45 terms
Crypto Glossary
Clear definitions of the most important terms in crypto, DeFi, and blockchain.
A
- Altcoin
- Any cryptocurrency other than Bitcoin. The term comes from 'alternative coin' and includes Ethereum, Solana, XRP, and thousands more.
- AMM (Automated Market Maker)
- A decentralized protocol that uses algorithms to price assets and facilitate trades without order books or human counterparties. Uniswap and Curve are popular examples.
- APY / APR
- APY (Annual Percentage Yield) is the annualized compounded return on an investment. APR (Annual Percentage Rate) excludes compounding. Both are used in DeFi to express staking or liquidity pool rewards.
- ATH / ATL
- ATH (All-Time High) is the highest price an asset has ever reached. ATL (All-Time Low) is the lowest price ever recorded.
B
- Bear Market
- A prolonged period of declining prices, generally defined as a drop of 20% or more from recent highs. The opposite is a bull market.
- Blockchain
- A distributed ledger technology where data is stored in cryptographically linked blocks in chronological order. It is the foundational technology behind Bitcoin, Ethereum, and most cryptocurrencies.
- Bridge
- A protocol that allows assets or data to be transferred between two different blockchains. For example, moving ETH from Ethereum mainnet to Arbitrum.
- Bull Market
- A sustained period of rising prices across the market. In crypto, a 'bull run' refers to especially intense price rallies.
C
- CEX (Centralized Exchange)
- A cryptocurrency trading platform managed by a company, such as Binance, Coinbase, or Kraken. They require registration and KYC but offer greater liquidity and ease of use.
- Consensus Mechanism
- The process by which blockchain nodes agree on the valid state of the ledger. The most common mechanisms are Proof of Work (PoW) and Proof of Stake (PoS).
- Correction
- A temporary price decline, typically between 10% and 20%, after a period of gains. It does not imply a long-term trend reversal.
- Cryptocurrency
- A digital asset that uses cryptography to secure transactions and control the creation of new units. It operates on a decentralized network without the need for banks or intermediaries.
D
- DAO (Decentralized Autonomous Organization)
- An organization governed by rules encoded in smart contracts and managed collectively by its members through governance tokens. It has no central leadership.
- DeFi (Decentralized Finance)
- An ecosystem of financial applications built on public blockchains, mainly Ethereum. It includes lending, trading, staking, and derivatives without traditional intermediaries.
- DEX (Decentralized Exchange)
- A trading platform that operates without centralized custody. Users maintain control of their funds at all times. Uniswap, dYdX, and Hyperliquid are notable examples.
F
- FOMO
- Fear Of Missing Out. The emotion that drives investors to buy rising assets for fear of missing gains, often without prior analysis.
- FUD
- Fear, Uncertainty and Doubt. Negative information, true or false, that creates panic selling in the market.
G
- Gas
- A fee paid to execute transactions or contracts on networks like Ethereum. It is measured in gwei and varies based on network congestion.
H
- Hash / Hash Rate
- A hash is a mathematical function that converts data into a fixed-length string. Hash rate measures the computational power of a Proof of Work network.
- HODL
- A long-term strategy of holding a cryptocurrency without selling, regardless of market fluctuations. The term originated from a typo of 'hold' in a Bitcoin forum post in 2013.
I
- Impermanent Loss
- A temporary loss experienced by liquidity providers when the price ratio of deposited assets changes from the time of deposit. It is the main risk of yield farming.
L
- Layer 2
- A solution built on top of a main blockchain (layer 1) to improve scalability and reduce fees. Examples include Arbitrum, Optimism (on Ethereum) and Lightning Network (on Bitcoin).
- Liquidity
- The ease with which an asset can be bought or sold without significantly impacting its price. A highly liquid market has many active buyers and sellers.
- Liquidity Pool
- A reserve of tokens locked in a smart contract that provides liquidity to a DEX. Liquidity providers earn a share of trading fees.
M
- Market Capitalization
- The total market value of a cryptocurrency, calculated by multiplying the current price by the circulating supply. It is the most common metric for comparing the relative size of different assets.
- Mempool
- A waiting area where pending transactions sit before being included in a block by a miner or validator. During periods of high activity, the mempool becomes congested and fees rise.
- Mining
- The process by which nodes (miners) solve complex mathematical problems to add new blocks to a Proof of Work blockchain, earning cryptocurrency rewards.
N
- NFT (Non-Fungible Token)
- A unique digital asset recorded on a blockchain that certifies ownership of a digital or physical item. Unlike cryptocurrencies, NFTs are not interchangeable with each other.
- Node
- A computer that participates in a blockchain network by storing a copy of the transaction history and/or validating new blocks. Full nodes verify all protocol rules.
P
- Private Key
- A secret code that proves ownership of a wallet and allows signing transactions. Whoever holds the private key controls the funds. Never share it with anyone.
- Public Key / Address
- A public identifier derived from the private key. It is the 'address' you share to receive funds, similar to a bank account number.
- Proof of Stake (PoS)
- A consensus mechanism where validators deposit (lock up) cryptocurrency as collateral to propose and validate new blocks. It is more energy-efficient than Proof of Work.
- Proof of Work (PoW)
- Bitcoin's original consensus mechanism. Miners compete to solve complex mathematical problems to add blocks and receive rewards. It requires significant energy consumption.
R
- Rollup
- A layer 2 scaling technique that bundles thousands of off-chain transactions and publishes them compressed in a single block. There are two types: Optimistic Rollups and ZK-Rollups.
S
- Seed Phrase
- A set of 12 or 24 words that serves as the master backup for a wallet. Whoever has the seed phrase can recover all funds. Store it securely and offline.
- Slippage
- The difference between the expected price of a trade and the actual execution price. It occurs in markets with low liquidity or in large-size trades.
- Smart Contract
- A self-executing program deployed on a blockchain that automatically fulfills its conditions when certain requirements are met. They are the foundation of DeFi, NFTs, and most Web3 applications.
- Stablecoin
- A cryptocurrency designed to maintain a stable value, usually pegged to the US dollar. Examples include USDT, USDC, and DAI. They are key in DeFi to avoid volatility.
- Staking
- The process of locking up cryptocurrency in a Proof of Stake network to participate in transaction validation and earn rewards. It is a way to generate passive income.
T
- Token
- A digital asset issued on an existing blockchain (as opposed to native coins like ETH or BTC). ERC-20 tokens on Ethereum are the most common example.
- TVL (Total Value Locked)
- The total value of assets deposited in a DeFi protocol. It is the primary metric for measuring the size and adoption of a protocol, usually expressed in USD.
- Trading Volume
- The total amount of an asset traded during a given period (usually 24 hours). High volume indicates greater interest and liquidity in the market.
W
- Wallet
- An application or device that stores the cryptographic keys needed to access funds on a blockchain. It can be custodial (a company holds the keys) or non-custodial (the user controls their keys).
- Web3
- The concept of a decentralized internet based on blockchain where users own their data and digital identity, without relying on large centralized platforms.
Y
- Yield Farming
- A DeFi strategy of maximizing returns by moving assets between different protocols to earn the best rewards. Risks include impermanent loss, smart contract bugs, and high volatility.
Definitions are provided for educational purposes only. They do not constitute financial advice.