Crypto Glossary

A paradigm shift in blockchain wallet design (formalized in Ethereum's ERC-4337) that replaces traditional externally owned accounts (EOAs) requiring direct private key management with programmable smart contract wallets. Account abstraction enables features previously impossible: social recovery, gas sponsorship (someone else pays your fees), session keys, transaction batching, and multi-factor authentication — all at the wallet level.

A unique string of alphanumeric characters derived from a public key that serves as a destination for sending and receiving cryptocurrency. Addresses function similarly to bank account numbers but are pseudonymous rather than tied to a real-world identity.

A distribution of free tokens sent to wallet addresses, typically used to reward early users, bootstrap a community, or distribute governance tokens. Airdrops may be based on criteria like holding a specific token, using a protocol before a certain date, or participating in governance. Retroactive airdrops reward past usage of a protocol.

A stablecoin that maintains its peg through algorithmic mechanisms — such as minting and burning tokens or adjusting supply via incentives — rather than being backed by fiat reserves or overcollateralized crypto. Algorithmic stablecoins are considered higher risk because they can experience 'death spiral' depeg events if confidence collapses.

Any cryptocurrency other than Bitcoin. The term combines 'alternative' and 'coin' to describe all other digital currencies that emerged after Bitcoin. Altcoins range from major platforms like Ethereum to small experimental tokens.

A type of decentralized exchange protocol that uses mathematical formulas to price assets instead of traditional order books. AMMs enable permissionless trading through liquidity pools, where prices are set algorithmically based on the ratio of tokens in the pool. The most common model is the constant product formula (x × y = k).

The simple annual rate of return on an investment, not accounting for the effect of compounding. In DeFi, APR represents the annualized yield you would earn if rewards were not reinvested. APR is always lower than or equal to APY for the same investment because APY factors in compounding.

The real rate of return on an investment, taking into account the effect of compound interest. APY represents what you would earn over a year if rewards are automatically reinvested. APY is always higher than APR when compounding occurs more than once per year. Extremely high advertised APYs in DeFi often signal unsustainable tokenomic models or elevated risk.

The practice of profiting from price differences for the same asset across different markets or exchanges. In crypto, arbitrage opportunities arise due to fragmented liquidity across hundreds of exchanges and DEXs. Common forms include exchange arbitrage (same token, different prices), triangular arbitrage (cycling through three trading pairs), and cross-chain arbitrage (same token, different blockchains).

A peer-to-peer exchange of cryptocurrencies between different blockchains without requiring a trusted intermediary or centralized exchange. Atomic swaps use hash time-locked contracts (HTLCs) to ensure that either both parties receive their assets or neither does — the swap is 'atomic' because it cannot partially complete.

A prolonged period of declining prices, typically defined as a drop of 20% or more from recent highs, accompanied by widespread pessimism and negative investor sentiment. Crypto bear markets can be especially severe, with drawdowns of 70-90% from all-time highs.

The first and largest cryptocurrency by market capitalization, created in 2009 by the pseudonymous Satoshi Nakamoto. Bitcoin is designed as a decentralized digital currency with a hard-capped supply of 21 million coins, enforced through a halving mechanism that reduces new coin issuance approximately every four years. It uses Proof of Work consensus and is often referred to as 'digital gold.'

A collection of transactions bundled together and permanently added to the blockchain. Each block contains a timestamp, transaction data, a reference (hash) to the previous block, and a nonce. This chaining of blocks through cryptographic hashes is what makes the blockchain tamper-resistant.

A web-based tool that allows users to search, browse, and analyze data on a blockchain, including transactions, addresses, blocks, and smart contracts. Block explorers provide transparency by making all on-chain activity publicly viewable and verifiable.

The cryptocurrency awarded to a miner or validator for successfully creating a new block on the blockchain. Block rewards consist of newly minted coins (block subsidy) plus the transaction fees from all transactions included in the block. In Bitcoin, the block subsidy halves approximately every four years.

A distributed, append-only digital ledger that records transactions across a network of computers in a way that makes it cryptographically secured and practically impossible to alter historical records. Each block contains transaction data and is linked to the previous block through a cryptographic hash, forming an immutable chain.

A protocol that enables the transfer of assets and data between two different blockchains that cannot natively communicate with each other. Bridges typically lock assets on the source chain and mint equivalent wrapped tokens on the destination chain. They are critical infrastructure for multi-chain ecosystems but have been the target of major exploits due to their complexity.

A prolonged period of rising prices, typically defined as a 20% or greater increase from recent lows, accompanied by widespread optimism and strong investor confidence. Crypto bull markets are historically driven by Bitcoin halving cycles, institutional adoption, and new technology narratives.

Financial services in the cryptocurrency space that are provided by centralized companies, operating as intermediaries between users. CeFi platforms offer services similar to DeFi — lending, borrowing, trading, yield — but with a centralized entity managing funds and operations. CeFi offers convenience but introduces counterparty risk.

A cryptocurrency exchange operated by a centralized company that acts as an intermediary between buyers and sellers. CEXs hold custody of user funds, maintain off-chain order books, and typically require identity verification (KYC). They offer high liquidity and ease of use but introduce counterparty risk.

