prices and positive market sentiment. Crypto bull markets have historically been characterised by rapid, parabolic price appreciation followed by severe corrections.

Burn

The permanent removal of tokens from circulation, typically by sending them to a verifiably unspendable address (a burn address). Used to reduce supply and potentially increase scarcity.

CEX

Centralised Exchange. A regulated, company-operated platform that facilitates cryptocurrency trading. CEXs hold custody of user assets and are subject to KYC/AML regulations. Examples include Coinbase, Kraken, and Binance.

Coin

A cryptocurrency native to its own blockchain, as distinguished from a token which is issued on someone else's blockchain. BTC and ETH are coins; most ERC-20 assets are tokens.

Cold Wallet

A wallet that stores private keys on a device or medium not connected to the internet. Hardware wallets (Ledger, Trezor) and paper wallets are common forms. Provides the highest level of security for long-term storage.

Confirmation

The number of blocks that have been added to the blockchain after the block containing a given transaction. Each confirmation makes the transaction progressively harder to reverse. Bitcoin transactions are generally considered final after 6 confirmations.

Consensus

The mechanism by which distributed nodes in a blockchain network reach agreement on the valid state of the ledger. Common consensus mechanisms include Proof of Work and Proof of Stake.

Custodial

Describes an arrangement where a third party (typically an exchange) controls the private keys associated with a user's crypto assets. Convenient but introduces counterparty risk.

DAO

Decentralised Autonomous Organisation. An entity governed by smart contracts and token-holder voting rather than traditional corporate hierarchy. DAOs govern many DeFi protocols, with governance token holders voting on protocol changes.

DApp

Decentralised Application. A software application whose backend logic runs on a blockchain via smart contracts rather than on centralised servers. DApps typically interact with users through a standard web frontend.

DeFi

Decentralised Finance. Financial protocols and applications built on public blockchains that provide services — lending, borrowing, trading, derivatives — without centralised intermediaries.

DEX

Decentralised Exchange. A trading venue operating via smart contracts that allows users to swap tokens directly from self-custody wallets. Uniswap, Curve, and dYdX are prominent examples.

DYOR

Do Your Own Research. A standard disclaimer in crypto communities urging individuals to independently verify information before making investment decisions, rather than relying on social media or influencer recommendations.

Ethereum

A programmable blockchain platform and the native cryptocurrency (ETH) that powers it. Ethereum introduced smart contracts in 2015 and transitioned from Proof of Work to Proof of Stake in September 2022 (the Merge).

Exchange

A platform facilitating the trading of cryptocurrencies. Centralised exchanges (CEXs) are company-operated and custodial. Decentralised exchanges (DEXs) operate via smart contracts and are non-custodial.

Fiat

Fiat currency: government-issued legal tender not backed by a physical commodity. USD, EUR, GBP, and JPY are fiat currencies. In crypto, "on-ramping" refers to converting fiat to crypto.

FOMO

Fear of Missing Out. A psychological state driving impulsive investment decisions based on social pressure or rising prices rather than analysis. FOMO-driven buying near market tops is a primary cause of retail losses.

Fork

A change to a blockchain's protocol rules. A soft fork is backward-compatible. A hard fork is not — nodes that don't upgrade cannot follow the new chain, potentially creating two separate blockchains (e.g., Bitcoin and Bitcoin Cash).

FUD

Fear, Uncertainty, and Doubt. Negative information — accurate or not — that creates doubt about an asset or project. Used as a descriptor for bearish sentiment and sometimes as a dismissal of legitimate criticism.

Gas

The unit measuring the computational effort required to execute operations on the Ethereum network. Gas fees are paid in ETH (specifically Gwei) and fluctuate based on network congestion. High-activity periods produce high gas fees.

Genesis Block

The first block in a blockchain, hardcoded into the software rather than mined. Bitcoin's genesis block was mined by Satoshi Nakamoto on January 3, 2009, and contains the message: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks."

Governance Token

A token granting holders the right to vote on protocol parameters, upgrades, and treasury allocations in a decentralised project. Examples include UNI (Uniswap) and AAVE.

Gwei

A denomination of ETH equal to 10⁻⁹ ETH (one billionth of one Ether). Gas prices on Ethereum are quoted in Gwei. Named after Wei Dai, a pioneer of cryptographic currency.

Halving

A programmatic reduction in the Bitcoin block reward by 50%, occurring every 210,000 blocks (~4 years). The 2024 halving reduced the reward to 3.125 BTC per block. Halvings reduce the rate of new supply issuance.

