Holder's dictionary

Crypto Glossary

Definitions of crypto terms - from wallets, seed phrases, and self-custody to staking, gas fees, and cost basis.

51% Attack

A 51% attack occurs when a single entity or group controls more than half of a blockchain's mining hash rate or staking power. With this majority, they can disrupt the network by reversing transactions, double-spending coins, and preventing new transactions from confirming. This undermines the blockchain's security and trustworthiness.

Address Poisoning Attack

An address poisoning attack involves sending a small amount of crypto from a fake address that looks similar to one you've transacted with before. The goal is to pollute your transaction history, hoping you accidentally copy the wrong address when sending funds next time. Always double-check addresses character by character.

Airdrop Taxation

Airdrops are distributions of free tokens to wallet holders. In most jurisdictions, the fair market value of airdropped tokens at the time of receipt is treated as ordinary income. You must report this income even if you did not sell the tokens. Later sales may generate capital gains or losses.

Annual Percentage Yield (APY)

Annual Percentage Yield, or APY, represents the real rate of return on your staked or lent crypto over one year, taking compounding into account. It helps you compare different earning opportunities. A higher APY means more potential earnings, but always check the associated risks.

Automated Market Maker (AMM)

An automated market maker is a type of decentralized exchange protocol that uses a mathematical formula to price assets. Instead of matching buyers and sellers, trades happen directly against a liquidity pool. The price is determined by the ratio of tokens in the pool. This system enables continuous liquidity for token swaps.

Block Reward

A block reward is the cryptocurrency given to a miner or validator for successfully adding a new block to the blockchain. For example, Bitcoin miners earn newly minted bitcoins plus transaction fees. Block rewards incentivize network participants to maintain the blockchain and validate transactions honestly.

Blockchain

A blockchain is a digital ledger where transactions are recorded in blocks linked together using cryptography. It is decentralized, meaning no single entity controls it. Each block contains a timestamp and a reference to the previous block, making the data tamper-resistant. This technology underpins cryptocurrencies like Bitcoin.

Brain Wallet

A brain wallet uses a memorable passphrase to generate a private key, eliminating the need for physical storage. However, humans are bad at creating strong passphrases, making brain wallets vulnerable to brute-force attacks. They are generally not recommended for large amounts.

Capital Gains Tax

Capital gains tax is a tax on the profit from selling or exchanging cryptocurrency. In many countries, crypto is treated as property, so each sale or trade triggers a taxable event. The rate depends on how long you held the asset (short-term vs. long-term) and your income bracket.

Centralized Exchange

A centralized exchange (CEX) is a cryptocurrency trading platform operated by a company that acts as an intermediary. It holds users' funds in custody and matches buy and sell orders. Examples include Coinbase and Binance. CEXs offer high liquidity and user-friendly interfaces but require trust in the operator.

Centralized Exchange (CEX)

A centralized exchange (CEX) is a crypto trading platform run by a company that holds users' funds and matches buy/sell orders. Examples include Coinbase and Binance. CEXs offer high liquidity and ease of use but require trusting the platform with your assets.

Cold Storage

Cold storage refers to keeping cryptocurrency private keys offline, away from internet access. This method provides high security against hacking. Common forms include hardware wallets, paper wallets, and offline computers. Ideal for storing large amounts of crypto long-term.

Cold Wallet

A cold wallet stores cryptocurrency offline, away from internet access. This makes it highly resistant to hacking. Examples include hardware devices like Ledger or paper wallets. Cold wallets are ideal for long-term holdings, but require careful backup of recovery phrases to avoid permanent loss.

Compounding Rewards

Compounding rewards means reinvesting the yield you earn back into the staking or farming position. This allows your returns to generate additional returns over time, growing your investment exponentially. Many platforms offer auto-compounding features. The more frequently you compound, the higher your effective APY becomes.

Consensus Mechanism

A consensus mechanism is a protocol that ensures all participants in a blockchain network agree on the current state of the ledger. It prevents double-spending and maintains trust without a central authority. Common examples are Proof of Work and Proof of Stake, each with different trade-offs in security, speed, and energy use.

Cost Basis

Cost basis is the original value of a cryptocurrency asset for tax purposes, including the purchase price and any fees paid. When you sell or trade crypto, the difference between the sale price and the cost basis is your capital gain or loss. Accurate cost basis tracking is essential for correct tax reporting.

Crypto Tax

Crypto tax refers to the taxes imposed on cryptocurrency transactions by governments. In many jurisdictions, buying, selling, trading, or earning crypto is a taxable event. Activities like mining, staking rewards, and airdrops may also be subject to tax. Proper record-keeping is essential for accurate reporting and compliance.

