New to crypto? This glossary covers the most important cryptocurrency terms, explained in plain English. Each definition includes links to related guides and tools on Crypto Wealth Hub.
A
- Airdrop
- Free tokens distributed to wallet addresses, usually by new crypto projects to generate awareness. Use our Airdrop Eligibility Checker to see if you qualify for upcoming drops.
- Altcoin
- Any cryptocurrency other than Bitcoin. The term comes from “alternative coin” and includes thousands of projects like Ethereum, Solana, and Cardano.
- AML (Anti-Money Laundering)
- Regulations and procedures that cryptocurrency exchanges must follow to prevent illegal financial activities. Most reputable crypto tools and exchanges require KYC and comply with AML laws.
- AMM (Automated Market Maker)
- A type of decentralized exchange that uses mathematical formulas to price assets instead of traditional order books. Uniswap and PancakeSwap are popular AMMs.
- APR (Annual Percentage Rate)
- The yearly interest rate earned from lending or staking crypto, without compounding. Compare with APY to understand your true returns on lending and staking platforms.
- APY (Annual Percentage Yield)
- The effective annual return on a crypto investment, including the effect of compounding interest. Usually higher than APR.
B
- Bear Market
- A prolonged period of declining prices where investor confidence is low. Bear markets are often the best time to use strategies like dollar-cost averaging (DCA) to accumulate crypto at lower prices.
- Bitcoin (BTC)
- The first and most valuable cryptocurrency, created in 2009 by the anonymous entity Satoshi Nakamoto. Bitcoin is a decentralized digital currency that operates without a central bank.
- Blockchain
- A distributed digital ledger that records transactions across many computers. Once data is recorded, it cannot be altered retroactively.
- Bridge
- A protocol that connects two different blockchains, allowing users to transfer tokens and data between them (e.g., between Ethereum and Solana).
- Bull Market
- A period when cryptocurrency prices are rising or expected to rise. Typically characterized by investor confidence and positive sentiment.
C
- CEX (Centralized Exchange)
- A cryptocurrency exchange operated by a company that holds users’ funds and matches buy/sell orders. Examples: Binance, Coinbase, Kraken.
- Cold Wallet
- A cryptocurrency wallet that is not connected to the internet, providing maximum security against hackers. Hardware wallets like Ledger and Trezor are cold wallets. Learn how to secure your private keys.
- Consensus Mechanism
- The method by which a blockchain network agrees on the validity of transactions. The two most common are Proof of Work (PoW) and Proof of Stake (PoS).
D
- DAO (Decentralized Autonomous Organization)
- An organization represented by rules encoded as smart contracts on a blockchain. Decisions are made through token-based voting by members.
- DApp (Decentralized Application)
- An application that runs on a blockchain network rather than a centralized server. DApps are typically open-source and governed by smart contracts.
- DCA (Dollar-Cost Averaging)
- An investment strategy where you invest a fixed amount of money at regular intervals, regardless of price. Reduces the impact of volatility. Calculate your DCA strategy.
- DEX (Decentralized Exchange)
- A peer-to-peer cryptocurrency exchange that operates without a central authority. Users trade directly from their wallets using smart contracts.
- DeFi (Decentralized Finance)
- Financial services built on blockchain technology that operate without traditional intermediaries like banks. Includes lending, borrowing, and trading.
- DYOR (Do Your Own Research)
- A common crypto community phrase urging investors to research a project thoroughly before investing, rather than relying on hype or others’ opinions.
F
- FOMO (Fear Of Missing Out)
- The anxiety that others are profiting from a crypto investment while you are not. Often leads to impulsive buying at market peaks.
- FUD (Fear, Uncertainty, and Doubt)
- Negative or misleading information spread to create fear and lower confidence in a cryptocurrency or project.
G
- Gas Fees
- Transaction fees paid to validators for processing transactions on a blockchain. Higher during network congestion. Ethereum gas fees are measured in gwei.
