Crypto Glossary

A

Airdrop

Free distribution of tokens to wallet addresses, often used for marketing or to reward early users of a protocol.

AMM (Automated Market Maker) DeFi

A type of decentralized exchange that uses algorithms and liquidity pools instead of order books to facilitate trades. Examples: Uniswap, Curve. Learn more

APY (Annual Percentage Yield)

The real rate of return earned on an investment, taking into account compound interest. Higher than APR when compounding is frequent.

B

Block

A collection of transaction data that is bundled together and added to the blockchain. Each block contains a cryptographic hash linking it to the previous block.

Bridge

A protocol that enables transferring tokens between different blockchain networks (e.g., Ethereum to Arbitrum).

Bull/Bear Market

Bull market: prolonged period of rising prices and optimism. Bear market: prolonged period of falling prices and pessimism.

C

CEX (Centralized Exchange)

A cryptocurrency exchange operated by a company that acts as an intermediary. Examples: Coinbase, Binance. Contrast with DEX.

Collateral

Assets deposited as security when borrowing in DeFi. If the loan isn't repaid or falls below health threshold, collateral is liquidated.

Consensus Mechanism

The method by which a blockchain network agrees on the current state. Common types: Proof of Work (Bitcoin), Proof of Stake (Ethereum). Learn more

D

DAO (Decentralized Autonomous Organization)

An organization governed by smart contracts and token holder votes rather than traditional management. Learn more

DeFi (Decentralized Finance) DeFi

Financial services built on blockchain that operate without traditional intermediaries. Includes lending, trading, and derivatives. Learn more

DEX (Decentralized Exchange)

A cryptocurrency exchange that operates through smart contracts without a central authority. Users trade directly from their wallets.

DePIN (Decentralized Physical Infrastructure)

Blockchain networks that coordinate physical infrastructure like wireless networks, computing power, or storage. Learn more

E

ERC-20

The most common token standard on Ethereum, defining how tokens can be transferred and tracked.

EVM (Ethereum Virtual Machine)

The runtime environment for smart contracts on Ethereum and compatible chains. "EVM-compatible" means a chain can run Ethereum smart contracts.

F

Flash Loan DeFi

An uncollateralized loan that must be borrowed and repaid within a single transaction. Used for arbitrage and liquidations. Learn more

Fork

A change to a blockchain's protocol. Soft fork: backward-compatible. Hard fork: creates a new chain (e.g., Bitcoin Cash). Learn more

Funding Rate

Periodic payments between long and short traders in perpetual futures, keeping the contract price aligned with spot. Learn more

G

Gas

The fee paid to execute transactions on Ethereum and similar networks. Measured in gwei (1 gwei = 0.000000001 ETH).

Governance Token

A token that grants voting rights over protocol decisions. Examples: UNI (Uniswap), AAVE, MKR (MakerDAO).

H

HODL

Crypto slang for holding assets long-term regardless of price volatility. Originally a typo for "hold."

Health Factor

In lending protocols, a ratio measuring how close a position is to liquidation. Below 1.0 typically triggers liquidation.

I

Impermanent Loss

The temporary loss experienced by liquidity providers when the price ratio of deposited assets changes. Becomes permanent when you withdraw.

Interoperability

The ability of different blockchains to communicate and transfer assets/data between each other. Learn more

L

Layer 1 (L1)

The base blockchain network (e.g., Ethereum, Solana, Bitcoin). Handles consensus and final settlement.

Layer 2 (L2)

Scaling solutions built on top of L1s to increase transaction throughput. Examples: Arbitrum, Optimism, Base.

Liquidation DeFi

Forced closure of a borrowing position when collateral value falls below required threshold. Protects lenders from bad debt. Learn more

Liquidity

The ease with which an asset can be bought or sold without significantly affecting its price. Higher liquidity = tighter spreads.

LTV (Loan-to-Value)

The ratio of loan amount to collateral value. 80% LTV means you can borrow $80 against $100 of collateral.

M

Market Cap

Total value of a cryptocurrency: current price multiplied by circulating supply.

MEV (Maximal Extractable Value) Advanced

Profit extracted by reordering, including, or excluding transactions within a block. Includes sandwich attacks and arbitrage. Learn more

Minting

Creating new tokens or NFTs. In stablecoins, minting refers to creating new coins by depositing collateral.

N

NFT (Non-Fungible Token)

A unique digital asset on blockchain representing ownership of specific items like art, collectibles, or in-game items.

Node

A computer that maintains a copy of the blockchain and helps validate transactions.

O

Oracle DeFi

A service that brings external data (like prices) onto the blockchain for smart contracts to use. Examples: Chainlink, Pyth. Learn more

Over-Collateralization

Requiring collateral worth more than the loan amount. Standard in DeFi due to price volatility and lack of credit assessment.

P

Perpetual Futures (Perps)

Derivative contracts with no expiration date, allowing leveraged speculation on asset prices. Learn more

Private Key

A secret cryptographic code that proves ownership and enables spending of cryptocurrency. Never share your private key.

Protocol

A set of rules and smart contracts that define how a decentralized application operates. Examples: Aave protocol, Uniswap protocol.

R

Rollup

An L2 scaling solution that processes transactions off-chain and posts compressed data to L1. Types: Optimistic rollups, ZK rollups.

RWA (Real World Assets)

Traditional assets like real estate, bonds, or commodities that are tokenized on blockchain. Learn more

S

Slippage

The difference between expected and actual execution price of a trade, caused by price movement or low liquidity.

Smart Contract

Self-executing code on blockchain that automatically enforces agreement terms when conditions are met. Learn more

Stablecoin

A cryptocurrency designed to maintain stable value, typically pegged to USD. Types: fiat-backed (USDC), crypto-backed (DAI), algorithmic. Learn more

Staking

Locking tokens to support network operations (validation) or earn rewards. Can refer to PoS staking or protocol-specific staking.

T

Tokenomics

The economic design of a token: supply, distribution, utility, and incentive mechanisms. Learn more

TVL (Total Value Locked) DeFi

The total value of assets deposited in a DeFi protocol. A key metric for measuring protocol adoption and trust.

V

Validator

In Proof of Stake, a node operator who stakes tokens to participate in block validation and consensus.

Vault DeFi

A smart contract that pools user deposits and executes automated yield strategies. Learn more

W

Wallet

Software or hardware that stores private keys and enables interaction with blockchain. Types: hot wallets (connected), cold wallets (offline).

Whale

An individual or entity holding a large amount of cryptocurrency, capable of moving markets with their trades.

Y

Yield Farming

Actively moving capital between DeFi protocols to maximize returns from interest, fees, and token incentives.