Crypto Glossary

An additional security step during login where a second code must be entered alongside the password (e.g. from an authenticator app). 2FA protects your account even if your password is stolen.

The free distribution of tokens to wallet addresses, often as a marketing measure or reward for early users of a protocol.

Any cryptocurrency other than Bitcoin. The term stands for 'Alternative Coin' and encompasses thousands of different projects like Ethereum, Solana, or Cardano.

Laws and procedures to combat money laundering. Crypto exchanges are required to implement AML guidelines, e.g. through KYC checks and monitoring of suspicious transactions.

An algorithm that automatically calculates prices on DEXs based on the ratio of two tokens in a liquidity pool. AMMs replace the traditional order book of centralized exchanges.

The highest price a cryptocurrency has ever reached. A new ATH signals strong demand and is often accompanied by FOMO and media attention.

The lowest price a cryptocurrency has ever reached. An ATL can indicate serious problems with the project or an extreme bear market.

A period of falling prices and negative market sentiment. A bear market in crypto can last months to years, with price drops of 70–90% from the peak.

The first and most well-known cryptocurrency, created in 2009 by Satoshi Nakamoto. Bitcoin is based on a decentralized blockchain and is limited to 21 million units.

A data record on the blockchain containing a group of transactions. Blocks are chained together chronologically, forming the blockchain — a complete transaction history.

A decentralized database where transactions are stored in sequential blocks. Each block is cryptographically linked to the previous one, making retroactive changes virtually impossible.

A protocol that enables the transfer of tokens between different blockchains. Bridges are technically complex and have historically been frequent targets of hacker attacks.

A period of rising prices and positive market sentiment. In a bull market, most cryptocurrencies increase significantly in value over an extended period.

The profit made from selling a cryptocurrency (sale price minus purchase price minus fees). Capital gains from crypto are subject to taxation in most countries, though rules vary by jurisdiction.

A centrally operated crypto exchange like Binance, Kraken, or Bitget. The exchange manages customer funds and provides the trading infrastructure.

A cryptocurrency with its own blockchain, e.g. Bitcoin (BTC) or Ethereum (ETH). Coins typically serve as a means of payment or to pay transaction fees on their respective network.

A wallet that is not connected to the internet, e.g. a hardware wallet or paper wallet. Cold wallets offer the highest protection against hacker attacks.

The method by which all participants in a blockchain network agree on the current state of the data. The most well-known consensus mechanisms are Proof of Work and Proof of Stake.

A feature that lets you automatically copy the trades of experienced traders. You select a top trader, and your account executes their trades proportionally to your stake.

A digital currency based on cryptographic methods and organized in a decentralized manner. Cryptocurrencies operate without a central bank or government.

A strategy where a fixed amount is regularly invested in a cryptocurrency, regardless of the price. DCA reduces the risk of a poorly timed entry.

Decentralized financial services on the blockchain that operate without banks or intermediaries. DeFi encompasses lending, trading, staking and more — all governed by smart contracts.

A crypto exchange that operates without a central authority. Trades run directly between users via smart contracts. Well-known DEXs include Uniswap, PancakeSwap, and Raydium.

The second-largest cryptocurrency and a platform for smart contracts and decentralized applications (dApps). Ethereum has used Proof of Stake instead of Proof of Work since 2022.

Government-issued currencies like the US Dollar, Euro, or British Pound. In the crypto context, fiat refers to traditional money as opposed to cryptocurrencies.

An accounting method where the first coins purchased are considered the first sold. FIFO is the most widely accepted method for calculating crypto gains for tax purposes in many jurisdictions.

Fear Of Missing Out — the fear of missing a profitable opportunity. FOMO often leads to impulsive buying during price surges and is one of the most common mistakes in crypto trading.

Fear, Uncertainty and Doubt — deliberately spread negative news or rumors to push down the price of a cryptocurrency. FUD can come from media, competitors, or traders.