The largest decentralized oracle network, providing tamper-resistant external data (price feeds, weather data, random numbers, and more) to smart contracts across multiple blockchains. Chainlink solves the 'oracle problem' — the challenge of getting reliable off-chain data on-chain — through a decentralized network of node operators who are economically incentivized to provide accurate data through staking and reputation systems.

A method of storing cryptocurrency private keys completely offline and disconnected from the internet. Cold storage provides the highest level of security against remote hacking, phishing, and malware attacks. Methods include hardware wallets, paper wallets, and metal seed phrase backups.

Cryptocurrency assets pledged as security for a loan in DeFi protocols. Borrowers deposit collateral that exceeds the loan value (overcollateralization) to protect lenders from default risk. If the collateral's value falls below a certain threshold relative to the loan, it can be automatically liquidated.

The adherence to regulatory requirements governing cryptocurrency businesses, including Anti-Money Laundering (AML) rules, Know Your Customer (KYC) procedures, securities laws, tax reporting obligations, and sanctions screening. Regulatory frameworks vary significantly by jurisdiction and are rapidly evolving. DeFi's permissionless nature creates unique compliance challenges compared to traditional finance.

The ability of DeFi protocols and smart contracts to seamlessly interact with and build upon each other, often called 'money legos.' Composability allows developers to combine existing protocols to create more complex financial products without needing permission, because all smart contracts on the same blockchain can call each other.

The method by which a decentralized blockchain network reaches agreement on the current state of the ledger and which transactions are valid. Consensus mechanisms solve the problem of coordinating untrusting parties without a central authority. Major types include Proof of Work, Proof of Stake, Delegated Proof of Stake, and Proof of Authority.

Referring to the ability to transfer assets, data, or messages between different blockchain networks. Cross-chain technology is essential for blockchain interoperability, allowing ecosystems like Ethereum, Solana, and Cosmos to communicate. Solutions include bridges, relay chains, and messaging protocols like Wormhole and LayerZero.

The various methods by which blockchain projects raise capital to fund development. These include Initial Coin Offerings (ICOs), Security Token Offerings (STOs), Initial DEX Offerings (IDOs), venture capital rounds, community token sales, launchpad platforms, and retroactive public goods funding. Fundraising methods have evolved significantly in response to regulatory pressure, with greater emphasis on compliance and fair launch principles.

Fraudulent schemes in the cryptocurrency space designed to steal users' funds or private keys. Common types include rug pulls (developers abandoning projects), phishing attacks (fake websites mimicking legitimate services), Ponzi schemes (paying existing investors with new investor money), pump-and-dump schemes, fake airdrops, and social engineering attacks impersonating trusted figures.

A digital or virtual currency that uses cryptography for security and operates on a decentralized network, typically a blockchain. Unlike traditional currencies issued by governments, cryptocurrencies are not controlled by any central authority and use consensus mechanisms to validate transactions and maintain the integrity of the ledger.

A decentralized, crypto-collateralized stablecoin pegged to the US dollar, created by the MakerDAO protocol. Unlike USDC or USDT, DAI is not backed by fiat reserves — it is minted by users who deposit cryptocurrency as overcollateralized collateral into Maker vaults. DAI maintains its peg through algorithmic interest rates and liquidation mechanisms.

An organization governed by smart contracts and token-holder votes rather than traditional management hierarchies. DAOs enable collective decision-making on protocol upgrades, treasury allocation, and strategic direction without centralized leadership. Proposals are submitted on-chain and executed automatically if they pass a vote.

An application that runs on a decentralized blockchain network rather than being hosted on centralized servers. dApps use smart contracts for their backend logic while providing user-friendly front-end interfaces. They are censorship-resistant and typically open-source, though their performance depends on the underlying blockchain's capabilities.

The distribution of control, authority, and data processing across a network of participants rather than concentrating it in a single entity. In blockchain, decentralization means no single party controls the network, making it censorship-resistant and reducing single points of failure.

A self-sovereign digital identity system built on blockchain technology where individuals own and control their personal data and credentials without relying on centralized authorities like governments or corporations. DIDs use cryptographic proofs to verify claims (age, qualifications, membership) without revealing unnecessary personal information, enhancing both privacy and security.

An ecosystem of financial services built on blockchain networks that operate without traditional intermediaries like banks, brokerages, or insurance companies. DeFi uses smart contracts to provide lending, borrowing, trading, insurance, derivatives, and yield generation in a permissionless, transparent, and composable manner. Anyone with a wallet can participate.

The process of assigning your staking rights to a validator without transferring custody of your tokens. Delegation allows token holders who don't have the technical expertise or minimum stake to run their own validator node to still earn staking rewards by backing a trusted validator. Delegators typically share in rewards proportionally and also share in slashing penalties if their chosen validator misbehaves.

An event where a stablecoin loses its intended peg to the underlying asset (usually $1.00 USD), trading significantly above or below its target value. Depegs can be temporary (caused by market panic or liquidity crunches) or permanent (caused by insolvency or mechanism failure), and they can trigger cascading liquidations across DeFi.

