Crypto terms, explained
Words that come up constantly and are rarely explained. If one of them is what stops you before buying — here is what it means, in plain language.
Basics
- Cryptocurrency
- Digital money issued by no state and no bank. Ownership is proven by a key only you hold, and the ledger is kept on thousands of computers at once.See also: Blockchain, Wallet
- Token
- A cryptocurrency with no network of its own that lives on someone else’s — most often Ethereum. Much as a cheque is not money in itself, but paper that has value because a bank stands behind it.See also: Network, Altcoin
- Altcoin
- Any cryptocurrency that is not bitcoin. The name comes from “alternative coin”. There are tens of thousands of them and the vast majority have no use at all.
- Stablecoin
- A cryptocurrency whose issuer promises it will always be worth roughly one dollar. That is a company’s promise, not a law of nature — if the issuer fails or lies about its reserves, the value can fall.It is used to step out of price swings without going back to local currency. The best known are USDT and USDC.See also: Volatility
- Memecoin
- A cryptocurrency created as a joke or around a popular image, with no technical purpose. Its price depends purely on how many people are talking about it.See also: Pump and dump, FOMO
- Market cap
- The price of one coin multiplied by the number of coins in circulation. It roughly shows how big something is, but not how much money has actually gone into it.See also: Circulating supply, Fully diluted valuation (FDV)
- Dominance
- How much of the whole crypto market’s value belongs to a single cryptocurrency, usually bitcoin. If it reads 57 %, bitcoin makes up a little over half of everything.See also: Market cap
- Circulating supply
- How many coins exist right now and can be spent. It differs from the total because a part is often locked or not yet issued.See also: Max supply, Fully diluted valuation (FDV)
- Max supply
- The largest number of coins that will ever exist. For bitcoin that is 21 million and the number cannot be changed. Many cryptocurrencies have no upper limit at all.
- Fully diluted valuation (FDV)
- What something would be worth if every coin that will ever exist were already in circulation. If that number is far above the market cap, a large issuance is still ahead.See also: Market cap, Max supply
Trading and prices
- Spread
- The gap between the price you buy at and the price you could sell at the same moment. It is a hidden fee — it never appears on your receipt, but you pay it.This is why comparing exchanges by the published commission alone can mislead: an exchange with a lower commission may have a wider spread.See also: Liquidity, Maker and taker
- SEPA
- The European system of bank transfers in euros. Money goes from your bank account to the exchange’s account, usually within one to two business days. Cheaper than a card, but slower.See also: Exchange
- Volume
- How much of something was bought and sold in the last 24 hours. High volume means you can get in and out easily; low volume means your own order will move the price.See also: Liquidity
- Liquidity
- How easily you can sell at the price you see. When liquidity is thin, selling a larger amount pushes the price down while you sell.See also: Spread, Volume
- Volatility
- How much the price jumps up and down. Crypto is known for losing a third of its value in a single day, with no news behind it.
- All-time high (ATH)
- The highest price something has ever reached, and the date it happened. It is used to see how far today’s price is from the peak.See also: All-time low (ATL)
- All-time low (ATL)
- The lowest price in that cryptocurrency’s history. For older coins that is often a few cents, from a time when nobody had heard of them.See also: All-time high (ATH)
- Maker and taker
- Two kinds of exchange fee. You pay the taker fee when you buy immediately at the current price, and the maker fee when you set your own price and wait. Maker is usually cheaper.See also: Limit order
- Limit order
- You tell the exchange the price you are willing to buy at and wait for someone to take it. Cheaper than buying with one click, but it may never execute.See also: Maker and taker
- Exchange
- The place where cryptocurrencies are bought and sold. The money and crypto you keep there sit in their account, not yours — until you withdraw them to your own wallet.See also: Wallet, Identity verification (KYC)
- P2P trading
- Buying directly from another person, with the exchange holding the money until both sides agree. Often the only way to pay in local currency, but it carries more risk and wider price differences.
Security
- Wallet
- A program or device that stores your key. It does not hold crypto inside it — crypto is always on the network; the wallet holds the proof that it is yours.See also: Private key, Cold wallet
- Private key
- The string of characters that proves the crypto is yours. Anyone who knows it can take everything — and that cannot be reversed or reported. No legitimate party will ever ask you for it.See also: Seed phrase
- Seed phrase
- Twelve or twenty-four words that can restore your wallet on any device. Whoever knows them has your money. No exchange, support desk or website will ever ask for them — anyone who does is trying to rob you.See also: Private key, Crypto scam
- Cold wallet
- A device that keeps your key off the internet, usually shaped like a USB stick. Safer because it cannot be attacked over the network, but if you lose both it and the seed phrase, the money is gone for good.See also: Wallet, Seed phrase
- Identity verification (KYC)
- An exchange’s legal obligation to know who you are — it asks for an ID card or passport and a photo of your face. Without it you cannot deposit money from a bank in Europe.See also: Exchange
- Crypto scam
- The most common forms: someone asks for your seed phrase, promises a guaranteed return, or offers to “double” your money if you send some first. All three are scams, without exception.A crypto transfer cannot be reversed the way a bank transfer can. Once the money is gone, it is gone.See also: Seed phrase, Pump and dump
- Confirmation
- A transfer counts as final only once the network has confirmed it several times. On bitcoin that takes about ten minutes per confirmation; on other networks, seconds.See also: Network
How it works
- Blockchain
- A shared ledger kept by many computers at the same time. Once something is written into it, it cannot be deleted or altered, because everyone else would see it.See also: Network, Mining
- Network
- The system of computers keeping one ledger — Bitcoin and Ethereum are separate networks. If you send crypto to the wrong network, it is normally lost.See also: Blockchain, Gas
- Mining
- How new transactions get written into the bitcoin network. Computers solve puzzles, and whichever succeeds first is paid in newly created coins.See also: Halving, Blockchain
- Staking
- You lock up your coins to help the network run and are paid a fee for it. The money is unavailable while it is locked, and its value can fall in the meantime.
- Gas
- The fee paid to the network for processing a transfer — not to the exchange. It depends on how busy the network is, so the same action costs differently at different times.See also: Network
- Halving
- On bitcoin, the reward paid to miners is cut in half roughly every four years. That is how the supply of new coins shrinks until the limit of 21 million is reached.See also: Mining, Max supply
- Fork
- When the community cannot agree on a rule change, the network splits in two. That is how Bitcoin Cash came out of Bitcoin.
- DeFi
- Financial services — loans, exchange, interest — run by programs on the network, with no bank. There is nobody to help if something goes wrong.
- NFT
- A record on the network claiming that something is yours — most often an image. The record is unique, but that does not stop anyone from copying the file.
- Whitepaper
- The document in which the creators explain what their cryptocurrency is for and how it works. If there is none, or it is full of promises without explanation, that is a bad sign.
- Airdrop
- A free distribution of tokens, usually to people who have already used something. A legitimate airdrop never asks you to send something first, or to enter your seed phrase.See also: Seed phrase, Crypto scam
Slang
- HODL
- It began as a typo for “hold” on a forum in 2013. It means holding regardless of a falling price. It is not a strategy or advice — just an expression.
- FOMO
- The fear of missing out, which makes you buy precisely because the price has already jumped. It is the most common way people buy at the top and lose.See also: Pump and dump
- Pump and dump
- A group buys a cheap coin, makes noise so others buy in, then sells into the rise. Those who came late are left holding something worthless. This is a common and deliberate fraud.See also: Memecoin, Crypto scam