A periodic fee exchanged between long and short traders on the futures market. Positive funding rates mean longs pay shorts — a signal of overheated bullishness.

Contracts that let you speculate on the future price of a cryptocurrency without owning it. Futures enable leveraged trading and betting on falling prices (shorting).

The transaction fee on the Ethereum network paid to validators. Gas fees rise during high network congestion and can make simple transactions expensive.

A trading bot that automatically places buy and sell orders in a predefined price grid. Grid bots profit from sideways markets and automate trading.

A physical device (e.g. Ledger or Trezor) that stores private keys offline. Hardware wallets are considered the safest storage method for larger crypto holdings.

The computing power of a mining network, measured in hashes per second. A high hash rate means a more secure network, as an attack would require more computing power.

Crypto slang for holding coins long-term, originating from a typo of 'Hold'. HODL represents the strategy of not selling even during strong price swings.

The length of time you hold a cryptocurrency before selling. In many jurisdictions, the holding period affects whether capital gains taxes apply. Longer holding periods often qualify for reduced tax rates or exemptions.

A wallet connected to the internet, e.g. browser extensions like MetaMask or an exchange's built-in wallet. Hot wallets are convenient but more vulnerable to attacks.

Initial Coin Offering — a fundraising method where a project sells its tokens before launch. ICOs were extremely popular in 2017/2018, though many turned out to be scams.

Initial DEX Offering — a token sale conducted through a decentralized exchange (DEX). Unlike an ICO, trading begins immediately after purchase.

The temporary loss that occurs when you provide tokens in a liquidity pool and the price ratio of the two tokens changes. The greater the price change, the higher the loss.

A reserve fund that crypto exchanges maintain to protect their users. In the event of a hack or unexpected losses, the insurance fund is meant to safeguard user deposits.

The identity verification that crypto exchanges require from their users. You typically need to upload an ID and a selfie. KYC is legally required and aims to prevent money laundering.

A platform on a crypto exchange where new token projects can be purchased early. Major exchanges like Binance or Bitget operate their own launchpads.

The base blockchain, e.g. Bitcoin, Ethereum, or Solana. Layer 1 is the foundation layer on which all transactions and smart contracts run.

A scaling solution built on top of a Layer 1 blockchain to make transactions faster and cheaper. Examples include Arbitrum and Optimism on Ethereum or the Lightning Network on Bitcoin.

Lending out cryptocurrencies to other users through DeFi protocols or centralized platforms to earn interest. Lending is one of the oldest DeFi applications.

A multiplier that increases your position size relative to the margin you put up. With 10x leverage, you control a position 10 times larger, but also carry 10 times the risk.

A buy or sell order at a price you specify. The order is only executed when the market reaches your desired price.

The automatic closing of a leveraged position when losses consume the deposited margin. Upon liquidation, you lose your entire stake in that position.

A pool of two tokens that serves as a trading source on a DEX. Users can deposit tokens into the pool (liquidity providing) and earn trading fees in return.

A position that bets on rising prices. Going long means buying an asset (or opening a futures contract) expecting to sell it later at a higher price.

A trader who places an order in the order book (e.g. limit order) that isn't executed immediately. Makers create liquidity and typically pay lower fees on most exchanges.

The collateral (equity) you must deposit for a leveraged position. If your margin is no longer sufficient, liquidation is triggered.

The total value of all circulating coins of a cryptocurrency (price × number of coins). Market capitalization helps assess the size and significance of a project.

An order that executes immediately at the current market price. Market orders guarantee execution but not the exact price — slippage can occur with thin liquidity.

The process of creating new blocks and confirming transactions by miners solving computationally intensive tasks. As a reward, miners receive new coins and transaction fees.

A computer that stores a copy of the blockchain and validates transactions. The more nodes a network has, the more decentralized and secure it is.

The total number of all open futures contracts for a cryptocurrency. Rising open interest shows growing interest and capital in the market, but can also signal higher liquidation risk.