Custodial vs Non-Custodial

Custodial means a third party, like an exchange, holds your private keys and controls your funds. Non-custodial means you hold your own keys and have full control. With custodial wallets, you trust the service to secure your assets. Non-custodial wallets give you complete ownership but also full responsibility for security.

Custodial Wallet

A custodial wallet is a type of cryptocurrency wallet where a third party holds and manages your private keys. This means the service provider has full control over your funds, much like a bank. Examples include exchange wallets and some mobile wallets. While convenient for beginners, it carries the risk of the provider losing funds due to hacking or mismanagement. You trust them to keep your crypto safe.

Decentralization

Decentralization means distributing power and control away from a single entity to many participants. In blockchain, it ensures no central authority can alter data or censor transactions. This makes the system more resistant to manipulation and failure.

Decentralized Exchange

A decentralized exchange (DEX) is a peer-to-peer marketplace where users trade cryptocurrencies directly without an intermediary. Trades occur via smart contracts on a blockchain, and users retain control of their funds. DEXs offer greater privacy and security but may have lower liquidity and a less intuitive experience.

Decentralized Exchange (DEX)

A decentralized exchange (DEX) is a peer-to-peer marketplace where users trade cryptocurrencies directly without an intermediary. Trades happen via smart contracts, giving users full control of their funds. Examples include Uniswap and SushiSwap. DEXs offer privacy but may have lower liquidity.

DeFi Lending

DeFi lending allows users to borrow or lend cryptocurrencies without a central authority. Lenders deposit assets into a protocol to earn interest, while borrowers put up collateral (often overcollateralized) to take out loans. Interest rates are determined algorithmically based on supply and demand. This system is permissionless and accessible globally.

DeFi Tax Reporting

DeFi tax reporting involves tracking transactions from decentralized finance platforms, such as lending, borrowing, yield farming, and liquidity provision. These activities can create complex tax events like interest income, trading gains, and airdrops. Proper record keeping is crucial for accurate reporting.

Delegated Staking

Delegated staking lets you stake your crypto by delegating it to a validator node without running one yourself. You earn a share of rewards minus a fee, making staking accessible to non-technical users.

Delegator

A delegator is a crypto holder who stakes tokens by assigning them to a validator, without running a node themselves. They earn a portion of the validator's rewards, usually after a fee. Delegating is a simple way to participate in staking and earn passive income on your holdings.

Dusting Attack

A dusting attack sends tiny amounts of crypto (called dust) to thousands of wallet addresses. The attacker then tracks these addresses to try and identify the owners, potentially linking them to real-world identities. To protect privacy, avoid spending dust or use privacy-focused coins like Monero.

ERC-721

ERC-721 is a standard for creating NFTs on the Ethereum blockchain. It defines a set of rules that allow developers to mint and manage unique tokens. Unlike ERC-20 tokens, each ERC-721 token is distinct, making it ideal for collectibles and digital art.

Fiat Gateway

A fiat gateway is a service that allows you to deposit or withdraw traditional currency (like USD or EUR) to and from a cryptocurrency exchange. It bridges the gap between fiat money and digital assets. Common fiat gateways include bank transfers, credit card purchases, and third-party payment processors.

FIFO (First-In, First-Out)

FIFO is a tax lot accounting method where the oldest cryptocurrency units are sold first. This method often results in higher capital gains if the asset value has increased over time. Many tax authorities accept FIFO as a default method, but you may choose another method consistently.

FIFO Method

FIFO stands for First In, First Out, a cost basis method where the oldest cryptocurrency units are considered sold first. This method can result in higher capital gains if the asset’s value increased over time. Other methods like LIFO or specific identification may be used to manage tax liability.

Floor Price

The floor price is the lowest listed price for an NFT within a specific collection on a marketplace. It represents the minimum cost to acquire an item from that collection. Floor prices are often used to gauge the overall value and demand for a collection. They fluctuate based on market activity and can be tracked on sites like OpenSea.

Fork

A fork in blockchain occurs when the network's protocol is updated or splits into two separate chains. Hard forks create a permanent divergence, resulting in a new cryptocurrency (e.g., Bitcoin Cash from Bitcoin). Soft forks are backward-compatible updates. Forks can happen due to disagreements among developers or to add new features.

Form 1099

Form 1099 is a tax document that crypto exchanges and platforms may issue to report certain transactions to the IRS. It shows gross proceeds from sales, but may not reflect cost basis or net gains. Taxpayers use this information to report their crypto activities on their annual tax returns.

Form 8949

Form 8949 is an IRS form used to report sales and exchanges of capital assets, including cryptocurrency. You list each transaction with details like date acquired, date sold, proceeds, cost basis, and gain or loss. This information is then summarized on Schedule D of your tax return.

