106 terms
Type a term and the list narrows as you write. Every entry takes two or three sentences, and many lead on to a tool or an article.
If one group controls more than half the computing power of a proof-of-work network, it can reverse its own transactions and spend the same coins a second time. Balances belonging to other people cannot be stolen this way, because that would need their private keys. On small networks with little hash rate such an attack is affordable, on Bitcoin it is very expensive.
An address is the string a transfer is sent to, comparable to an account number. It is derived from the public key and may be passed on openly. Anyone who uses one address repeatedly makes their own payments easier to follow in a block explorer, which is why many wallets create a new address for every incoming payment.
In an airdrop a project hands out tokens free of charge to addresses that meet a condition, such as early use of a network. The incentive is attention. The many fake airdrops are the risk: they ask for an approval that gives a contract access to the wallet. Tokens received may also be taxable.
Altcoin is the collective term for every cryptocurrency other than Bitcoin, from Ethereum through stablecoins to thousands of small projects. The range is wide: some networks have run for years, others disappear after months. Altcoin prices usually swing harder than the bitcoin price, and trading volumes are often far thinner.
AML stands for anti-money-laundering, KYC for checking the identity of customers. Trading venues and custodians in the EU have to collect identity data, check the origin of funds and report suspicious cases. The legal basis in Germany is the German Money Laundering Act (Geldwaeschegesetz), supplemented by the requirements of Regulation (EU) 2023/1114.
APR states the annual rate without compounding, APY counts continuous reinvestment and therefore sits higher. With a daily payout, 10 per cent APR becomes roughly 10.5 per cent APY. Both figures are snapshots that change with demand, and neither says anything about the default risk of the provider.
An automated market maker replaces the order book with a formula. The price follows the ratio of two tokens in a pool: a purchase shifts that ratio and moves the price. Large orders against small pools therefore cause high slippage. The fee paid by those swapping goes to the people who funded the pool.
A bear market usually means a phase in which prices sit at least 20 per cent below their high, a bull market the opposite move upwards. With cryptocurrencies such phases often last months or years. The classification only becomes certain in hindsight, so it is no signal for an entry.
Bitcoin is the first cryptocurrency, launched in 2009. The money supply is limited in the program code to 21 million units, and new units come into being only as a reward for mining. Roughly every ten minutes a block of new transactions is added. One bitcoin divides into 100 million satoshi, so small amounts are possible.
A block bundles transactions, a timestamp and the hash of its predecessor. Through that reference every block hangs on the one before it, and a later change would make every following block invalid. On Bitcoin a block appears on average every ten minutes, on Ethereum the rhythm is a few seconds.
A block explorer shows every transaction, every address and every block of a chain in the browser. It lets you check whether a transfer has arrived, how many confirmations it has and which fee was paid. Because all the data is public, anyone can also see the history of somebody else's address.
The block height is the sequential number of a block, counted from the genesis block with number zero. It serves as the time axis of the chain: halvings, protocol changes and lock-up periods are given in block heights rather than calendar dates. The Bitcoin halving, for example, follows a rhythm of 210,000 blocks.
Whoever finds a block receives newly created coins and the fees of the transactions it contains. On Bitcoin the reward started at 50 bitcoin in 2009 and halves every 210,000 blocks. Since the halving in April 2024 it has been 3.125 bitcoin. As the reward falls, transaction fees carry more weight.
A blockchain is a ledger made of chained blocks that sits on many computers at the same time. Every block carries the hash of its predecessor, so any later change stands out immediately. New entries get in only if enough nodes agree under the same rules. Old entries stay readable for good.
A bridge moves value between two networks by locking tokens on one side and issuing a representation on the other. Bridges are among the most frequently attacked parts of the sector, because large sums sit in their contracts. A flaw in the contract hits every locked balance at once.
Circulating supply counts the units that are actually available on the market, without locked or not yet issued holdings. It feeds into market capitalisation. On Bitcoin the circulating supply moves slowly towards the limit of 21 million. Lost coins stay in the figure even though they will never move again.
In a coin join several participants combine their inputs and outputs into a single shared transaction. For an outside observer it is then harder to say which input belongs to which output. The coins stay in the participants' own custody throughout. Some trading venues flag amounts mixed this way and ask for extra proof of origin.
