Glossary
Crypto terms, in plain English
Each definition comes from one of our sourced explainers, linked under it. Educational content, not financial advice.
A
- Account abstraction
- A set of changes that lets a crypto wallet follow programmable rules instead of being controlled by one private key and nothing else. Features like fee sponsorship, batching, passkeys and recovery become possible.
- Actively validated service (AVS)also: AVS
- A service that uses restaked collateral for security, for example a data layer, a rollup component or an oracle. AVSs pay rewards to the operators and restakers who back them.
- Address poisoning
- A scam that exploits habit: an attacker sends you a tiny or zero-value transaction from an address that looks like one you use, matching the first and last characters.
- Attestation
- A check that confirms an issuer's balances at a date. It is narrower than a full audit, so it gives less assurance than an audit.
B
- Bundler
- In ERC-4337, a node that collects UserOperations from a separate pool, simulates them, groups several together and submits them as one regular transaction. It is paid from the fees.
- Burnalso: token burn
- Using payments to remove tokens, which ties a network's usage to its token supply. When usage is high, more tokens are burned than issued and supply shrinks; when usage is low, issuance outweighs the burn and supply grows.
C
- Cost basisalso: basis
- For US tax, what you paid for an asset, including fees and commissions, in US dollars. For crypto you received as income, the basis is its value when received.
- Custodyalso: third-party custody
- Who controls the private keys. With third-party custody, which includes exchanges, if the custodian is hacked, shuts down or goes bankrupt you may lose access to your crypto.
D
- DePINalso: decentralized physical infrastructure networks
- Decentralized physical infrastructure networks: a way of building real-world infrastructure, such as wireless coverage, data storage, computing power or street maps, by paying many independent people in tokens to supply the hardware instead of one company buying and running it all.
E
- EntryPoint
- In ERC-4337, a shared contract that every smart account uses. It checks each operation, runs it, and pays the bundler.
- Externally owned account (EOA)also: EOA
- A normal Ethereum wallet: one key controls everything, and a lost or stolen key cannot be fixed.
F
- Form 1099-DA
- "Digital Asset Proceeds from Broker Transactions", the form US brokers now file to report crypto sales; the crypto equivalent of Form 1099-B for stocks. It is not a substitute for your own records.
H
- Hardware wallet
- A dedicated device that keeps your keys and is not connected to the internet except when you sign a transaction.
- Honeypotalso: honeypot token
- A token whose code lets people buy but blocks most holders from selling.
- Hot wallet
- A wallet whose keys live on a device that is online. Suitable for amounts you are willing to lose and for using decentralized apps, less suitable for long-term savings.
K
- KYCalso: know your customer
- "Know your customer": the identity information regulated exchanges collect as part of anti-money-laundering controls.
L
- Liquid restaking token (LRT)also: LRT
- A token such as eETH, ezETH or rsETH that represents ETH restaked through a protocol, which you can trade or use as collateral. It is a claim on a pool, not ETH itself.
- Liquid staking tokenalso: stETH, rETH
- A claim on staked ETH, not ETH itself, so it can trade slightly below ETH when many people want out at once.
- Long-term and short-term gainsalso: holding period
- In US tax, gains on crypto held one year or less are short-term and taxed like ordinary income; gains on crypto held more than one year are long-term and taxed at lower rates.
M
- Multisigalso: multisignature
- A wallet that needs more than one key to approve a transaction, for example any 2 of 3. It reduces single points of failure but is harder to set up and maintain.
O
- Off-chain
- Happening outside the blockchain. The chain can record that a payment was made, but it cannot by itself prove that something in the physical world actually happened.
P
- Paymaster
- In ERC-4337, an optional contract that pays gas on a user's behalf, so an app can sponsor fees for new users or accept a token such as a stablecoin and settle the gas in ETH behind the scenes.
- Pig butcheringalso: sha zhu pan
- A romance or friendship scam that ends in investment fraud: scammers build a relationship with a target, then pitch a fake financial opportunity.
- Proof of reserves
- A published check that an exchange holds the assets it owes customers. Some exchanges publish them.
R
- Real-world asset (RWA)also: RWA, tokenized asset
- Something that exists outside the blockchain, such as a US Treasury bill, a loan, a bar of gold or a building, whose ownership is recorded as a token on a blockchain. The token is a digital claim on the asset, issued and managed by a regulated company.
- Recovery phrasealso: seed phrase
- A list of words that restores your wallet. Whoever has your recovery phrase controls your coins.
- Restaking
- Taking ETH that is already staked to secure Ethereum and also pledging it to secure other services, in exchange for extra rewards.
- Rug pull
- When the creators of a token take the money and disappear.
S
- Self-custody
- Controlling your own private keys instead of leaving them with an exchange. If your wallet or recovery phrase is lost, stolen or hacked, you may permanently lose access.
- Slashing
- A penalty that cuts staked ETH. A validator that provably misbehaves, for example by signing two conflicting blocks, has part of its stake destroyed; in restaking, an AVS can cut the stake delegated to an operator that breaks its rules.
- Smart contract accountalso: smart account
- A wallet that is itself a contract. The account contract defines how signatures are checked, so it could be a passkey, a group of keys or something else.
- Spread
- The gap between the price you pay and the market price, built into the quote. It is often not shown as a line item.
- Stablecoin
- A token meant to stay at one dollar. Behind it sits real-world collateral, mainly cash and short-term government debt.
T
- Taxable event
- In US tax, anything that makes you owe tax, or at least report a gain or loss, for the year. Selling crypto, swapping it for another coin or spending it is one; moving it between wallets you control is not.
- Token approvalalso: approval
- Permission that lets a smart contract spend a token from your wallet. It can spend at any time until the approval is revoked, and unlimited approvals extend this to the full balance of that token.
V
- Validator
- An account that proposes blocks and votes on the state of the chain. Ethereum is secured by validators.
W
- Wallet drainer
- Malicious code on a fake website or a hijacked real one that tricks you into authorising a transfer out of your wallet.