Governance Token

A governance token is a cryptocurrency that gives holders voting rights in a decentralized protocol. Owners can propose and vote on changes, such as fee structures or new features. These tokens align incentives between users and developers, allowing the community to steer the project's direction. Examples include UNI and COMP.

Hardware Wallet

A hardware wallet is a physical device that stores your cryptocurrency private keys offline. It keeps your coins safe from online hacks, viruses, and phishing attacks. To make a transaction, you connect the device to a computer or phone and confirm the action on the device itself. Popular brands include Ledger and Trezor.

Hash Rate

Hash rate measures the total computational power used by a Proof of Work blockchain to process transactions and mine new blocks. It is expressed in hashes per second (e.g., terahashes). A higher hash rate means greater network security because it requires more energy to attack. It also indicates miner interest and competition.

HD Wallet

An HD (Hierarchical Deterministic) wallet generates a tree of key pairs from a single seed phrase. This allows you to create multiple addresses without managing separate private keys. Most modern software wallets use HD technology for convenience and backup.

Hierarchical Deterministic (HD) Wallet

An HD wallet generates a tree of key pairs from a single seed phrase. This allows you to create many addresses without managing multiple private keys. It simplifies backups because you only need to save the seed phrase. HD wallets are standard in modern crypto software, offering convenience and improved privacy by using new addresses for each transaction.

Hierarchical Deterministic Wallet

A hierarchical deterministic (HD) wallet generates a tree of key pairs from a single seed phrase. This allows you to create many addresses without managing multiple private keys. HD wallets improve privacy by using a new address for each transaction and simplify backups since the seed phrase recovers all keys.

Hot Wallet

A hot wallet is a cryptocurrency wallet that is connected to the internet. It allows quick access to funds for trading or spending but is more vulnerable to hacking. Examples include mobile apps, desktop software, and exchange wallets. Best for small amounts used frequently.

Impermanent Loss

Impermanent loss is a temporary loss in value that liquidity providers can experience when the price of tokens in a liquidity pool changes relative to when they were deposited. It becomes permanent only if you withdraw your liquidity while the price ratio is unfavorable. This risk is inherent in automated market maker (AMM) DEXs like Uniswap. Understanding impermanent loss is key to deciding if providing liquidity is worth the fees earned.

LIFO (Last-In, First-Out)

LIFO is a tax lot accounting method where the most recently acquired cryptocurrency units are sold first. This can reduce short-term capital gains by selling higher-cost basis lots, potentially lowering your tax bill. However, LIFO may not be accepted in all jurisdictions.

Limit Order

A limit order is an instruction to buy or sell cryptocurrency at a specific price or better. Unlike a market order that executes immediately, a limit order waits until the market reaches your price. This gives you control over entry and exit points but may not fill if the price never hits your target.

Liquid Staking

Liquid staking lets you stake tokens while receiving a tradable derivative token in return. This derivative can be used in other DeFi protocols to earn additional yield. It combines staking rewards with liquidity, so your assets aren't locked up. Examples include Lido and Rocket Pool.

Liquidity

Liquidity refers to how easily a cryptocurrency can be bought or sold without affecting its price. High liquidity means there are many buyers and sellers, leading to tight spreads and fast execution. Low liquidity can cause significant price swings and slippage when trading.

Liquidity Pool

A liquidity pool is a collection of funds locked in a smart contract. Users called liquidity providers deposit pairs of tokens to enable trading on a decentralized exchange. In return, they earn fees from trades that occur in that pool. This mechanism allows decentralized trading without needing a traditional order book.

Lock-up Period

A lock-up period is the time your staked crypto cannot be withdrawn or traded. During this time, you earn rewards but cannot access your assets. Lock-up periods vary by protocol, from a few days to months. Some staking options offer flexible terms with no lock-up but lower yields.

Maker and Taker

Maker and taker are roles in exchange trading. A maker adds liquidity by placing a limit order that is not immediately filled, sitting on the order book. A taker removes liquidity by placing a market order that fills instantly. Exchanges often charge lower fees for makers to encourage liquidity.

Maker and Taker Fees

Maker and taker fees are trading fees charged by exchanges. A maker fee applies when you place a limit order that adds liquidity to the order book, while a taker fee applies when you place a market order that removes liquidity. Makers usually pay lower fees to encourage order book depth.

Market Order

A market order is an instruction to buy or sell a cryptocurrency immediately at the best available current price. Unlike limit orders, market orders prioritize speed over price control. They fill quickly but may incur slippage if the order is large relative to market liquidity.

Metadata

In the context of NFTs, metadata refers to the descriptive information stored on-chain or off-chain that defines the token's properties. This can include the title, creator, description, image URL, and attributes. Metadata makes each NFT distinct and allows marketplaces to display the asset's details. It is often stored using a standard like ERC-721.

