Crypto Glossary

40 terms explained without the jargon. If a word gets thrown around without explanation, it belongs here.

A

Airdrop Free tokens distributed to wallet addresses, usually to reward early users of a protocol. AMM Automated Market Maker — a protocol that prices assets with a formula instead of an order book. APR vs APY APR is the yearly rate without compounding; APY includes compounding and is always higher. ATH All-Time High — the highest price an asset has ever traded at.

B

Bear Market A prolonged decline, conventionally 20% or more from recent highs. Bull Market A prolonged rise driven by new demand, easy credit and rising confidence. Block Explorer A site for viewing every transaction, wallet and contract on a blockchain. Bridge A protocol that moves assets from one blockchain to another.

C

CEX Centralized Exchange — a company like Binance or Bybit that holds user funds and matches trades. Cold Wallet A hardware wallet that keeps private keys offline, never touching the internet.

D

DEX Decentralized Exchange — trading directly from your wallet against smart contracts, no custodian. DeFi Decentralized Finance — lending, trading and earning rebuilt on smart contracts without banks.

G

Gas Fee The cost paid to have a transaction included in a blockchain block.

H

HODL Holding an asset long-term through volatility instead of selling on every dip. Hot Wallet An internet-connected wallet — convenient for daily use, more exposed to attacks.

I

Impermanent Loss The relative loss from providing liquidity, compared with simply holding both tokens.

K

KYC Know Your Customer — the identity verification that regulated exchanges require.

L

Layer 1 A base blockchain that processes and secures its own transactions, like Bitcoin or Ethereum. Layer 2 A network on top of an L1 that processes transactions cheaply and settles them back to it. Liquidity Pool A pool of funds locked in a smart contract that anyone can trade against. Liquidity Mining Extra token rewards paid to people who deposit into a liquidity pool.

M

Mainnet The live production blockchain, where transactions cost real money. MEV Maximal Extractable Value — profit taken by controlling the order of transactions in a block.

N

NFT Non-Fungible Token — a unique token proving ownership of a specific digital asset.

P

Private Key The secret number that controls a wallet. Whoever holds it, holds the funds. Proof of Stake A consensus mechanism where validators lock capital as collateral for securing the chain. Proof of Work A consensus mechanism where miners spend computation to secure the network.

R

Rug Pull A scam where developers drain liquidity or dump their own tokens, leaving buyers with nothing.

S

Seed Phrase The 12 or 24 words that can restore an entire wallet. It is the wallet. Slippage The gap between the price you expected and the price your trade actually filled at. Smart Contract Self-executing code deployed to a blockchain, with no off switch and no support line. Stablecoin A token pegged to a currency, usually the US dollar. Staking Locking tokens to help secure a network, earning rewards in return. Sybil Attack Creating many fake wallets to farm a single airdrop multiple times.

T

Testnet A practice network with worthless tokens for testing features safely. TVL Total Value Locked — the total value of assets deposited in a protocol's contracts.

W

Whale An entity holding enough of an asset to move its price.

Y

Yield Farming Chasing the best returns by moving capital between DeFi protocols.

Z

Zero-Knowledge Proof A cryptographic proof that something is true, without revealing the underlying data. ZK Rollup A Layer 2 that validates transactions with cryptographic proofs rather than assuming honesty.