A cold wallet keeps the private keys permanently offline, for example on a hardware wallet or as paper in a safe. Malware on the computer cannot reach the keys. The price is effort: every withdrawal needs the device, and a lost backup of the seed phrase means the balance is gone for good.
A transaction counts as confirmed once it sits in a block. Every further block on top counts as one more confirmation and makes a later change more expensive. On Bitcoin a block appears roughly every ten minutes, so six confirmations take about an hour. Many trading venues credit deposits only after that.
Anyone investing the same amount at a fixed rhythm buys fewer units at high prices and more at low ones. The average price paid therefore sits below the average of the prices. The effect smooths the entry point but prevents no losses: if the price falls for good, so does the value of the savings plan.
Regulation (EU) 2023/1114 defines a crypto-asset as a digital representation of a value or a right that can be transferred and stored electronically using distributed ledger technology. It separates asset-referenced tokens, e-money tokens and other crypto-assets. The duties of issuers and service providers follow from this classification.
A cryptocurrency is a digital unit whose ownership is proven through cryptography and whose bookkeeping is run by a network rather than by a bank. The protocol sets issuance and any upper limit. In Germany it is not legal tender, and for tax purposes it counts as another economic asset.
Custodial means that a provider holds the private keys and manages balances in its own name. That is convenient, because a forgotten password can be reset. In exchange, access depends on the solvency and the technology of the provider. There is no deposit guarantee of the kind that covers bank balances.
Custody answers the question of who holds the private keys. With self-custody the responsibility sits entirely with the person, including the backup of the seed phrase. With third-party custody an authorised provider takes over, which leaves a claim against that provider instead of direct control over the coins.
A DAO is an organisation whose rules sit in smart contracts. Anyone holding governance tokens can put forward proposals and vote, for example on the use of a shared treasury. Voting power usually follows the number of tokens, so large holders can dominate decisions. In Germany the legal status of a DAO is unsettled.
Decentralisation means that many independent computers hold the same data and check the same rules. If one node fails, the network carries on, and nobody can change entries alone. It is measured by the number and the spread of nodes, and by how far mining or staking concentrates on a few providers.
A decentralised exchange settles swaps through smart contracts, and the balance stays in your own wallet until the trade happens. There is no registration and usually no identity check. In return there is also no office that could step in after a mistake, a wrong address or a fake token.
DeFi stands for decentralised finance: swapping, lending and hedging run through smart contracts instead of an institution. Anyone taking part keeps their own keys and carries the risk themselves. Flaws in contract code, manipulated price feeds and unaudited projects have repeatedly led to total losses.
A depeg is when a stablecoin moves clearly away from its target price, for example falling below one euro. Triggers are doubts about the reserves, selling pressure or a fault in the mechanism. Some algorithmic stablecoins never recovered after a depeg and became practically worthless.
Difficulty governs how hard it is to find a valid block. Bitcoin adjusts it every 2,016 blocks, so roughly every two weeks. If more computing power joins the network, difficulty rises, and the rhythm of about ten minutes per block is kept all the same.
With a digital signature the sending side proves that it holds the matching private key without giving it away. Every node checks the signature against the public key and rejects the transaction otherwise. That is why no password protects a balance, only the key that is kept secret.
Drawdown measures in per cent how far a price has fallen from its previous peak to its lowest point. On Bitcoin several drawdowns have historically been more than 70 per cent. The figure shows what paper loss would have to be borne in a bad phase, and makes risk comparable between investments.
Dust means amounts so small that sending them later costs more in fees than the amount itself. On Bitcoin, standard nodes reject outputs below roughly 546 satoshi. Unexpected dust arriving at an address can be an attempt to tie later payment flows to the same owner.
Since the London upgrade in August 2021 the Ethereum fee splits into a base fee and a voluntary tip. The base fee follows how full the previous block was and is destroyed, while the tip goes to the validator. Fees became easier to predict as a result, and part of the money supply disappears.
