In this glossary, scattered and confusing crypto definitions are gathered in one place so you can access the meaning of each term without wasting time.
In this section, you have access to the basic cryptocurrency trading terms.
Spot trading refers to buying or selling an asset at the current market price, with settlement completed in accordance with the standard cycle of that market and in the shortest possible time. The spot price represents the best available price in the market. Traders can use market orders or limit orders to control the timing and price of entry or exit. In both cases, actual ownership of the asset is transferred, and the trade is executed in the spot market.
Futures trading refers to transactions in which a contract based on the price of an asset is traded, rather than buying or selling the asset directly. In this type of trading, ownership of the underlying asset is not transferred, and the trader can profit from both rising and falling market prices. Futures contracts have a specific expiration date and are settled at maturity.
Perpetual contracts have a structure similar to futures, with the difference that they have no expiration date, and positions can remain open indefinitely. To keep the contract price close to the spot market price, a mechanism called the funding rate is applied, which is periodically paid or received between traders.
Margin trading involves using credit from a broker or exchange by depositing a portion of the trade’s value as collateral. This approach enables larger positions but also increases the risk of losses and liquidation.
Leverage is the ratio of a trading position’s nominal value to the trader’s actual capital. High leverage greatly increases both potential profits and losses as market prices change.
A buy or long position is a trade in which a trader expects the price of an asset to rise. In this case, profit is generated by the difference between the entry and exit prices.
A sell or short position is taken when a trader expects an asset's price to decline. The trader sells the asset at a higher price and, if the price drops, repurchases it at a lower price. The profit is the difference between the selling and repurchase prices.
Liquidation refers to the forced closure of a position by the exchange’s risk management system. When losses exceed a threshold, and there is insufficient margin to keep the position open, it is automatically liquidated.
A limit order refers to an instruction to execute a transaction only at a predetermined price. While limit orders contribute to market liquidity, their execution is contingent upon the market reaching the specified price and the availability of corresponding counter-orders.
A stop loss order is a conditional order that limits losses and is activated when the price reaches a specified level. Execution does not necessarily occur at the exact specified price, and in volatile market conditions, the trade may close at the nearest available price. This price difference is known as slippage.
A take-profit order is a conditional order that closes a trade at a predetermined price. It helps lock in profits and reduce the risk of price reversal after a favorable market move.
In this section, you can access the essential concepts related to blockchain technology.
Blockchain refers to a distributed digital ledger that records and stores transaction data in a sequential, chained structure. Information recorded on the blockchain is immutable and is maintained and verified by a decentralized network of participants, eliminating the need for a central authority.
A block is a unit of data in a blockchain that contains a set of transactions. Once confirmed, each block links to the previous one, forming a continuous chain that preserves transaction order and security.
Perpetual contracts have a structure similar to futures, with the difference that they have no expiration date, and positions can remain open indefinitely. To keep the contract price close to the spot market price, a mechanism called the funding rate is applied, which is periodically paid or received between traders.
A consensus algorithm is a protocol that enables network nodes to reach agreement regarding the validity of transactions and the overall state of the blockchain. Such algorithms ensure that only valid data are recorded and facilitate coordination within decentralized networks.
Proof of Work is a consensus mechanism in which network nodes solve complex computational problems to obtain the right to add a new block to the blockchain. While this approach offers a high level of security, it requires substantial energy consumption.
Proof of Stake is a consensus method in which transaction validation is based on the amount of assets staked by nodes. This model consumes less energy, and the probability of being selected to validate a block depends on the size of the stake.
A node is any device or system connected to a blockchain network that participates in sending, receiving, or validating data. Nodes are essential for maintaining the security, transparency, and decentralization of the network.
A hash function is a cryptographic tool that converts data into a fixed-length output. It is designed so that even the smallest change in input data produces a completely different output, preventing data tampering.
A smart contract is a self-executing contract on the blockchain that automatically runs when predefined conditions are met. These contracts operate without intermediaries, increasing transparency and trust in the execution of agreements.