A category of blockchain projects that use token incentives to crowdsource the deployment and operation of real-world physical infrastructure — such as wireless networks, storage, computing, energy grids, and mapping. Instead of a single company building infrastructure (e.g., AT&T for telecom), DePIN uses crypto economic incentives to coordinate thousands of individual contributors to collectively build and operate these networks.

A cryptocurrency exchange that operates without a central authority, using smart contracts to enable peer-to-peer trading directly from users' wallets. DEXs never take custody of user funds. Most DEXs use automated market maker (AMM) models with liquidity pools, though some use on-chain order books.

A database that is consensually shared, replicated, and synchronized across multiple sites, institutions, or geographies. Unlike a centralized database controlled by one entity, a distributed ledger has no central administrator — each participant maintains an identical copy. A blockchain is one specific type of distributed ledger that organizes data into chained blocks.

The practice of thoroughly investigating a cryptocurrency project before investing, including analyzing its team, technology, tokenomics, competitive landscape, community, and potential risks. DYOR is both a personal responsibility mantra in crypto and a disclaimer often used by influencers to absolve themselves of liability for their recommendations.

A multi-token standard on Ethereum that can represent both fungible and non-fungible tokens within a single smart contract. ERC-1155 is more gas-efficient than deploying separate ERC-20 and ERC-721 contracts, and supports batch transfers, making it popular for gaming assets and collections with varying rarity levels.

The most widely adopted token standard on Ethereum, defining a common set of rules that all fungible tokens must follow. ERC-20 specifies six mandatory functions (like transfer, approve, and balanceOf) that ensure any compliant token can be seamlessly used across wallets, exchanges, and DeFi protocols without custom integration.

The Ethereum token standard for non-fungible tokens (NFTs). Unlike ERC-20 tokens where each unit is identical, each ERC-721 token has a unique identifier making it one-of-a-kind. The standard defines functions for transferring, approving, and querying ownership of individual tokens, enabling digital art, collectibles, and unique digital assets.

The second-largest cryptocurrency and the most widely used smart contract platform, created by Vitalik Buterin and launched in 2015. Ethereum introduced programmable blockchain functionality, enabling the creation of tokens, DeFi protocols, NFTs, and dApps. In September 2022, Ethereum transitioned from Proof of Work to Proof of Stake ('The Merge'), reducing energy consumption by over 99%.

A platform where users can buy, sell, and trade cryptocurrencies. Centralized exchanges (CEX) are operated by companies that custody user funds and match orders, while decentralized exchanges (DEX) operate via smart contracts, allowing users to trade directly from their wallets.

Government-issued currency that is not backed by a physical commodity like gold but rather by the trust and authority of the issuing government. Fiat currencies are the traditional monetary system that cryptocurrencies aim to complement or disrupt, and serve as the primary on-ramp and pricing reference for crypto markets.

An uncollateralized loan that must be borrowed and repaid within a single atomic blockchain transaction. If the borrower cannot repay the loan plus fees by the end of the transaction, the entire transaction reverts as if it never happened — the blockchain's atomicity guarantee eliminates default risk for the lender. Flash loans enable capital-efficient arbitrage, collateral swaps, and self-liquidation without requiring any upfront capital.

The practice of placing a transaction ahead of a known pending transaction to profit from the anticipated price impact. In crypto, front-runners monitor the mempool for large pending trades, then submit their own transaction with a higher gas fee to be included first. This is a primary form of MEV extraction and is often considered predatory, as it extracts value from regular users by worsening their execution prices.

A strategy of spreading negative, misleading, or exaggerated information to create fear and drive down the price of a cryptocurrency. FUD can originate from competing projects, media, regulators, or market manipulators. The term is also used casually to dismiss any bearish news or criticism.

A unit measuring the computational effort required to execute operations on the Ethereum network. Users pay gas fees in ETH to compensate validators for processing transactions. Since EIP-1559, gas fees consist of a base fee (burned) and an optional priority fee (tip) to incentivize faster inclusion.

The maximum amount of gas units a user is willing to spend on a single transaction on Ethereum. If a transaction requires more gas than the limit allows, it fails and reverts, but the gas spent up to that point is still consumed. Setting the gas limit too low causes failed transactions; setting it appropriately prevents runaway costs from buggy contracts.

A token that grants holders voting rights in a decentralized protocol's governance process. Governance tokens allow the community to propose and vote on changes to protocol parameters, treasury allocation, fee structures, upgrades, and strategic direction. Voting power is typically proportional to token holdings, though some systems implement quadratic voting or delegation to reduce plutocratic influence.

A denomination of Ethereum's native currency ETH, equal to 0.000000001 ETH (one billionth, or 10⁻⁹). Gwei is the standard unit for expressing gas prices on Ethereum. The name comes from 'giga-wei,' where wei is the smallest possible unit of ETH (10⁻¹⁸).

A pre-programmed event that cuts the block reward for mining new blocks in half, reducing the rate at which new coins are created. Bitcoin's halving occurs every 210,000 blocks (approximately every 4 years) and is a core mechanism for enforcing its deflationary supply schedule. Halvings are historically correlated with subsequent bull markets due to reduced sell pressure from miners.

A permanent, backward-incompatible change to a blockchain's protocol rules that requires all nodes to upgrade to the new software version. Nodes that don't upgrade continue following the old rules, effectively creating two separate chains. Hard forks can be planned upgrades or contentious splits when the community disagrees on the direction.