ERC-20 describes which functions an interchangeable token on Ethereum has to offer, such as checking a balance and making a transfer. Because all contracts use the same interface, wallets and applications can show any new token straight away. The standard says nothing about seriousness: anyone can create an ERC-20 token in minutes.
Ethereum is a network launched in 2015 on which programs run as smart contracts. Its own currency is called ether and pays for computing time. Since the switch to proof of stake on 15 September 2022, validators secure the network instead of miners. There is no fixed upper limit on the money supply.
Under section 23 (3) of the German Income Tax Act (Einkommensteuergesetz), profits from private sale transactions stay tax free if together they come to less than 1,000 euro in a calendar year. That amount has applied since 2024, before it was 600 euro. An exemption limit is not an allowance: once it is reached, the whole profit is taxable.
A fear and greed index bundles figures such as volatility, trading volume and search interest into a single value between 0 and 100. Low values stand for fear, high ones for greed. The index describes mood, not a forecast: extreme readings can last for weeks without the price turning.
Fiat money is state-issued money such as the euro or the dollar, whose value rests on trust and legal recognition rather than on backing by gold. Central banks steer the amount. With cryptocurrencies the protocol instead sets how many units come into being, for Bitcoin at most 21 million.
FIFO stands for first in, first out: the units bought first count as the ones sold first. For the German holding period, the circular of the German Federal Ministry of Finance of 6 March 2025 asks first for a unit by unit view. Where that cannot be kept, FIFO applies per wallet. The chosen method has to be documented.
In a soft fork the rules become stricter and old nodes still accept new blocks. A hard fork changes the rules so that old nodes reject the new blocks. If both camps then carry on, two chains with their own currency come into being. Bitcoin and Ethereum have seen both forms.
A full node downloads every block and checks every rule itself instead of trusting a provider. For Bitcoin that needs several hundred gigabytes of storage. The more independent full nodes are running, the harder it is to push rule changes through against the will of the people using the network.
Gas measures the computing effort of an action on Ethereum. A simple ether transfer costs 21,000 gas, a complex contract call a multiple of that. The cost is the amount of gas times the gas price, quoted in gwei. When the network is busy the gas price rises, while the gas an action needs stays the same.
The genesis block is the first block of a chain and carries block height zero. On Bitcoin it came into being on 3 January 2009 and holds a newspaper headline of that day in a data field. Its reward of 50 bitcoin cannot technically be spent, so those coins are permanently missing from the supply.
Every 210,000 blocks, so roughly every four years, the reward for a bitcoin block that has been found is halved. From 50 bitcoin in 2009 it has fallen in several steps to 3.125 bitcoin since April 2024. The money supply therefore moves towards the limit of 21 million, which is reached around the year 2140.
A hardware wallet creates and stores the private keys on a chip of its own. A transaction is shown on the device, confirmed there and signed, and the key never leaves it. The seed phrase stays decisive: anyone who photographs it or types it in somewhere defeats the protection of the device.
A hash function turns any data into a string of fixed length, on Bitcoin 256 bits, which is 64 hexadecimal characters. A single changed character in the text gives a completely different hash, and the text cannot be calculated back from the hash. The chaining of blocks draws its security from that.
The hash rate states how many hash values all miners together calculate per second. It is the measure of the computing power behind a proof-of-work network: the higher it sits, the more expensive an attack would be. If the hash rate rises for good, difficulty follows at the next adjustment.
A hierarchical deterministic wallet derives any number of key pairs from a single seed phrase. One backup therefore covers every address and account, including those created later. The method is described in the proposals BIP 32 and BIP 44, which is why a backup can be moved between different wallets.
If crypto-assets are held as private property for longer than one year, the profit on sale is tax free under section 23 of the German Income Tax Act (Einkommensteuergesetz). Within the year the profit counts at the personal income tax rate. Swapping one cryptocurrency for another also counts as a sale and starts a period of its own for the new unit.
A hot wallet runs as an app or a browser extension on a device with an internet connection. Payments are quick that way, but malware can read along or slip in transactions. A split is common: small everyday amounts in the hot wallet, larger holdings kept apart from it without a network connection.
If the prices of two tokens in a pool drift apart, the pool formula automatically trades in favour of the weaker token. On withdrawal the value is then below what simply holding would have given. The loss is called impermanent because it disappears once the price ratio comes back together. That need not happen.
