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 poisoning
- A trick in which a scammer sends a very small transaction from an address that looks almost identical to one the victim used before, hoping the victim later copies the wrong address.Ethereum.org accounts documentation
- Anti-money laundering (AML)
- Laws, rules and controls aimed at stopping criminal proceeds from being hidden inside the financial system. Regulated businesses must check customers, watch activity and report suspicion. Often written AML/CFT to include terrorist financing.Financial Action Task Force guidance on virtual assets
B
- Beneficial owner
- The real person who ultimately owns or controls a company or account, even when it is held in another name or through several layers of companies. Regulated firms must identify beneficial owners before opening certain accounts.Financial Action Task Force guidance on virtual assets
- Blockchain
- Think of it as an append-only ledger that anyone in the network can read, with new entries added in batches. Changing an earlier entry would break the links that follow it, which makes tampering visible.NIST Computer Security Resource Center: Glossary
C
- Consensus mechanism
- A consensus method is how a decentralized system reaches agreement on one shared history. Nodes follow a common procedure, so every honest copy of the ledger ends up identical.Ethereum.org: Consensus mechanisms
- Consumer protection
- The set of rights that protect customers when they deal with a business, such as the right to accurate information, fair contract terms and a way to complain or seek redress when something goes wrong.
- 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.
- Cryptocurrency
- A digital asset that uses cryptography to secure transfers, and that usually records them on a distributed ledger. Its units are not issued by a central bank.
- Cryptojacking
- A form of malware that secretly turns a victim's device into a source of computing power for a miner. The owner usually notices only hotter hardware, shorter battery life or sluggish performance.Ethereum.org security guidance
- Custodial wallet
- A wallet in which a third party, such as a service provider, holds the private keys on the user's behalf. The user logs in to access their holdings, but does not control the keys directly.Ethereum.org: Wallets
- Custody
- The safekeeping of crypto assets by a firm on behalf of its clients, which can carry specific regulatory duties. Holding someone else's assets is treated as a distinct activity.
- Customer due diligence (CDD)
- The checks a regulated firm carries out on a customer's identity, the purpose of the relationship and the level of risk. Checks are repeated over time so that records stay up to date.Financial Action Task Force guidance on virtual assets
D
- Derivative
- A derivative is a financial instrument that takes its worth from another asset, index or rate. Crypto derivatives may be offered on platforms that fall under different rules depending on the jurisdiction.
- 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.
- Digital signature
- A cryptographic proof, created with a private key, that the key holder authorized a transaction and that the data was not changed afterwards. Anyone can check it with the matching public key.NIST Computer Security Resource Center: Glossary
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.
F
- Fork
- When developers disagree about a protocol change, the network can split into two chains, each following different rules. Such a divergence is often described as a contentious fork.Ethereum.org: Glossary
H
- Honeypot scam
- A trap that lures people into depositing assets into a contract they cannot later reclaim. The contract is usually promoted as a route to quick gains, and the code hides the rule that blocks outgoing transfers.Ethereum.org smart contract security documentation
M
- Market maker
- A participant that continuously posts quotes at which it will both take and offer an asset, which helps keep a market liquid so others can trade more readily.
- Market order
- An instruction to trade immediately at the most favorable level currently available in the market, at whatever level that turns out to be. It prioritizes speed of execution over the specific level.
N
- Node
- Every full node independently verifies the history it receives, rejecting blocks that break the protocol. Some nodes run on ordinary personal hardware while others run in data centers.Ethereum.org: Glossary
- Non-custodial wallet
- A wallet where only the user holds the private keys, so no third party can move funds on the user's behalf. The user is fully responsible for backups.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
- Pig butchering
- An investment romance scam that uses weeks or months of trust-building before any money moves. Victims see fabricated profits on a fake dashboard, and withdrawals are then blocked by requests for more payments.
- Pooling
- A way of tracking holdings of the same token as one balance with a single average cost. Each sale reduces that balance and the matching share of cost, which keeps records simple for many holders.
- Proof of work
- Miners use specialized hardware to make repeated guesses until one meets the network's target. Verifying the winning answer is fast, so other nodes can check the result easily.Ethereum.org: Proof-of-work
- Public key
- A key that can be shared openly, used to verify digital signatures and derived from a private key. Holding a copy does not expose the owner's funds.NIST Computer Security Resource Center: Glossary
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
- Securities (concept)
- A legal category that determines which investor protections and registration duties apply to an offering. Tests for crypto assets differ between countries, so one token can be treated differently in two places.
- Seed phrase
- Also called a recovery phrase, it is usually a list of several words written down during setup. It lets the owner restore access if a device is lost or damaged.Ethereum.org: Wallets
- Smart contract
- A program stored on a blockchain that runs automatically when its coded conditions are met. Its outputs are recorded on the ledger and the network executes them without a human intermediary.Ethereum.org: Smart contracts
- Social engineering
- Psychological tricks used to bypass security controls. Common examples include impersonation calls, fake login pages shared by chat and requests to read out a one-time code, all aimed at a human weak point.
- Source of funds
- The origin of the money or assets used in a particular transaction, such as salary, a sale of property or an inheritance. Regulated firms ask about it to check that funds are legitimate.Financial Action Task Force guidance on virtual assets
- Spread
- The gap between the highest level a bidder will pay and the lowest level an asker will accept. In an active market the spread is usually narrow, and it widens when liquidity is thin.
- 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
V
- Virtual asset service provider (VASP)
- The international term for a business that exchanges, transfers, safekeeps or administers virtual assets on behalf of others. Such businesses are normally expected to meet anti-money laundering rules.Financial Action Task Force guidance on virtual assets
- Virtual currency as property
- A common tax treatment under which a digital asset is taxed like other property rather than like money. Gains and losses on disposals usually count, and general property tax rules apply.
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