A physical device specifically designed to securely store cryptocurrency private keys offline in a tamper-resistant secure element chip. Hardware wallets sign transactions internally without ever exposing private keys to an internet-connected computer, protecting against malware, phishing, and remote attacks.

A fixed-length alphanumeric string produced by passing data through a cryptographic hash function (like SHA-256). Hashes are one-way functions — they can convert any input into a unique fingerprint, but the original data cannot be recovered from the hash. Hashing is fundamental to blockchain security, mining, address generation, and data integrity verification.

The total combined computational power being used to mine and process transactions on a Proof of Work blockchain, measured in hashes per second. A higher hash rate means greater network security because it becomes more expensive for an attacker to gain majority control. Hash rate is a key indicator of mining activity and network health.

A crypto community term meaning to hold cryptocurrency long-term rather than selling during price drops. Originating from a misspelling of 'hold' in a 2013 Bitcoin forum post, HODL has become a widespread investment philosophy and is sometimes backronymed as 'Hold On for Dear Life.'

A cryptocurrency wallet that is connected to the internet, enabling quick and convenient access for frequent transactions. Hot wallets include browser extensions, mobile apps, and exchange wallets. While more convenient than cold storage, they are more vulnerable to hacking and phishing attacks.

A fundraising method where a cryptocurrency project sells newly created tokens to early investors before the token is publicly tradable. ICOs were extremely popular in 2017-2018 but attracted significant regulatory scrutiny due to widespread scams and securities law violations. Many jurisdictions now require ICOs to comply with securities regulations.

The reduction in value experienced by liquidity providers compared to simply holding the same assets, caused by price divergence between the deposited token pair. As one token's price moves relative to the other, the AMM rebalances the pool, effectively selling the appreciating token and buying the depreciating one. The loss is 'impermanent' because it reverses if prices return to their original ratio, but becomes permanent upon withdrawal during divergence.

The ability of different blockchain networks to communicate, share data, and transfer assets between each other. Interoperability is considered one of blockchain's biggest challenges, as most chains are isolated by default. Solutions include bridges, relay chains (like Polkadot), messaging protocols (like LayerZero), and standardized communication layers.

Identity verification procedures required by financial regulations where platforms collect and verify users' personal information such as government-issued ID, address, and source of funds. Most centralized crypto exchanges require KYC, while DeFi protocols generally do not. KYC is part of broader Anti-Money Laundering (AML) compliance.

The base blockchain network that provides the foundational infrastructure — consensus, security, and data availability — upon which applications and Layer 2 solutions are built. Layer 1 blockchains process and finalize transactions on their own mainnet and have their own native cryptocurrency for gas fees.

A secondary protocol built on top of a Layer 1 blockchain to improve scalability, reduce transaction costs, and increase throughput without sacrificing the security guarantees of the underlying chain. Layer 2 solutions process transactions off the main chain and periodically post compressed proofs or data back to Layer 1 for finality.

A DeFi protocol that enables users to lend crypto assets to earn interest or borrow assets against deposited collateral, all managed by smart contracts without traditional banks. Interest rates are typically set algorithmically based on the utilization rate (ratio of borrowed to supplied assets) within each lending pool.

The use of borrowed capital to increase the size of a trading position beyond what the trader's own funds would allow. Leverage amplifies both gains and losses — a 10x leveraged position earns 10x the profit on favorable moves but also faces 10x the losses and can be fully liquidated by a relatively small adverse price movement.

An order to buy or sell a cryptocurrency at a specific price or better. A buy limit order executes at the limit price or lower, while a sell limit order executes at the limit price or higher. Limit orders provide price control but may not execute if the market never reaches the specified price.

A DeFi mechanism that allows users to stake their tokens and simultaneously receive a liquid derivative token representing their staked position. This derivative (e.g., stETH for staked ETH) can be freely traded, used as collateral in DeFi, or deposited in liquidity pools — solving the capital inefficiency of traditional staking where tokens are locked and illiquid.

The forced closing of a leveraged position or the seizure and sale of collateral when a borrower's position falls below the required margin or collateralization ratio. In DeFi lending, liquidation occurs automatically via smart contracts when the value of collateral drops below a protocol-defined threshold, protecting lenders from bad debt.

The ease with which an asset can be bought or sold without causing a significant change in its price. High liquidity means large trades can be executed with minimal price impact (slippage), while low liquidity means even small trades can move the price substantially. Liquidity is one of the most important factors in healthy financial markets.

A DeFi incentive mechanism where users provide liquidity to a protocol and receive bonus token rewards on top of standard trading fees. Protocols use liquidity mining programs to bootstrap initial liquidity and distribute governance tokens to the community. Rewards are typically temporary and decrease over time.

A collection of funds locked in a smart contract that enables decentralized trading on AMM-based exchanges. Liquidity providers (LPs) deposit paired tokens in equal value ratios and earn a share of the trading fees generated by swaps in that pool. Pools replace traditional order books in DEX architecture.

