If you’re new to crypto, its technical terms may sound daunting. But they don’t have to be. This glossary, filled with terms about cryptocurrency for beginners, explains common crypto terms to help you build confidence as you explore the ever-evolving world of digital assets.
Whether you’re learning how crypto works, researching blockchain technology, or preparing to make your first crypto investment, this cryptocurrency glossary filled with cryptocurrency definitions can help you get clarity.
Cryptocurrency definitions: A–D
Altcoin
What is an altcoin?
An altcoin, or alternative coin, refers to any cryptocurrency that is not bitcoin. Altcoins exist on a number of blockchains and often have different features than bitcoin.
Because each altcoin runs on its own technology and community, the purposes and risks of these cryptocurrencies can vary widely.
Bitcoin (BTC)
What is bitcoin?
Bitcoin is the largest and most well-known cryptocurrency in the world by market cap. Launched in 2009, it was the first cryptocurrency that could be transferred peer-to-peer (defined below) using blockchain technology.
The Bitcoin network (capital B) has a fixed maximum supply of 21 million bitcoin (lowercase b) and uses a proof-of-work system which rewards miners for completing complex calculations to verify transactions and secure the network.
Blockchain
What is a blockchain?
A blockchain is like a digital accountant, which maintains a ledger of every single transaction in the network, and makes that ledger completely transparent to anyone in the world to see and validate its accuracy.
Most cryptocurrencies rely on blockchain as their core operating technology, so knowing what blockchain is will help towards better understanding what cryptocurrencies are (and how they work). Often decentralized (see definition below), blockchains run without the need for a third party like a bank.
Coins
What are coins in the crypto space?
Coins are cryptocurrencies that run on their own blockchains, while tokens are crypto assets that run on blockchains that already exist.
For example, bitcoin is the native cryptocurrency of the Bitcoin blockchain—so it is classified as a coin, not a token.
Crypto wallet
What is a crypto wallet?
A crypto wallet is a physical device or software program where you can hold cryptocurrency.
Wallets can be software based (like apps) or hardware based (physical devices). Your wallet does not actually hold your crypto—it holds the keys (defined below) that let you access it.
Cryptocurrency
What is cryptocurrency?
Cryptocurrency is a digital form of currency that's transferred peer-to-peer, without using a third party, such as a bank.
Cryptocurrency (or crypto for short) runs on blockchain technology (explained above), which helps verify transactions and secure the network. Many cryptocurrencies aim to be used as a currency, investment, or both.
Crypto IRA
What are crypto IRAs?
Crypto IRAs are individual retirement accounts that let you buy and hold cryptocurrencies like bitcoin and ethereum directly.
Just as with other non-crypto assets held in tax-advantaged retirement accounts, crypto investments in retirement accounts have the potential to grow tax-deferred or even tax-free.
Decentralized
What does decentralized mean?
A decentralized network is not run by a single authority, such as a bank. Instead, the control is shared by everyone who wants to take part in the network.
Crypto is designed to be decentralized (though each individual crypto network can have varying degrees of decentralization). In contrast, the US dollar is managed by a central authority (the Federal Reserve) and is backed by the US government.
Decentralized applications (dApps)
What are decentralized applications—or dApps?
dApps are just like any other app you interact with on a daily basis except that they're built atop a decentralized blockchain.
Decentralized finance (also known as DeFi)
What is decentralized finance (otherwise known as DeFi)?
DeFi refers to financial services built on blockchain technology that operate without traditional intermediaries like banks or brokers.
Depegging
What is depegging?
Depegging happens when a stablecoin (see definition below) loses the fixed value it is designed to track (such as $1). If the systems supporting the stablecoin fail or lose trust, its price may move away from its target (more on stablecoins below). Note: The risk of this happening varies based on the underlying asset.
Digital asset
What is a digital asset?
A digital asset is anything that exists in electronic form and has value, ownership, and the ability to be transferred. This includes cryptocurrencies and digital tokens, as well as other types of digital content that represent value. Many digital assets, such as cryptocurrencies, use blockchain technology to record ownership and verify transactions in a transparent, decentralized way.
Cryptocurrency definitions: E–N
Ether
What is ether?
Ether (also referred to as ethereum or ETH) is the native cryptocurrency for the Ethereum blockchain. Ether can make payments and collect fees from users interacting with applications on the network.
Ethereum
What is Ethereum?
Ethereum was launched in 2015 as a project headed by Vitalik Buterin and is now the second-largest cryptocurrency by market cap. The Ethereum blockchain is programmable, allowing for the creation of decentralized applications (dApps) and smart contracts. Ethereum's native token is ether, also referred to as ethereum or ETH. Originally a proof-of-work consensus protocol, Ethereum moved to proof-of-stake, which uses validators to stake ether tokens to confirm transactions and secure its network. Validators receive newly created ETH tokens based on how much ETH they stake, and Ethereum burns ether (intentionally destroys ether tokens by removing them from the supply, with the goal of reducing inflation) used to pay for transactions to manage the supply over time.
Like the Bitcoin network, the Ethereum network is a digital asset network built on blockchain technology that offers a digital currency: ethereum, typically abbreviated as “ETH.”
However, they are also very different. For example, there is a finite supply of bitcoin, but a potentially unlimited supply of ETH. And while bitcoin was created solely to be used as a currency, the Ethereum network also allows other applications to be programmed on top of it, a bit like how unique smartphone apps can be built for smartphones.
Halving
What is a Bitcoin halving event?
A halving occurs nearly every 4 years, and this is when the amount of bitcoin a miner can earn per block is cut in half.
Keys
What are cryptocurrency keys?