A layer 2 settles transactions away from the main chain and anchors the result there in bundled form. Fees and waiting times fall, while security rests on the main chain. On Bitcoin the Lightning network is one example, on Ethereum they are rollups. The way back to the main chain can cost time.
The Lightning network lays payment channels over the Bitcoin chain. Two parties lock an amount, settle any number of payments between themselves and write only the opening and the closing into the chain. Payments are possible in seconds and for fractions of a cent, but need capital in the channel and a counterparty that can be reached.
A market order is executed immediately at the next available price, which is not guaranteed. A limit order names a maximum or minimum price and waits until somebody takes it, so it can stay unfilled. In thin order books a market order is often executed noticeably worse than expected.
In liquid staking a service deposits the coins in the network and issues a tradable token that stands for the claim. The deposit stays usable even though it is tied up. The risks come twice over: from the contract of the provider and from a possible price gap between the token and the coin behind it.
Liquidity describes how much can be bought or sold without moving the price much. It shows in the depth of the order book and in the spread. With small tokens liquidity is often so thin that even a mid-sized sale pushes the price down by double-digit percentages.
In a liquidity pool several people deposit two tokens that others can swap against. Those who deposit receive a share of the trading fees. Against that stand impermanent loss when the two prices drift apart and the risk of a faulty contract, which holds the whole deposited balance.
Market capitalisation is the current price times the circulating supply. It serves to compare the size of projects, but says nothing about how much money has actually been invested. If most of the tokens are locked or held by a few owners, the figure overstates the tradable market considerably.
The mempool is the store in which every node holds valid but still unconfirmed transactions. Miners prefer to pick out transactions with a high fee per virtual byte. When the mempool is full, cheap transactions wait longer. When it empties, low fees are enough again.
The Merge is the name for Ethereum moving to proof of stake on 15 September 2022. The existing chain was joined to the Beacon Chain and mining fell away. The power consumption of the network dropped by more than 99 per cent, while the balances of users stayed unchanged.
In a Merkle tree transactions are hashed in pairs until a single root is left, which sits in the block header. A few hash values are then enough to prove that a transaction is contained in a block, without loading the whole block. Light wallets check incoming payments this way.
MiCA is Regulation (EU) 2023/1114 on markets in crypto-assets. It has applied in full since 30 December 2024, and the rules for asset-referenced tokens and e-money tokens since 30 June 2024. Providers need an authorisation, issuers a whitepaper following set requirements, and national authorities carry out the supervision.
In mining, computers search for a suitable number in the block header until the hash falls below a target value. Whoever finds it first may append the block and receives the block reward. The effort is deliberate: it makes rewriting the chain later expensive and costs real electricity.
In a mining pool many participants combine their computing power and share the reward according to the work they contributed. Instead of rarely hitting a whole block, there are small shares on a regular basis. It becomes critical when a few pools together provide most of the hash rate, because they then decide which blocks are built.
A multisig wallet requires several signatures, typically two out of three keys. A single lost or stolen key is then enough neither to spend the balance nor to block it. Companies, associations and families use the split. It does raise the effort involved in every payment and in the backup.
An NFT is a token in which every unit carries a number of its own and is therefore not freely interchangeable. On Ethereum the ERC-721 standard describes its behaviour. The token usually holds only a reference to a file rather than the file itself, and copyright as a rule does not pass with the purchase.
The nonce is a 32 bit field in the block header that miners try out millions of times over to find a hash below the target value. If the possible values run out, miners also change the timestamp or the choice of transactions. On Ethereum, nonce instead means the transaction counter of an account.
Smart contracts only see what stands in their own chain. An oracle delivers data from outside, for example a euro price, so that a loan can be valued automatically. If an oracle is manipulated or delivers late, the contract calculates with wrong figures. Such attacks have already cost large sums in DeFi.
The order book lists all open buy and sell offers by price. At the top stand the highest bid and the lowest ask, and their difference is the spread. How much volume sits close to the price shows the depth of the book, and with it how far a large order would move the price.