A token automatically issued to liquidity providers as a receipt for their deposit in a liquidity pool. LP tokens represent proportional ownership of the pool's assets and accumulated fees. They can be redeemed at any time to withdraw the underlying tokens, and many DeFi protocols allow staking LP tokens for additional rewards.

The live, production version of a blockchain network where real transactions with real economic value take place. A mainnet launch represents the moment a blockchain goes from development and testing to public operation. Assets on mainnet have real market value, unlike testnet tokens which are worthless.

Trading with borrowed funds to amplify potential returns, using existing crypto holdings as collateral. The trader posts a 'margin' (collateral) and borrows additional funds from the exchange or protocol. If the position moves against the trader beyond the maintenance margin, it gets liquidated to repay the borrowed amount.

The total value of a cryptocurrency, calculated by multiplying the current price per coin by the circulating supply. Market cap is the primary metric for ranking cryptocurrencies by size and is used to categorize assets as large-cap (>$10B), mid-cap ($1B-$10B), or small-cap (<$1B).

An entity or algorithm that provides liquidity to markets by continuously placing buy and sell orders on both sides of the order book, profiting from the bid-ask spread. In crypto, professional market makers ensure healthy trading volumes, reduce price volatility, and minimize slippage for tokens listed on exchanges.

An order to buy or sell a cryptocurrency immediately at the best available current price. Market orders guarantee execution but not a specific price. In low-liquidity markets, large market orders can cause significant slippage as they consume multiple price levels in the order book.

The 'memory pool' — a holding area where unconfirmed transactions wait before being included in a block by miners or validators. Each node maintains its own version of the mempool. Transactions with higher fees are typically prioritized, which is how MEV searchers and front-runners identify profitable opportunities.

A data structure where every leaf node contains a hash of a data block and every non-leaf node contains a hash of its child nodes, forming a tree that culminates in a single root hash (the Merkle root). Merkle trees allow efficient and secure verification that specific data is included in a large dataset without downloading the entire dataset — a property essential to blockchain scalability and light client operation.

The maximum value that can be extracted from block production beyond standard block rewards and gas fees by including, excluding, or reordering transactions within a block. MEV is extracted by validators and specialized 'searchers' who identify profitable opportunities like arbitrage, liquidations, and sandwich attacks. The MEV ecosystem has evolved to include builder-searcher separation (MEV-Boost) to reduce negative externalities.

The process of using computational power to validate transactions and add new blocks to a Proof of Work blockchain. Miners compete to solve a cryptographic puzzle (finding a hash below a target difficulty), and the first to succeed earns the block reward plus transaction fees. Mining secures the network by making it prohibitively expensive to attack.

A cryptocurrency wallet that requires multiple private key signatures to authorize a transaction, typically configured as M-of-N (e.g., 3-of-5 means any 3 of 5 keyholders must approve). Multisigs enhance security by eliminating single points of failure and are widely used by DAOs, companies, and teams to manage shared treasuries.

A unique digital token on a blockchain that represents ownership of a specific item — such as art, music, collectibles, virtual real estate, or in-game items. Unlike fungible tokens like BTC or USDC where each unit is identical, each NFT has a unique identifier making it one-of-a-kind. NFTs typically follow the ERC-721 or ERC-1155 token standard and store metadata pointing to the associated content.

A computer that maintains a copy of the blockchain and participates in validating and relaying transactions. Full nodes store and verify the complete blockchain history independently. Light nodes store only block headers for efficiency. Archive nodes retain every historical state of the blockchain. The more nodes a network has, the more decentralized and resilient it becomes.

A 'number used once' that serves two key purposes in blockchain: (1) In Proof of Work mining, the nonce is the variable miners change to produce a block hash below the target difficulty. (2) In transactions, the nonce is a sequential counter for each wallet address that prevents replay attacks and ensures transaction ordering.

A governance mechanism where token holders cast votes directly on the blockchain to approve or reject proposals affecting a protocol. On-chain votes are transparent, tamper-proof, and can trigger automatic execution of approved changes via smart contracts. Voting models vary: token-weighted (1 token = 1 vote), quadratic (diminishing returns for large holders), conviction voting (vote weight increases with time committed), and delegated voting (assigning your votes to a representative).

A service that provides external, off-chain data to smart contracts, which by design cannot access any information outside their blockchain. Oracles bridge the gap between on-chain and off-chain worlds, supplying critical data like asset prices, weather conditions, sports scores, and random numbers. The 'oracle problem' — ensuring the oracle itself is trustworthy — is typically solved through decentralization, economic incentives, and data source aggregation.

A real-time list of all open buy orders (bids) and sell orders (asks) for a trading pair on an exchange, organized by price level. The order book shows market depth and the spread between the highest bid and lowest ask. Centralized exchanges and some DEXs use order books to match buyers with sellers.

The practice of depositing collateral worth more than the value of a loan to provide a safety buffer against price volatility. In DeFi, most lending protocols require overcollateralization because there is no credit scoring — the excess collateral protects lenders if the borrower's collateral loses value. Typical ratios range from 110% to 200%+.

A type of derivative contract that lets traders speculate on a cryptocurrency's price with leverage, without owning the underlying asset or dealing with expiry dates. Unlike traditional futures that expire, perpetual futures use a funding rate mechanism — periodic payments between long and short traders — to keep the contract price anchored to the spot price.

