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Cryptocurrency Glossary

A-C

  • Altcoin – Any cryptocurrency other than Bitcoin, such as Ethereum, Litecoin, or Cardano.
  • Bitcoin (BTC) - A specific type of cryptocurrency, and likely the most well-known, in an electronic payment system that acts as an alternative to fiat currency. It is created or mined by computers and exists only in a digital state. It is not backed by a government, and its price is not set by a centralized authority. Bitcoin is unique in that it has a finite supply. It currently has a maximum supply of 21 million bitcoins.
  • Blockchain – A decentralized, distributed ledger that records all transactions across a network securely and transparently.
  • CBDC (Central Bank Digital Currency) – A digital currency issued and regulated by a central bank, designed as a government-backed alternative to cryptocurrencies.
  • Cold Wallet – A cryptocurrency storage method that keeps assets offline, making them less vulnerable to hacking.
  • Crypto Exchange – A platform where users can buy, sell, and trade cryptocurrencies. Prominent crypto exchanges include Coinbase, Kraken, Gemini and more.
  • Cryptography – The practice of secure communication techniques used to protect blockchain transactions.

D-H

  • Decentralization – The principle of distributing control and decision-making away from a central authority, such as banks or governments.
  • DeFi (Decentralized Finance) – Financial services built on blockchain technology that operate without traditional intermediaries.
  • Exchange Traded Fund (ETF) – Similar to a mutual fund, an ETF tracks the price of an asset or a basket of assets such as stocks, bonds, or cryptocurrencies but can be traded like stock via a traditional brokerage account. In 2024, several U.S. firms, including BlackRock, Fidelity, and Grayscale, secured approval from the Security and Exchange Commission (SEC) to list and trade spot BTC ETFs on U.S. exchanges.
  • Fiat Currency – Currency issued by a recognized government or authority and not backed by a physical commodity like gold. U.S. Dollars, for example, are backed by the “full faith and credit” of the United States government. The word "fiat" comes from the Latin word fiducia, which means "trust"
  • Gas Fees – Transaction fees required to execute operations on certain blockchain networks, such as Ethereum.
  • Halving – A process where the reward for mining a cryptocurrency is reduced by half at predetermined intervals, helping control supply (e.g., Bitcoin halving every four years).
  • Hashing – A process used to secure transactions and data in a blockchain by converting input into a fixed-length code.
  • Hot Wallet – A cryptocurrency wallet that is always connected to the internet or another connected device. Hot wallets are used as temporary key storage and to send and receive cryptocurrency.

I-N

  • ICO (Initial Coin Offering) – A fundraising method where new cryptocurrencies or tokens are sold to investors.
  • Liquidity – The ease with which a cryptocurrency can be bought or sold without affecting its price.
  • Meme Coin - A cryptocurrency named after characters, individuals, animals, artwork, or anything else in an attempt to be humorous, light-hearted, and attract a user base by promising a fun and related-interest community.
  • Mining – The process of validating transactions and adding them to the blockchain, often involving complex mathematical calculations.
  • NFT (Non-Fungible Token) – A unique digital asset representing ownership of a specific item, such as art or collectibles, using blockchain technology.
  • Node – A computer connected to a blockchain network that helps maintain and validate transactions.

P-Z

  • Pig Butchering – A type of cryptocurrency scam where fraudsters build trust with victims over time before convincing them to invest in fake crypto schemes, eventually stealing their funds.
  • Private Key – A secret alphanumeric code that allows a user to access and control their cryptocurrency holdings.
  • Proof of Work (PoW) – A consensus mechanism requiring miners to solve complex puzzles to validate transactions and add blocks to the blockchain.
  • Proof of Stake (PoS) – An alternative consensus mechanism where validators are chosen to confirm transactions based on the number of coins they hold.
  • Public Key – A cryptographic code that allows a person to receive cryptocurrencies into his or her account. The public key is derived from the private key. In the Bitcoin system, transactions are done using a "pair" consisting of a private and public key.
  • Smart Contract – A self-executing contract with terms written in code, automatically enforcing agreements when conditions are met.
  • Stablecoin – A cryptocurrency designed to maintain a stable value by being pegged to assets like the U.S. dollar or gold.
  • Wallet – A digital tool used to store, send, and receive cryptocurrencies, available in hot (online) or cold (offline) forms.
  • Zero Confirmation – An unconfirmed transaction that has not yet been confirmed or verified on the blockchain.
  • Zero-Knowledge Proof (ZKP) – A method of authentication in which no passwords are shared. Zero-knowledge proofs enable the posting of private transactions to the blockchain while maintaining their privacy by offering a way to confirm that the transaction was completed successfully without disclosing private information utilized in the transaction.

The information provided herein is general in nature and intended only for educational purposes. It is not a replacement for legal, tax or financial advice and no recommendations of a particular legal, investment, or tax strategy are implied or should be inferred. We encourage you to consult with a trusted attorney, accountant, and/or financial advisor concerning your specific situation.

Please note: Cryptocurrency is a very speculative investment, it is not insured by the FDIC or any other agency, and it involves a high degree of risk.

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