A service that brings real-world data (e.g. prices, weather, sports results) onto the blockchain. Oracles are essential for DeFi, as smart contracts cannot process external information without them.

A fraud method where attackers use fake websites or emails to steal login credentials. In crypto, phishing attacks often target exchange logins or wallet seed phrases.

A secret cryptographic key that enables access to cryptocurrencies. Whoever possesses the private key controls the associated coins. Never share it!

Verification that a crypto exchange actually holds enough reserves to cover all customer deposits. After the FTX scandal, Proof of Reserves became an industry standard.

A consensus mechanism where validators stake their coins as collateral to confirm new blocks. PoS uses significantly less energy than Proof of Work. Ethereum has used PoS since 2022.

A consensus mechanism where miners solve complex mathematical puzzles to create new blocks. Proof of Work consumes a lot of energy but is considered very secure. Bitcoin uses PoW.

The public address of a wallet, comparable to a bank account number. The public key can be freely shared to receive cryptocurrencies.

A scam where the developers of a crypto project suddenly withdraw all liquidity and disappear. The token becomes worthless, and investors lose everything.

A sequence of 12 or 24 words that serves as a backup for a crypto wallet. Whoever has the seed phrase has full access to the wallet — it must be stored offline and securely.

A position that bets on falling prices. When shorting, you profit when the price drops. Shorts in crypto are primarily available through futures.

The deviation between the expected and actual execution price of an order. Slippage occurs mainly with market orders and in illiquid markets.

A self-executing contract on the blockchain whose conditions are defined in code. Smart contracts execute automatically when the defined conditions are met.

The direct buying and selling of cryptocurrencies at the current market price. With spot trading, you actually own the coins, unlike futures or derivatives.

The difference between the best buy and sell price in the order book. A tight spread indicates high liquidity and lower hidden trading costs.

A cryptocurrency pegged to a stable value like the US Dollar. Well-known examples include USDT and USDC. Stablecoins are often used as a 'safe haven' in the crypto market.

Locking up cryptocurrencies to help secure a Proof of Stake network. Stakers receive new coins as a reward. Staking is comparable to earning interest on a savings account.

An order that automatically triggers when the price reaches a specified loss level. Stop-loss orders limit downside risk and are a fundamental risk management tool.

An order that automatically realizes gains when the price reaches a set target. Together with stop-loss, take-profit forms the foundation of disciplined trading.

A trader who takes an existing order from the order book (e.g. market order). Takers remove liquidity and generally pay higher fees than makers.

A threshold below which crypto gains may not be subject to taxation. Tax exemption rules vary by country — always check your local tax regulations for applicable thresholds and conditions.

The obligation to report and pay taxes on crypto gains. In most countries, profits from selling cryptocurrencies must be reported on your tax return, subject to local holding period rules and exemption thresholds.

A digital asset created on an existing blockchain, e.g. ERC-20 tokens on Ethereum. Tokens can serve various functions, from governance rights to platform access.

The total value of all crypto assets locked in a DeFi protocol, measured in US Dollars. TVL is the most important indicator for the size and popularity of a DeFi project.

A regulated stablecoin by Circle, also pegged 1:1 to the US Dollar. USDC is considered more transparent than USDT, as its reserves are regularly audited.

The largest stablecoin by market capitalization, issued by Tether. 1 USDT is designed to always be worth 1 US Dollar, backed by the company's reserves.

A measure of how much a price fluctuates. Cryptocurrencies are significantly more volatile than traditional assets — swings of 10% in a single day are not uncommon.

A digital wallet for storing cryptocurrencies. The wallet doesn't actually store the coins themselves, but the private keys that give you access to your holdings.

A technical document describing the functionality, goals, and technology of a crypto project. The Bitcoin whitepaper by Satoshi Nakamoto was the first of its kind.

A DeFi strategy where you deposit crypto assets into various protocols to earn returns. Yields come from trading fees, token rewards, or interest.