A continuously updated stream of off-chain data — most commonly asset prices — delivered to smart contracts by oracle networks. Price feeds aggregate data from multiple sources and exchanges, apply outlier detection, and deliver tamper-resistant reference prices. They are critical infrastructure for DeFi lending (determining liquidations), derivatives (settlement prices), and any smart contract that needs to know real-world asset values.

A secret cryptographic code, typically a 256-bit number, that proves ownership of cryptocurrency and authorizes transactions. The private key is mathematically linked to a public key through elliptic curve cryptography — it can generate the public key, but the public key cannot reverse-derive the private key. Anyone with access to a private key has complete, irrevocable control over the associated funds.

A consensus mechanism where validators are selected to propose and attest to new blocks based on the amount of cryptocurrency they have staked as collateral. PoS replaces energy-intensive computational competition (PoW) with economic stake as the security mechanism — validators risk losing their staked tokens (slashing) if they act maliciously. PoS is significantly more energy-efficient than PoW and is used by Ethereum, Solana, Cardano, and most modern blockchains.

A consensus mechanism where miners compete to solve computationally difficult cryptographic puzzles (finding a hash below a target difficulty) to validate transactions and create new blocks. The first miner to find a valid solution broadcasts it to the network and earns the block reward. PoW's security comes from the immense cost of computation — attacking the network requires controlling 51%+ of the total hash rate, which is prohibitively expensive for major chains.

A set of rules, standards, and smart contracts that define how a blockchain network or decentralized application operates. In DeFi, 'protocol' typically refers to the suite of smart contracts that provide a specific financial service. Protocols are usually governed by DAOs and can be forked (copied and modified) because their code is open-source.

A cryptographic code derived mathematically from a private key that can be shared publicly without compromising security. Public keys are used to generate wallet addresses (via hashing) and to verify digital signatures, confirming that a transaction was authorized by the corresponding private key holder.

A mechanism that allows already-staked assets (like staked ETH) to be used as security for additional protocols and services simultaneously, extending the economic trust of the base layer to new applications. Pioneered by EigenLayer on Ethereum, restaking lets validators opt-in to secure additional 'actively validated services' (AVSs) like oracles, bridges, and data availability layers, earning extra rewards but also accepting additional slashing risk.

A Layer 2 scaling solution that executes transactions off-chain, compresses them, and posts transaction data or validity proofs to the main chain for finality. Rollups inherit the security of the underlying blockchain while dramatically increasing throughput and reducing costs. The two main types are Optimistic rollups (assume transactions are valid unless challenged during a dispute window) and ZK rollups (use cryptographic zero-knowledge proofs to verify transaction validity instantly).

An automatic payment to the original creator of an NFT each time the NFT is resold on a secondary market. Royalties are typically set between 2.5% and 10% of the sale price. While early NFT platforms enforced royalties on-chain, many newer marketplaces have made them optional, sparking debate about creator compensation.

A type of crypto scam where project developers abruptly abandon the project and steal investor funds after attracting significant investment. Common methods include draining liquidity pools, exploiting hidden backdoors in smart contracts, selling a large pre-mined token allocation, or minting unlimited new tokens. Rug pulls are most common with new, unaudited tokens.

Physical or traditional financial assets — such as real estate, government bonds, commodities, private credit, and equities — that have been tokenized and brought on-chain as blockchain tokens. RWA tokenization aims to make traditionally illiquid or access-restricted assets tradeable, fractionally ownable, and composable with DeFi protocols. It is viewed as one of the largest growth opportunities for bridging traditional finance with blockchain.

A form of MEV exploitation where an attacker places two transactions around a victim's pending swap on a DEX — buying the token just before the victim's trade (front-run) to push the price up, then selling immediately after (back-run) once the victim's large order has further increased the price. The victim receives fewer tokens due to the artificially inflated price, and the attacker profits from the price difference.

The smallest unit of Bitcoin, equal to 0.00000001 BTC (one hundred-millionth of a Bitcoin). Named after Bitcoin's pseudonymous creator, Satoshi Nakamoto, sats allow for precise microtransactions and are increasingly used as a unit of account as Bitcoin's price rises, making whole BTC amounts impractical for everyday use.

A blockchain's ability to handle increasing transaction volume without degrading performance, increasing fees, or sacrificing decentralization and security. The 'scalability trilemma' (coined by Vitalik Buterin) posits that blockchains can only optimize two of three properties: decentralization, security, and scalability. Layer 2 solutions, sharding, and alternative consensus mechanisms are approaches to improving scalability.

A blockchain token that represents ownership in a regulated financial asset — such as equity in a company, a debt instrument, real estate, or a fund — and is subject to securities laws in the issuing jurisdiction. Security tokens must comply with regulations like SEC's Regulation D or Regulation S, including investor accreditation, transfer restrictions, and reporting requirements.

A series of 12 to 24 words, generated following the BIP-39 standard, that serves as the master backup for a cryptocurrency wallet. The seed phrase deterministically derives all private keys and addresses in a wallet, meaning anyone with the phrase can fully restore the wallet on any compatible device. Losing the seed phrase means permanently losing access to the funds.