There are 2 types of keys related to cryptocurrencies. The first is a public key, which is like an account number. You use it to send and receive crypto, and it’s safe to share. The second is a private key, which is a password you use to access your crypto. This should be kept secret. If you lose your private key, you might lose access to your crypto forever.
If you buy crypto through a financial platform or crypto exchange, the platform or exchange might manage your keys for you. If you move your crypto to a private wallet, you’re in charge of your keys. Note that there are risks associated with each option.
Litecoin (LTC)
What is Litecoin?
Launched by founder Charlie Lee in 2011, Litecoin was one of the first cryptocurrencies to be released to the public as an alternative to bitcoin. Developed from the Bitcoin source code, Litecoin was designed to be an inexpensive and quicker network for cryptocurrency payments. The Litecoin network can currently process and confirm transactions approximately 4 times faster than Bitcoin. With a maximum circulating supply of 84 million tokens, Litecoin has less scarcity, and the network has a lower hash rate to safeguard its blockchain.
Mining
What is crypto mining?
Mining is the process through which blockchain networks, like Bitcoin, verify transactions. It's called mining because new coins are released into circulation when transactions are approved.
The term miner refers to the specialized software used to verify the transactions
Crypto mining typically involves solving complex equations that require powerful computers, a process known as proof of work.
Non-fungible tokens (NFTs)
What are non-fungible tokens (or NFTs)?
Non-fungible tokens (NFTs) are used to record ownership of one-of-a-kind digital items—kind of like a registry of deeds for online content. These tokens can be used to facilitate the sale of digital artwork, digital sports cards, individual tweets, and more. Unlike owning a physical item, owning an NFT doesn’t necessarily mean you can prevent others from using the thing you own.
Art and collectibles are the most common NFTs.
Cryptocurrency Definitions: P–V
Peer-to-peer
What does peer-to-peer mean?
Peer-to-peer transactions occur when people exchange digital assets directly with each other, without a middleman like a bank or payment company.
Proof of stake
What is proof of stake (PoS)?
Proof of stake is a blockchain method used to validate transactions. Instead of mining, participants “stake” (lock up) their cryptocurrency to help secure the network. In return, they may earn rewards.
Under PoS, the validator (defined below) is determined through a lottery-like system.
Proof of work
What is proof of work?
Proof of work is a consensus protocol that requires miners to work to solve complex mathematical problems. This computational "work" keeps networks secure and verifies cryptocurrency transactions.
Under proof of work, the validator is determined through competition.
Satoshi
What is a satoshi?
A satoshi is the smallest amount a bitcoin can be divided into. Unlike the dollar, which can only be divided into a single cent, a bitcoin can be reduced into 8 decimal places. This means a satoshi is equal to 100 millionth of a bitcoin.
Smart contracts
What are smart contracts?
Smart contracts are contracts on a blockchain that will execute once programmed conditions are met.
Smart contracts are built and stored on blockchains like Ethereum. Once they're active, the terms of the contract can't be changed, which supporters hope will reduce the risk of fraud and manipulation. They're also decentralized (i.e., they aren't executed by a central authority or third party), and can be audited and verified by the public.
Solana (SOL)
What is Solana?
Solana was launched in 2020 as a blockchain for smart contracts, decentralized applications (dApps), and Web3. Solana uses a unique dual protocol system to maintain consensus and process transactions. The proof-of-history protocol allows nodes to individually process timestamps to increase transaction times. The proof-of-stake protocol allows validators to secure the network by staking its native token (SOL) and validating new blocks.
Stablecoins
What are stablecoins?
Stablecoins are cryptocurrencies designed to maintain a stable value, often by linking (otherwise known as “pegging”) them to assets like the US dollar. They aim to offer the benefits of crypto with less price volatility—and are often used to facilitate crypto transactions for that reason.
Staking
What is staking?
Staking is a way of locking up your cryptocurrency to strengthen a network and earn certain rewards.
This process is used in proof-of-stake blockchains (see definition above).
Tokens
What are tokens in the crypto space?
Tokens are crypto assets that run on an existing blockchain, while coins are a blockchain’s native cryptocurrency (see the definition of coins above).
Validator
What is a validator?
A validator is a participant in a blockchain network that helps maintain the network by verifying transactions and adding new blocks to the blockchain.
Volatility
What is volatility?
Cryptocurrency volatility measures how quickly and to what degree crypto prices change over a period of time. Crypto prices can be influenced by multiple factors, including news, investor sentiment, regulatory actions, and monetary policy, among others.
Feeling confident with these terms? Test your knowledge in this quick quiz.
1. What is blockchain?
A) A physical device that stores cryptocurrency.
B) A shared digital ledger that records transactions.
C) A cryptocurrency pegged to the U.S. dollar.
D) A token used only for staking.
Get the answer:
2. What is an altcoin?
A) Another word for bitcoin.
B) Any cryptocurrency that is not bitcoin.
C) A blockchain.
D) A type of NFT.
Get the answer:
3. What is a crypto wallet?
A) A protocol where users stake cryptocurrency to validate transactions.
B) A shared digital ledger that records all network activity.
C) A device or software app that stores the keys to your crypto.
D) A system that cuts bitcoin mining rewards in half every 4 years.
Get the answer:
Understanding these common terms about cryptocurrency for beginners can make the relatively new and exciting world of crypto feel much more approachable while you start your learning journey.
As you begin understanding cryptocurrencies through topics like blockchain technology, crypto wallets, and different types of cryptocurrencies, having a solid grasp of key cryptocurrency definitions can help you make more informed decisions and feel more confident along the way.
Whether you're learning out of curiosity or preparing to take your first step into crypto, building your knowledge on crypto basics is a smart place to start.