A passphrase is a freely chosen extra word added to the seed phrase, often called the 25th word. Every passphrase creates a completely separate wallet. That protects the balance if the seed phrase is found, but raises the risk: without exactly the same spelling the balance is lost, and there is no recovery.
In a peer to peer network all computers have equal rights and pass transactions and blocks straight to one another, without a central server. If part of the network fails, the remaining nodes look for new connections. This design makes a shutdown at any single point impossible.
In phishing, fake sites, emails or support chats lead somebody to type in a seed phrase or sign an approval. No serious service asks for the seed phrase. Approvals that give a contract unlimited access to a balance are especially treacherous: they look harmless and can be misused months later.
The private key is the secret number that transactions are signed with. Whoever holds it controls the balance. Whoever loses it loses access for good, because there is no reset function. In current wallets every private key is derived from the seed phrase.
Under proof of stake, validators deposit coins of their own as a pledge and are chosen at random to propose and confirm blocks. On Ethereum that takes 32 ether per validator. Anyone signing incorrectly or staying offline for long loses part of the stake. The method uses hardly any electricity.
Proof of work requires a costly computing task to be solved for every block. The solution is hard to find and can be checked in fractions of a second. Bitcoin has secured itself this way since 2009. The price is high electricity use, the return a physically measurable barrier against rewriting the chain.
The public key is calculated from the private key, and the way back is practically impossible. The receiving address is derived from it. The network uses the public key to check whether a signature is genuine. Passing it on is harmless, and money cannot be spent with it.
In a pump and dump, organisers push the price of a small token up with coordinated buying and promotion in chat groups, then sell their holdings into the demand that follows. Whoever buys last carries the loss. The pattern counts as market manipulation and is banned in the EU.
A rollup carries out transactions away from the main chain and writes them back there in bundled form. Optimistic rollups assume correctness and allow an objection period of usually about a week, while zero-knowledge rollups supply a mathematical proof straight away. Fees fall considerably against the main chain.
In a rug pull the operators of a project withdraw the liquidity from the trading pool or sell their own tokens all at once. The price falls towards zero within minutes, and selling is practically no longer possible. Warning signs are anonymous teams, founder shares without a lock-up and an unaudited contract.
Bitcoin fees are quoted in satoshi per virtual byte, not as a percentage of the amount. What counts is the size of the transaction, not its value. Anyone combining several small inputs creates a larger transaction and pays more. When the mempool is full the necessary rate rises, when it is empty it falls.
A satoshi is the smallest unit of Bitcoin: 100 million satoshi make one bitcoin. It is named after the pseudonym behind the whitepaper. Because the protocol counts amounts in satoshi anyway, purchases far below a whole bitcoin are possible without trouble.
A savings plan buys a fixed amount at a fixed rhythm, monthly for example. The entry point therefore matters less, and the decision is separated from the mood of the day. Fees fall due at every execution and weigh more heavily on small instalments. The price risk stays in full.
The seed phrase usually consists of 12 or 24 words from a set list of 2,048 terms and stands in for every private key of a wallet. Whoever has it has the balance. It belongs on paper or metal in a safe place, not in a photo, a cloud service or an input field.
Segwit separates the signature data from the rest of a transaction, and the upgrade was activated in August 2017. More transactions fit into a block as a result, fees fall for segwit addresses, and an old flaw in how transactions were identified fell away. Segwit addresses on Bitcoin start with bc1.
Slashing means that part of the deposited stake is taken away when a validator breaks the rules, for example by signing two contradictory blocks. The penalty also hits deposits made through a service. Plain downtime, by contrast, costs only small, running deductions.
Slippage is the difference between the price when an order is sent and the price when it is executed. It comes from thin order books, large orders and fast moves. Many trading interfaces allow an upper limit in per cent. If it is passed, the order is cancelled instead of executing expensively.
A smart contract is a program that sits on a blockchain and runs the same way at every call. Swaps, loans or votes can be mapped this way without a middleman. Published code is usually unchangeable: a flaw stays in place and can affect the whole balance deposited in it.
The spread is the difference between the highest bid and the lowest ask in the order book. It belongs to the real costs of trading, because buying and selling at once ends up down by the spread. On large cryptocurrencies it is a fraction of a per cent, on small tokens far higher.