An independent blockchain that runs parallel to a main chain (Layer 1) with its own consensus mechanism, connected via a two-way bridge that enables asset transfers between chains. Unlike Layer 2 solutions that inherit the security of the main chain, sidechains have their own security model with their own validators, making them faster but potentially less secure.

A penalty mechanism in Proof of Stake networks that destroys a portion of a validator's staked tokens for malicious behavior or severe negligence. Slashable offenses include double-signing (proposing two different blocks for the same slot), surround voting (contradictory attestations), and prolonged downtime. Slashing creates strong economic disincentives against attacks, as validators risk permanent loss of capital.

The difference between the expected price of a trade and the actual executed price. Slippage occurs due to low liquidity, large trade sizes relative to pool depth, or market movement during the time between submitting and executing a transaction. In DEXs, users can set slippage tolerance — the maximum acceptable price deviation — to protect against excessive slippage, though setting it too tight can cause transactions to fail.

Self-executing programs stored on a blockchain that automatically enforce the terms of an agreement when predetermined conditions are met. Smart contracts enable trustless transactions without intermediaries because the code, once deployed, executes exactly as written and cannot be altered (unless specifically designed to be upgradeable). They form the foundation of DeFi, NFTs, DAOs, and virtually all dApps.

A comprehensive security review of a smart contract's source code performed by specialized firms to identify vulnerabilities, bugs, logical errors, and potential attack vectors before or after deployment. Audits examine code quality, access controls, economic assumptions, and edge cases. While audits significantly reduce risk, they are not a guarantee of safety — exploits have occurred even in audited contracts.

A backward-compatible change to a blockchain's protocol rules where upgraded nodes enforce new rules while older nodes still recognize the new blocks as valid. Soft forks don't split the blockchain because old nodes can still participate, though they don't enforce the new rules. Soft forks are considered less disruptive than hard forks.

A non-transferable token that remains permanently attached to a specific wallet address, conceptualized by Vitalik Buterin. SBTs are designed to represent identity, achievements, credentials, and reputation that shouldn't be tradeable or transferable. They enable on-chain identity systems where trust is built on verifiable, permanent records rather than transferable assets.

A cryptocurrency designed to maintain a stable value relative to a reference asset, typically the US dollar. Stablecoins provide a way to hold value and transact in crypto without exposure to price volatility. The three main types are: fiat-backed (USDC, USDT — backed by dollar reserves), crypto-backed (DAI — overcollateralized with crypto), and algorithmic (maintaining peg through algorithmic supply mechanisms).

The process of locking up cryptocurrency as collateral to support blockchain network operations — specifically validating transactions and producing blocks — in exchange for rewards. Staking is the core economic mechanism of Proof of Stake blockchains. Stakers earn yield from block rewards and transaction fees but risk slashing (losing a portion of their stake) for misbehavior or extended downtime.

A regulated fundraising method where blockchain tokens represent ownership in an underlying asset — such as equity, debt, real estate, or revenue shares — and comply with securities laws. STOs offer more investor protection than ICOs through regulatory compliance, including investor accreditation requirements, prospectus filings, and transfer restrictions.

A separate blockchain network used for testing and experimentation that mirrors the functionality of its corresponding mainnet but uses tokens with no real monetary value. Testnets allow developers to deploy, test, and debug smart contracts in a realistic environment without risking real funds. Users can obtain free testnet tokens from 'faucets.'

A digital asset created on an existing blockchain rather than its own native chain. Tokens can represent a wide range of assets and utilities — from currency and governance rights to real-world assets and collectibles. Unlike coins (BTC, ETH) which are native to their blockchain, tokens are created using smart contracts on platforms like Ethereum (ERC-20, ERC-721).

The permanent removal of tokens from circulation by sending them to an inaccessible wallet address (a 'burn address'). Token burns reduce total supply, which can create deflationary pressure on the token's price if demand remains constant. Burns can be one-time events, part of regular protocol operations (like Ethereum's EIP-1559 base fee burn), or buyback-and-burn programs.

The plan for how a project's total token supply is allocated among various stakeholders — including the team, investors, community, ecosystem grants, treasury, and public sale. Token distribution is a critical element of tokenomics because it determines initial ownership concentration, vesting schedules, and potential sell pressure over time.

A set of rules defined in a smart contract interface that tokens must implement to be compatible with the broader ecosystem of wallets, exchanges, and dApps on a blockchain. Standards ensure interoperability — any application built to support a standard automatically works with all tokens following it. Major Ethereum standards include ERC-20 (fungible), ERC-721 (NFT), and ERC-1155 (multi-token).

The quantitative metrics describing a token's availability: Circulating Supply is the number of tokens currently available in the market; Total Supply is all tokens that have been created minus any that have been burned; Max Supply is the absolute maximum number of tokens that can ever exist (if capped). These metrics directly impact market capitalization calculations and price analysis.

The economic model and design of a cryptocurrency token, encompassing its supply schedule, distribution plan, utility within the ecosystem, value accrual mechanisms, inflation/deflation dynamics, and incentive structures. Well-designed tokenomics align incentives between all stakeholders and sustain long-term value. Poorly designed tokenomics can lead to unsustainable inflation or wealth concentration.