H
- Halving
- An event that reduces the block reward for Bitcoin miners by half, occurring approximately every four years. Historically associated with price increases due to reduced supply.
- HODL
- A crypto slang term originating from a 2013 forum typo for “hold.” Means holding your crypto long-term regardless of price fluctuations. The strategy of HODLing is central to long-term crypto investing.
- Hot Wallet
- A cryptocurrency wallet connected to the internet, making it convenient for frequent transactions but more vulnerable to hacks. Mobile and browser extension wallets like MetaMask are popular hot wallets.
I
- Impermanent Loss
- A temporary loss in value that liquidity providers may experience when providing tokens to an AMM pool, caused by price divergence between the paired assets.
K
- KYC (Know Your Customer)
- The process by which cryptocurrency exchanges verify the identity of their users, typically requiring a government-issued ID and proof of address.
L
- Layer 2
- A secondary protocol built on top of a Layer 1 blockchain (like Ethereum) to improve scalability and reduce transaction costs. Examples: Arbitrum, Optimism.
- Liquidity Pool
- Collection of funds locked in a smart contract that provides liquidity for trading on decentralized exchanges. Liquidity providers earn fees from trades.
M
- Mining
- The process of validating transactions and adding them to a blockchain by solving complex mathematical problems. Miners are rewarded with newly created cryptocurrency.
N
- NFT (Non-Fungible Token)
- A unique digital asset representing ownership of a specific item (art, music, collectible) on the blockchain. Unlike cryptocurrencies, NFTs cannot be exchanged 1:1.
O
- Oracle
- A service that brings real-world data (like price feeds or weather data) onto the blockchain so smart contracts can use it. Chainlink is the most prominent oracle network.
P
- Private Key
- A secret alphanumeric code that gives you ownership and control over your cryptocurrency. Never share your private key with anyone. Learn to secure your private keys.
- Proof of Stake (PoS)
- A consensus mechanism where validators are chosen to create new blocks based on the amount of cryptocurrency they “stake” as collateral. More energy-efficient than PoW.
- Proof of Work (PoW)
- The original consensus mechanism used by Bitcoin, requiring miners to solve computational puzzles to validate transactions. Highly secure but energy-intensive.
S
- Seed Phrase (Recovery Phrase)
- A set of 12 or 24 words that can restore access to your crypto wallet. Writing down and storing your seed phrase securely offline is critical. Backup guide.
- Sidechain
- A separate blockchain that runs in parallel to a main chain (Layer 1), allowing assets and data to be transferred between them for improved scalability.
- Slippage
- The difference between the expected price of a trade and the actual executed price, caused by price changes during transaction processing. Higher slippage is common in low-liquidity pools and during volatile markets.
- Smart Contract
- A self-executing program on the blockchain that automatically enforces and executes terms of an agreement when predetermined conditions are met.
- Staking
- The process of locking up cryptocurrency in a Proof of Stake network to support network operations in exchange for rewards. Passive income strategy.
T
- TVL (Total Value Locked)
- The total value of assets deposited in a DeFi protocol’s smart contracts. A key metric for measuring a protocol’s popularity and health.
W
- Whale
- An individual or entity that holds a large amount of cryptocurrency, capable of influencing market prices through large trades.
- Whitepaper
- A document published by a cryptocurrency project that explains its technology, purpose, and roadmap. Bitcoin’s whitepaper, published by Satoshi Nakamoto, started the crypto revolution.
Y
- Yield Farming
- The practice of earning rewards by lending or staking cryptocurrency in DeFi protocols. Often involves providing liquidity to earn high returns, but carries risks like impermanent loss. Use our Crypto Tax Calculator to track taxable events.
Z
- Zero-Knowledge Proof (ZK Proof)
- A cryptographic method that allows one party to prove to another that a statement is true without revealing any additional information. Used in privacy-focused cryptocurrencies and Layer 2 scaling solutions.
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