A gas fee is the cost users pay to perform transactions or execute smart contracts on a blockchain network. This fee incentivizes nodes to process transactions and varies based on factors such as network congestion.
Decentralization is a network structure in which control is distributed among participants rather than being concentrated in a single entity or individual. This approach enhances transparency, mitigates censorship risk, and reduces dependence on intermediaries.
A non-fungible token (NFT) is a blockchain-based digital asset in which each unit is unique and cannot be replaced with another. NFTs represent ownership of assets such as digital art, in-game items, and collectibles.
Minting refers to the process of creating and recording a new NFT on the blockchain. During this process, the asset’s data is added to the blockchain, and the token is officially created and becomes transferable or tradable.
Perpetual contracts have a structure similar to futures, with the difference that they have no expiration date, and positions can remain open indefinitely. To keep the contract price close to the spot market price, a mechanism called the funding rate is applied, which is periodically paid or received between traders.
Metadata comprises information that defines a non-fungible token (NFT), such as its name, description, image, attributes, and history. Metadata is essential for identifying and valuing NFTs across different platforms.
The floor price refers to the lowest price at which a non-fungible token (NFT) from a specific collection is listed for sale in the market. This metric serves as a benchmark for determining the minimum value of the collection.
A royalty is a portion of the sale price that goes to the creator or original owner whenever a non-fungible token (NFT) is resold. This way, creators can keep earning money from later sales, not just the first one.
A profile picture NFT refers to a type of non-fungible token created as a collection of images intended for use as profile pictures on social media platforms. These NFTs frequently serve as markers of social identity and possess collectible value.
A collection refers to a group of NFTs released under a single project or shared concept. NFTs within a collection share common characteristics and are traded as a group in marketplaces.
A marketplace is an online platform that enables the buying, selling, and trading of NFTs. Marketplaces act as intermediaries between buyers and sellers and provide tools to display prices, history, and metadata.
Rarity refers to how uncommon certain traits or the total supply of NFTs are within a collection. The rarer an NFT, the higher its potential value and demand.
An airdrop is a method of distributing tokens or NFTs for free to users, typically used to attract users, reward loyalty, or introduce a new project.
Web3 is the next generation of the internet built on blockchain technology, aiming to reduce reliance on intermediaries and central institutions. In Web3, users own their data and digital assets, and interactions are transparent.
Decentralized identity refers to a digital identity model that grants users complete control over their identity data. By leveraging blockchain technology, this model facilitates secure authentication and enhances privacy.
A non-custodial wallet is a digital wallet in which the user holds the private keys. In this model, no intermediary has access to the assets, and full responsibility for security and management lies with the user.
A DAO (Decentralized Autonomous Organization) is a digital organization governed by smart contracts. Decision-making in a DAO is carried out through member voting, and its rules are transparently enforced on the blockchain.
Tokenization is the process of converting ownership or value of a physical or digital asset into a digital token on the blockchain.
Interoperability refers to the ability of different networks or blockchains to communicate and exchange data or assets. It allows users to operate across multiple ecosystems without limitations.
A decentralized application (dApp) is software that runs on a blockchain rather than a centralized server. dApps are more transparent, resistant to censorship, and independent of intermediaries.
Remote Procedure Call (RPC) is a method for applications to interact with a blockchain, allowing them to read data or submit transactions. RPC acts as a bridge between wallets, dApps, and blockchain networks.
A zero-knowledge proof is a cryptographic technique that enables one party to demonstrate the validity of a claim without disclosing the underlying information. This approach is significant for improving privacy and scalability within blockchain systems.
A smart contract wallet is managed by a smart contract rather than a private key. It provides features like access restrictions and multi-step approvals.
The metaverse refers to a network of interconnected digital spaces where users can interact, operate, and own digital assets. It combines blockchain technology, virtual reality, and the internet.
Virtual reality is a technology that immerses users in a simulated digital environment through headsets or specialized equipment, allowing interactive engagement with the environment.
Augmented reality overlays digital elements onto the real world. In this method, virtual images or information are displayed over physical environments to enhance the user experience.