A stablecoin is meant to track a reference value permanently, usually a dollar or a euro. Backed versions hold bank deposits and short-dated bonds for that, algorithmic ones steer the supply through contracts. Quality and auditing of the reserves are decisive. In the EU, Regulation (EU) 2023/1114 governs issuance and redemption.
In staking, coins are deposited in the network in order to confirm blocks, and a reward is paid for that. The risks are lock-up periods, price falls while the coins are tied up, slashing and the failure of a provider. In Germany staking income counts as other income under section 22 no. 3 of the German Income Tax Act, with an exemption limit of 256 euro.
Taproot was activated in November 2021 and brought Schnorr signatures to Bitcoin. Several signatures can be combined into one, so complex payments such as multisig look from the outside like an ordinary transfer. That saves space in the block and improves the privacy of everyone involved.
A testnet is a chain of its own running the same software but with worthless coins that are handed out free. Developers check contracts and upgrades there before going to the main network. Addresses on the test network and the main network are separate. Anyone sending real coins to a testnet address loses them.
A token is issued through a smart contract on an existing chain, while a coin is the native currency of a network. Ether is a coin, and most stablecoins are tokens on Ethereum. Whoever buys a token acquires an entry in a contract whose rules the issuers set.
A trading venue brings buy and sell orders together, usually through an order book. Central venues hold the balances of their customers and check their identity, decentralised ones settle the swap through contracts. Providers in the EU have been subject to the authorisation rules of Regulation (EU) 2023/1114 since 30 December 2024.
The transaction fee goes to whoever finds the block and decides the waiting time. On Bitcoin it is counted in satoshi per virtual byte, so it hangs on the size of the data rather than on the amount. On Ethereum it follows from the amount of gas and the gas price. A fee that is too low means a long wait.
In addition to the password, two-factor authentication asks for a second proof, such as a numeric code from an app that changes every 30 seconds, or a security key. Codes by SMS count as weaker, because phone numbers can be taken over. It does not protect your own wallet: there only the seed phrase counts.
Bitcoin keeps no account balances, only unspent transaction outputs. A balance is the sum of all UTXO that match your own keys. A payment consumes whole outputs and creates new ones, often including change back to yourself. Many small UTXO make later transactions larger and therefore more expensive.
A validator deposits a stake and in return gains the right to propose and confirm blocks. On Ethereum 32 ether are needed per validator. Correct work earns rewards, misbehaviour brings deductions up to slashing. Anyone wanting to put in less usually uses a service and carries its risk as well.
Volatility measures how strongly a price swings around its mean, usually as the standard deviation over a period. Bitcoin has historically swung several times as much as broad equity indices. High volatility means larger moves in both directions and makes short periods of little use for judging an investment.
A wallet stores no coins, only the keys that entries in the chain can be moved with. It shows balances, creates addresses and signs transactions. Wallets are told apart by their connection to the network, into hot and cold, and by who controls the keys.
In wash trading the same party buys and sells the same asset in order to feign volume and interest. A project looks more liquid than it is and climbs the rankings. Even volumes without any price movement are a sign. In the EU such sham trading counts as market manipulation.
Wei is the smallest unit of ether: one ether equals a one followed by 18 zeros in wei. One gwei is a billion wei, so a billionth of an ether. Gas prices are quoted in gwei because the numbers stay manageable there, while the protocol calculates internally in wei.
A whitepaper describes the purpose, the technology and the money supply of a project. The Bitcoin whitepaper appeared on 31 October 2008 across nine pages. Under MiCA a crypto-asset whitepaper is mandatory for issuers in the EU and must contain set information on rights and risks, though the supervisor does not check its content.
A wrapped token represents a coin on a chain it does not belong to: the original is deposited, the representation is issued, and on redemption it is destroyed again. That lets bitcoin be used in Ethereum applications, for example. The value depends on the deposit actually existing and on redemption working.
A zero-knowledge proof shows that a statement is true without revealing the data behind it, for example that a balance is sufficient without naming its size. In rollups such a proof replaces repeating every computing step on the main chain. Creating it is costly, while checking it is very fast.
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