Glossary of blockchain and crypto terms
Short, plain-language explanations of common blockchain and crypto terms. The entries are general education and do not describe any particular product or service.
A
- Address
- A string of characters derived from a public key that serves as the destination when someone sends crypto assets to a wallet. It identifies where transfers go.Ethereum.org: Glossary
- Address poisoning
- A type of fraud that exploits the habit of copying addresses from transaction history. The attacker's look-alike address appears in that history, so a rushed user may send funds to the scammer instead.Ethereum.org accounts documentation
- Airdrop scam
- A fraud that uses the promise of free tokens. Victims are asked to connect a wallet, sign a request, or enter a seed phrase to claim an allocation that never arrives, and their funds are taken instead.
- Anti-money laundering (AML)
- A set of duties that financial and crypto businesses carry under the law to prevent their services being used to disguise the origin of illegal money. Duties include identity checks and reporting unusual activity.Financial Action Task Force guidance on virtual assets
C
- Consensus mechanism
- The set of rules that lets the participants in a network agree on which transactions are valid and the order in which they are recorded, without a central authority.Ethereum.org: Consensus mechanisms
- Consumer protection
- Laws and public agencies that set minimum standards for how businesses sell to the public. They cover honest advertising, clear terms, complaint routes and, in many places, refund rights for people who were misled.
- Cost basis
- The original cost of an asset, including the amounts paid to acquire it and certain related costs, used as the starting point when working out a gain or loss on disposal.
- Custody
- When a business holds clients' crypto assets for them, it is providing custody, a regulated activity in several countries. Rules often require asset segregation and clear records of ownership.
D
- Decentralization
- A system is decentralized when its data, validation and governance are shared among many separate computers and people. Removing one participant rarely stops the system from running.Ethereum.org: Glossary
- Derivative
- A contract whose value depends on an underlying asset, such as a futures or option contract. The holder gains or loses according to movements in that asset's value.
- Digital asset
- Anything that exists electronically and can be transferred or recorded using distributed-ledger or similar technology. The term is broad and covers many different kinds of holdings.
- Digital asset reporting
- Rules that require platforms and intermediaries to report certain digital asset sales and transfers to tax authorities. Reporting forms, thresholds and start dates are set by each country and change over time.
E
- Exchange
- An exchange is a marketplace, whether centralized or decentralized, where crypto assets are traded against one another or against fiat money. Where it is regulated, the rules depend on the country and the services offered.
H
- Hash
- A cryptographic hash turns an arbitrary amount of data into a short string of fixed size. The result is effectively impossible to reverse, which makes it useful for verifying data integrity.NIST Computer Security Resource Center: Glossary
- Honeypot scam
- A fake token or contract that looks tradable but is built so that the scammer alone can withdraw funds. Victims can add money but find that selling is blocked, or that the only exit is taxed heavily.Ethereum.org smart contract security documentation
- Hot wallet
- Because it stays online, a hot wallet can sign transactions quickly, but it has more exposure to malware and phishing. Many users choose to hold only smaller amounts in this type of wallet.Ethereum.org: Wallets
L
- Layer 2
- A network built on top of a base blockchain that processes transactions off the main chain and then reports results back to it. It aims to increase throughput.Ethereum.org: Glossary
- Limit order
- A limit order names the most a participant will pay or the least it will accept per unit. The trade executes only if the market reaches that threshold.
- Liquidity
- Liquidity describes depth in a market: how much can be traded at close to the current level before the level shifts noticeably. Thin markets are less liquid.
M
- Money transmission
- Accepting money or value from one person and passing it to another person or place. In some countries, doing this as a business can require a license or registration.
N
- Non-custodial wallet
- Also called self-custody, this model puts the entire responsibility for keys and recovery phrases with the owner. Losing the keys generally means losing access to the assets.Ethereum.org: Wallets
O
- Order book
- The live list of open orders on a trading venue, showing how much is waiting at each level on each side of the market for that asset.
P
- Phishing
- Fake messages, websites or apps that imitate a trusted service to trick people into revealing logins, seed phrases or private keys. Phishing often creates urgency, such as warnings that an account will close.
- Pig butchering
- A long-running scam in which a fraudster builds a friendly relationship with the victim, often online, and then persuades them to send crypto to a fake investment platform that appears to show gains.
- Politically exposed person (PEP)
- A label used in anti-money laundering rules for people in powerful public positions, and their relatives and close associates, because they are more exposed to bribery and misuse of public funds. Firms apply extra checks.Financial Action Task Force guidance on virtual assets
- Private key
- Within a key pair this is the half kept secret; it is mathematically linked to a public key but cannot feasibly be derived from the public key. Its owner signs transactions with it.NIST Computer Security Resource Center: Glossary
- Proof of work
- A consensus method in which participants compete to solve computing puzzles, and the winner adds the next block to the chain. Solving the puzzle requires substantial computing work.Ethereum.org: Proof-of-work
- Public key
- The public half of a key pair, which can be published without weakening security. Anyone can use it to confirm that a signature was made with the matching private key.NIST Computer Security Resource Center: Glossary
- Pump-and-dump
- A type of market manipulation in which insiders or coordinated groups hype a token with false or misleading claims, then exit while newcomers are left holding a token that falls sharply.
R
- Rug pull
- A fraud in which the organizers of a crypto project abandon it or drain its funds after attracting participants' money. Organizers may take the reserves and stop communicating.
S
- Smart contract
- Smart contracts are code that a blockchain executes exactly as written, with every node checking the same outcome. Because they can be upgradeable or flawed, careful review matters.Ethereum.org: Smart contracts
- Social engineering
- Manipulating people, rather than code, to reveal secrets or take actions. Attackers may pretend to be support staff, invent urgency or build trust over time to get passwords, codes or access.
- Spread
- The bid-ask spread is an implicit cost of trading, because a trade usually happens at the less favorable side of the gap. Narrow spreads signal a deep, competitive market where trades happen readily.
- Suspicious activity report (SAR)
- An alert sent to a financial intelligence body when something looks unusual, such as structured payments or sudden movement of funds with no clear reason. The term varies by country; some call it an unusual activity report.Financial Action Task Force guidance on virtual assets
T
- Tax residency
- The status that decides which country can tax a person's income and gains, usually based on where they live, how long they stay and where their main economic ties are. It can differ from citizenship.Canada Revenue Agency guidance on crypto-asset tax obligations
- Transaction monitoring
- Automated and manual review of payments and account activity to spot patterns that may point to money laundering, fraud or sanctions breaches. Alerts are investigated and may lead to a report.Financial Action Task Force guidance on virtual assets
- Travel rule
- A rule that applies to payments between regulated businesses, obliging the sending business to pass on the sender's and recipient's details. Crypto transfers are covered in many countries, with differing start dates.Financial Action Task Force guidance on virtual assets
V
- Volatility
- The measure of how much and how quickly the value of an asset moves up and down over a given period. Higher volatility means larger swings in either direction.
W
- Wallet
- A wallet is better understood as a manager of cryptographic keys than as a container of coins. Its main job is to sign transactions that move assets recorded on a public ledger.Ethereum.org: Wallets
- Wash trading
- Trades that do not change beneficial ownership, placed to make trading volume look higher than real demand. It is a form of market manipulation and can mislead other participants about activity.