An avatar is a digital representation of a user in virtual environments, displayed as a customizable character. It represents the user’s chosen identity in spaces such as the metaverse or games.
Virtual land refers to digital plots within the metaverse that users can buy, sell, or develop. These lands are typically recorded as NFTs with defined ownership.
A digital twin is a digital replica of a real-world object, system, or process used for simulation, analysis, and optimization. It allows the behavior of the real-world counterpart to be studied in a virtual environment.
Play-to-earn is a gaming model in which users receive rewards, such as tokens or NFTs, for playing and completing activities, turning gaming into an economic activity.
An immersive environment is a digital space where users experience a strong sense of presence. These environments use sound, visuals, and real-time interaction to create deep engagement.
Interoperable worlds are digital environments that allow the transfer of assets, identities, or data between them, preventing users from being confined to a single platform.
A virtual economy refers to the economic system formed within digital environments, including the buying, selling, ownership, and exchange of digital assets. This economy can have real-world value and direct connections to traditional economies.
An automated market maker (AMM) is a system that enables asset trading without an order book. Prices are determined by mathematical formulas and liquidity reserves.
A liquidity pool is a collection of assets locked by users to facilitate trading in a decentralized protocol. These pools are the core of automated market maker functionality.
Yield farming is a method of earning returns by depositing assets into DeFi protocols in exchange for rewards. The yield depends on liquidity and the protocol's conditions.
Staking is the process of locking digital assets to support a network’s security or operations. In return, users receive periodic rewards or yields.
Lending and borrowing in DeFi allow users to lend assets or borrow against collateral through smart contracts, without intermediaries.
A flash loan is an uncollateralized loan that must be repaid within the same blockchain transaction. If repayment is not made, the entire transaction is automatically reversed.
Total value locked (TVL) represents the total value of assets deposited or locked in a DeFi protocol. TVL is a key metric used to assess a protocol's size and trust level.
A governance token grants holders voting rights and participation in decision-making within a protocol or project, including changes to rules, fees, or development direction.
Impermanent loss refers to the loss liquidity providers may experience in liquidity pools when asset prices decline relative to the price at the time of deposit.
This loss is realized only when assets are withdrawn from the pool, which is why it is called impermanent.
A decentralized exchange (DEX) is a platform for trading digital assets without intermediaries. Trades occur directly between users through smart contracts, and asset control remains with users.
An order book is a list of buy and sell orders in a market, showing the prices and volumes proposed by traders. It enhances market transparency and shows supply and demand at different price levels.
A market maker is a large trader or financial institution that increases market liquidity by placing buy and sell orders. Market makers use limit orders, enabling faster trades with narrower price spreads.
A market taker is a trader or institution that immediately executes trades by accepting existing orders in the order book. Market takers use market orders and consume available liquidity.
Know Your Customer (KYC) is a process that verifies user identities using valid documentation. It is conducted to enhance security and comply with financial regulations.
Anti-money laundering (AML) refers to a set of laws and measures aimed at preventing the entry and circulation of illegal funds within the financial system, promoting transparency and financial integrity.
A deposit address is a unique address provided to a user to receive digital assets. Each asset and blockchain network has its own deposit address, and using an incorrect address may result in loss of funds.
A withdrawal fee is a charge applied when transferring assets from a platform to an external wallet. This fee depends on the network and transaction processing costs.
A maker fee is charged on trades executed via limit orders that contribute liquidity to the market. Such orders are not executed immediately and remain in the order book until matched. Since maker orders provide liquidity, maker fees are typically lower than taker fees.
A taker fee is charged on trades executed immediately by matching with existing orders in the order book. Because these trades remove liquidity, taker fees are generally higher than maker fees.
Proof of reserves is a method for demonstrating a platform’s financial transparency by verifying that user assets are fully backed. In this approach, exchanges or platforms publicly disclose their reserves in a verifiable way.
For deeper learning of trading concepts and their practical application in real markets, refer to the trading glossary.
Trading Terms
For deeper learning of trading concepts and their practical application in real markets, refer to the trading glossary.