Hardware Wallet

A dedicated physical device that stores private keys in a secure chip, isolated from internet-connected computers. Transactions are signed on the device itself. Ledger and Trezor are the leading manufacturers.

Hash

The output of a cryptographic hash function — a fixed-length string produced from an input of any size. Hash functions are deterministic (same input = same output) and one-way (the input cannot be derived from the output). SHA-256 is Bitcoin's primary hash function.

HODL

Originally a typo for "hold" in a 2013 Bitcoin forum post, now used as an acronym (Hold On for Dear Life). Refers to the long-term holding strategy rather than trading, often cited as the most reliable retail strategy in studies of actual returns.

Hot Wallet

A wallet with private keys stored on an internet-connected device. Includes mobile apps, browser extensions, and desktop software. Convenient for active use but exposed to online threats.

ICO

Initial Coin Offering. A fundraising mechanism in which a project sells newly created tokens to investors. ICOs were common in 2017–2018; many proved fraudulent or failed to deliver. The SEC has pursued enforcement actions against numerous ICOs as unregistered securities offerings.

Immutable

Unchangeable. Data recorded on a public blockchain cannot be altered without invalidating the chain's cryptographic integrity. Immutability is a core property of decentralised ledgers and a key distinction from centralised databases.

KYC

Know Your Customer. Regulatory requirements mandating that financial service providers verify the identity of their customers. KYC in crypto typically involves submitting a government ID, proof of address, and sometimes a liveness check.

Layer 1

The base blockchain network (e.g., Bitcoin, Ethereum, Solana). Layer 1 handles final settlement and security. Scalability limitations on L1 have driven the development of Layer 2 solutions.

Layer 2

A network built on top of a Layer 1 blockchain to improve scalability. Layer 2 solutions process transactions off the main chain and periodically settle on it. Examples include the Lightning Network (Bitcoin) and Arbitrum, Optimism (Ethereum).

Ledger

A record of financial transactions. A blockchain is a distributed ledger: a record maintained simultaneously across many nodes rather than by a single authority. Also the name of the leading hardware wallet manufacturer.

Liquidity

The ease with which an asset can be bought or sold without significantly affecting its price. High-liquidity markets (Bitcoin on major exchanges) have tight bid-ask spreads. Low-liquidity tokens can see large price swings on small trades.

Market Cap

Market Capitalisation. Calculated as current price × circulating supply. Used to rank and compare cryptocurrency size. Bitcoin's market cap consistently exceeds $1 trillion; many tokens have market caps below $1 million.

Memecoin

A cryptocurrency originating from internet memes or pop culture with little or no underlying utility. Dogecoin and Shiba Inu are the original examples; thousands of imitators exist. Memecoins are highly speculative and subject to extreme volatility.

Mining

The Proof of Work process by which nodes (miners) compete to add new blocks to a blockchain by finding a hash meeting the current difficulty target. Successful miners receive newly issued cryptocurrency and transaction fees.

Minting

The process of creating new tokens or NFTs on a blockchain. For NFTs, minting records a new ownership entry on-chain. For fungible tokens, minting increases total supply.

Moon

Slang describing a dramatic price increase. "To the moon" expresses the hope for parabolic gains. Often used ironically. A useful red flag for irrational exuberance.

NFT

Non-Fungible Token. A unique cryptographic token representing ownership of a specific item or piece of content. Unlike fungible tokens (every BTC is identical), each NFT has distinct properties. Built on standards like ERC-721 on Ethereum.

Node

A computer participating in a blockchain network. Full nodes store the complete blockchain history and validate all transactions and blocks. Light nodes store only block headers. Nodes are essential to the decentralisation of the network.

Non-Custodial

Describes wallets or services where the user retains exclusive control of their private keys. Non-custodial arrangements eliminate counterparty risk but place full security responsibility on the user.

P2P

Peer-to-Peer. Direct interaction between two parties without an intermediary. Bitcoin was designed as a peer-to-peer electronic cash system, enabling transactions without financial institutions.

Private Key

A cryptographic secret — a large random number — from which a public key and address are derived. Whoever holds a private key has unconditional control over the funds at the associated address. Must never be disclosed.

Proof of Stake

A consensus mechanism in which validators lock (stake) cryptocurrency as collateral to earn the right to validate blocks. Dishonest validators risk losing their stake (slashing). More energy-efficient than Proof of Work. Used by Ethereum post-Merge.

Proof of Work

A consensus mechanism in which nodes expend computational energy solving cryptographic puzzles to earn the right to add blocks. The difficulty adjusts to maintain consistent block times. Used by Bitcoin. Energy-intensive by design — the cost deters attacks.