The buying and selling of cryptocurrencies with the goal of generating profit from price movements. Crypto trading occurs on centralized exchanges (using order books), decentralized exchanges (using liquidity pools), and via derivatives platforms. Common strategies include spot trading (buying/selling actual assets), margin trading (using leverage), and derivatives trading (futures, perpetuals, options).

A combination of two assets that can be traded against each other on an exchange, denoted as BASE/QUOTE (e.g., BTC/USDT). The base currency is the asset being bought or sold, and the quote currency is the unit of measurement for the price. Trading pairs define what assets you can directly exchange without intermediary conversions.

A payment made to network validators or miners for processing and confirming a transaction on the blockchain. Fees incentivize block producers and prevent network spam. Fee structures vary by blockchain — Bitcoin uses a fee market based on transaction size in bytes, while Ethereum uses gas-based pricing. During congestion, fees increase as users bid for limited block space.

The total value of cryptocurrency assets deposited in a DeFi protocol's smart contracts, expressed in USD. TVL is the primary metric for measuring DeFi adoption, protocol health, and user trust. It includes all assets used for lending, liquidity provision, staking, and collateral. TVL can be measured per-protocol, per-blockchain, or aggregated across all of DeFi. However, TVL can be inflated by double-counting (e.g., recursive lending) and should be analyzed alongside other metrics.

A fully-reserved, fiat-backed stablecoin pegged 1:1 to the US dollar, issued by Circle and originally co-founded with Coinbase. Each USDC token is backed by US dollars held in segregated bank accounts and short-term US Treasuries, with reserves attested monthly by an independent accounting firm. USDC is one of the most trusted stablecoins in DeFi and is available on multiple blockchains.

The largest stablecoin by market capitalization, pegged 1:1 to the US dollar and issued by Tether Limited. USDT is the most widely traded cryptocurrency by daily volume and the dominant quote currency on exchanges globally, particularly in Asia. Tether's reserves include US Treasuries, cash, and other investments, though its reserve composition has faced scrutiny and regulatory settlements.

A network participant in a Proof of Stake blockchain that is responsible for proposing new blocks, attesting to the validity of blocks proposed by others, and maintaining the integrity of the network. Validators must stake a minimum amount of the native token as collateral and run node software continuously. They earn rewards for honest participation and face slashing penalties for misbehavior.

A tamper-evident, cryptographically signed digital claim about a subject (person, organization, or thing) that can be verified by anyone without contacting the original issuer. In blockchain contexts, verifiable credentials are used alongside decentralized identifiers (DIDs) to enable privacy-preserving identity verification — proving specific attributes (age, qualifications, memberships) without revealing unnecessary personal information.

A schedule that gradually releases tokens to their recipients over a defined period, preventing large holders from immediately selling their entire allocation. Vesting typically applies to team members, advisors, and early investors. A common structure includes a 'cliff' (an initial lockup period where no tokens are released) followed by linear or periodic unlocking. Vesting reduces short-term sell pressure and aligns long-term incentives.

A software application or hardware device that stores the cryptographic private keys needed to access and manage cryptocurrency holdings. Despite the name, wallets don't actually store crypto — the assets exist on the blockchain. The wallet stores the keys that prove ownership and authorize transactions. Wallets can be hot (internet-connected) or cold (offline).

A vision for the next evolution of the internet built on decentralized blockchain infrastructure, where users own their data, digital assets, and identity rather than relying on centralized platforms. Web3 encompasses DeFi, NFTs, DAOs, decentralized identity, and dApps — aiming to shift power from corporations (Web2) back to individuals through cryptographic ownership and governance.

An individual or entity that holds a very large amount of a particular cryptocurrency — enough that their trades can meaningfully move the market price. Whale activity is closely monitored by traders, as large buy or sell orders can signal market direction or trigger cascading liquidations.

A detailed technical document published by a cryptocurrency project that outlines its purpose, technology, architecture, tokenomics, team, roadmap, and the problem it aims to solve. Whitepapers serve as the foundational reference for evaluating a project's legitimacy and vision. Bitcoin's original whitepaper by Satoshi Nakamoto ('Bitcoin: A Peer-to-Peer Electronic Cash System') pioneered the format.

A token on one blockchain that represents an equivalent asset from another blockchain or a non-tokenized asset, typically backed 1:1 by the original asset held in a custodial or smart contract vault. Wrapped tokens enable assets to be used in ecosystems they weren't originally designed for, expanding DeFi composability across chains.

The practice of strategically deploying crypto assets across DeFi protocols to maximize returns through a combination of trading fees, token rewards, lending interest, and liquidity incentives. Yield farmers actively move capital between protocols to chase the highest yields, often compounding returns by reinvesting rewards. Higher yields typically come with higher risks, including impermanent loss, smart contract exploits, and token devaluation.

A cryptographic method that allows one party (the prover) to prove to another party (the verifier) that a statement is true without revealing any information beyond the truth of the statement itself. In blockchain, ZK proofs enable privacy-preserving transactions, scalable computation verification (ZK rollups), and identity verification without data exposure. The two main types used in crypto are ZK-SNARKs (succinct, require trusted setup) and ZK-STARKs (transparent setup, quantum-resistant).