Crypto glossary: key terms in plain English

A

Address

A public identifier where crypto can be sent, derived from a public key. Safe to share, unlike a private key or seed phrase.

Airdrop

Free tokens distributed to wallet addresses, often to reward early users. Unsolicited airdrops can also be a scam vector.

Altcoin

Any cryptocurrency other than Bitcoin.

ATH (All-Time High)

The highest price an asset has ever reached.

B

Block

A batch of transactions added to a blockchain together, linked to the previous block by its hash.

Bridge

A protocol that moves assets or data between two blockchains.

C

Cold wallet

A wallet whose private keys are kept offline, such as a hardware wallet.

Consensus mechanism

The method a network uses to agree on which transactions are valid, such as proof of work or proof of stake.

Custodial

A service where a third party, such as an exchange, holds your private keys for you.

D

DeFi

Decentralised finance: financial services like lending and trading run by smart contracts instead of banks.

DEX

Decentralised exchange: a platform for swapping tokens directly from your wallet via smart contracts.

G

Gas

The fee paid to process a transaction or run a smart contract on networks like Ethereum.

H

Halving

The scheduled 50% cut in Bitcoin’s block reward, roughly every four years (every 210,000 blocks).

Hardware wallet

A physical device that stores private keys offline and signs transactions securely.

Hash

A fixed-length fingerprint of data. Any change to the data produces a completely different hash.

K

KYC

Know Your Customer: identity checks that regulated exchanges must perform.

L

Layer-2

A network built on top of a base blockchain to make transactions faster and cheaper.

Liquid staking

Staking that issues a tradable token representing your staked assets and rewards.

Liquidity

How easily an asset can be bought or sold without moving its price significantly.

M

Market cap

Circulating supply multiplied by current price; a rough measure of a network’s size.

Mining

Using computing power to secure a proof-of-work blockchain and earn newly issued coins.

P

Private key

The secret number that proves ownership of crypto at an address. Whoever holds it controls the funds.

Proof of stake

A consensus mechanism where validators lock up coins as collateral to propose and confirm blocks.

Proof of work

A consensus mechanism where miners compete to solve puzzles using computing power.

R

Rug pull

A scam where a project’s creators abandon it and take investors’ funds.

S

Satoshi

The smallest unit of Bitcoin: 0.00000001 BTC.

Seed phrase

A list of 12 or 24 words that backs up a self-custody wallet. Anyone with it can take your funds.

Slashing

A penalty that removes part of a validator’s stake for misbehaviour or certain failures.

Smart contract

Code deployed on a blockchain that runs automatically when its conditions are met.

Stablecoin

A token designed to hold a steady value, usually pegged to a currency like the US dollar.

V

Validator

A participant in a proof-of-stake network who verifies transactions and proposes blocks.

Volatility

How sharply and frequently an asset’s price moves.