Public Key

A cryptographic key derived from the private key. Public keys can be shared without compromising security and are used to generate wallet addresses. Others can encrypt messages or verify signatures with your public key.

Rug Pull

A type of exit scam where a crypto project's creators drain liquidity or funds and abandon the project after attracting investor capital. Common in DeFi and memecoin launches. A major risk of investing in unaudited, anonymous projects.

Satoshi

The smallest divisible unit of Bitcoin, equal to 0.00000001 BTC (10⁻⁸ BTC). Named after Bitcoin's pseudonymous creator. Important as Bitcoin's price rises and whole-coin ownership becomes inaccessible to many.

Satoshi Nakamoto

The pseudonymous individual or group who authored the Bitcoin whitepaper in 2008 and launched the network in 2009. Satoshi Nakamoto's true identity has never been confirmed. They withdrew from public activity in 2011, leaving approximately 1 million unmoved BTC.

Seed Phrase

A human-readable representation of a wallet's master private key, typically 12 or 24 words from the BIP-39 wordlist. All private keys in the wallet can be regenerated from the seed phrase. Its loss or exposure results in loss of all associated funds.

Shitcoin

Informal term for cryptocurrencies perceived to have no legitimate use case, value, or honest development. The label is subjective and contested. Generally applied to obvious pump-and-dump schemes, abandoned projects, or low-quality copies.

Smart Contract

Self-executing code deployed on a blockchain that automatically enforces predefined rules and conditions. Smart contracts are immutable once deployed (unless designed with upgrade mechanisms) and execute deterministically without human intervention.

Stablecoin

A cryptocurrency designed to maintain a stable value relative to a reference asset, typically the US dollar. Mechanisms include fiat reserves (USDC, USDT), crypto over-collateralisation (DAI), and algorithmic supply adjustments (the latter having a poor track record).

Staking

The act of locking cryptocurrency in a Proof of Stake network to participate in validation and earn rewards. Also used loosely to describe depositing crypto in DeFi protocols to earn yield, which carries different and often greater risks.

Token

A digital asset issued on an existing blockchain platform using smart contracts, as distinct from a coin native to its own chain. ERC-20 tokens on Ethereum are the most common example. Tokens can represent utility, governance rights, assets, or purely speculative value.

Tokenomics

The economic structure governing a cryptocurrency: total supply, distribution schedule, token utility, inflation/deflation mechanisms, and incentive design. Good tokenomics align the incentives of users, validators, and the protocol. Poor tokenomics benefit insiders at the expense of later buyers.

Transaction Fee

The fee paid to miners or validators for including a transaction in a block. On Bitcoin, fees are set by the sender and fluctuate with network congestion. On Ethereum, the EIP-1559 mechanism introduced a base fee (burned) plus an optional tip for validators.

Validator

A node participating in Proof of Stake consensus by locking up cryptocurrency as collateral, proposing and attesting to new blocks, and earning rewards for honest behaviour. Validators can be slashed (penalised) for downtime or malicious activity.

Volatility

A statistical measure of price dispersion over time, typically expressed as annualised standard deviation of returns. Crypto assets exhibit significantly higher volatility than traditional asset classes, which presents both risk and opportunity.

Wallet

A tool for storing cryptographic keys and interacting with blockchains. Wallets do not store cryptocurrency; they store the private keys that prove ownership of on-chain balances. Available as hardware devices, software applications, and browser extensions.

Web3

A concept describing a decentralised internet built on blockchain infrastructure, where users control their own data and digital assets rather than centralised platforms. Encompasses DeFi, NFTs, DAOs, and decentralised applications. The term is aspirational; the current reality varies widely in decentralisation.

Whale

A holder of a sufficiently large quantity of cryptocurrency to materially influence market prices. Whale wallet movements are tracked by on-chain analysts as potential leading indicators. Large sell orders from whales can trigger rapid price declines.

Whitepaper

A technical and conceptual document published by a cryptocurrency project describing its design, purpose, and mechanisms. The Bitcoin whitepaper by Satoshi Nakamoto (2008) is the canonical example. Reading a project's whitepaper is a basic step in due diligence.

Yield

The return earned on cryptocurrency deposited in lending protocols, liquidity pools, or staking arrangements, typically expressed as an annual percentage rate (APR) or annual percentage yield (APY). High advertised yields should prompt scrutiny of the underlying risk.

Yield Farming

The practice of actively moving capital between DeFi protocols to optimise yield returns. Involves providing liquidity, staking tokens, and claiming protocol rewards. Carries compounded risks: smart contract risk, impermanent loss, and asset volatility.