Mining

Mining is the process of validating new transactions and adding them to a blockchain. In Proof of Work systems, miners use powerful computers to solve cryptographic puzzles. Successful miners are rewarded with newly created coins and transaction fees.

Mining Pool

A mining pool is a group of miners who combine their computational resources to increase their chances of solving a block and earning rewards. Rewards are shared among pool members based on their contributed hash power. Pools provide more consistent payouts compared to solo mining, which can be unpredictable.

Minting

Minting is the process of creating a new NFT or token on the blockchain. It involves uploading digital content, such as artwork or music, to a platform that generates a unique token representing ownership. Minting often requires paying a network fee, called gas, to process the transaction.

Multi-Signature Wallet

A multi-signature wallet requires multiple private keys to authorize a transaction. For example, a 2-of-3 setup needs two out of three key holders to sign. This enhances security by preventing a single compromised key from draining funds. Often used by organizations or shared accounts to distribute control.

Multisig Wallet

A multisig (multi-signature) wallet requires multiple private keys to authorize a transaction. For example, a 2-of-3 wallet needs two out of three keys to move funds. This adds security by preventing a single point of failure. It is often used by organizations or groups to manage shared funds, or by individuals to add an extra layer of protection.

Multisignature Wallet

A multisignature wallet requires multiple private keys to authorize a transaction. For example, a 2-of-3 wallet needs two out of three key holders to sign off. This adds security by preventing a single compromised key from draining funds.

Node

A node is a computer that participates in a blockchain network by maintaining a copy of the ledger and validating transactions. Full nodes enforce the rules of the network, while lightweight nodes rely on full nodes for data. Nodes are essential for decentralization and security.

Non-Custodial Wallet

A non-custodial wallet gives you full control over your private keys and funds. No third party can access or freeze your assets. Examples include hardware wallets like Ledger and software wallets like MetaMask. While you are solely responsible for security, this eliminates the risk of exchange hacks or custodial mismanagement. It is often recommended for long-term storage and larger amounts.

Non-Fungible Token (NFT)

A Non-Fungible Token, or NFT, is a unique digital asset stored on a blockchain that represents ownership of a specific item, such as art, music, or virtual real estate. Unlike cryptocurrencies like Bitcoin, each NFT is one-of-a-kind and cannot be exchanged on a one-to-one basis with another NFT.

Order Book

An order book is a real-time list of buy and sell orders for a specific cryptocurrency on an exchange. It shows the prices traders are willing to pay (bids) and the prices they are asking (asks), along with the quantities available. The order book helps traders gauge market depth and liquidity before placing trades.

Paper Wallet

A paper wallet is a physical document containing your private keys and public addresses printed as QR codes. It allows you to store cryptocurrency offline, making it immune to hacking and computer failures. However, it requires careful handling to avoid loss or damage.

Phishing Attack

A phishing attack in crypto is a scam where attackers impersonate legitimate services (like exchanges or wallets) to trick you into revealing your private keys, seed phrases, or login details. They often use fake emails, websites, or social media messages. Once obtained, they steal your funds. Always double-check URLs, enable two-factor authentication, and never share your seed phrase.

Private Key

A private key is a secret alphanumeric code that allows you to access and control your cryptocurrency holdings. It is mathematically linked to your public address but must never be shared. Anyone with your private key can spend your funds. Safeguarding it is the most critical aspect of crypto security.

Proof of Stake

Proof of Stake (PoS) is a consensus mechanism used by some blockchains to validate transactions and create new blocks. Instead of miners solving complex puzzles, validators are chosen to create blocks based on the amount of cryptocurrency they hold and are willing to lock up as collateral. This approach is more energy-efficient than Proof of Work.

Proof of Stake (PoS)

Proof of Stake is a consensus mechanism where validators are chosen to create new blocks based on the amount of cryptocurrency they stake. It is more energy-efficient than Proof of Work and is used by networks like Ethereum.

Proof of Work

Proof of Work is a consensus mechanism used by blockchains like Bitcoin. It requires participants, called miners, to solve complex mathematical puzzles to validate transactions and create new blocks. This process consumes significant computing power and energy, but it secures the network against attacks by making it costly to alter the blockchain.

Proof of Work (PoW)

Proof of Work is a consensus mechanism used by networks like Bitcoin. Miners compete to solve complex math puzzles using powerful computers. The first miner to solve the puzzle validates a block of transactions and earns newly created coins as a reward. This process secures the network but consumes significant energy.

Public Key

A public key is a cryptographic code that allows you to receive cryptocurrency. It is derived from your private key and can be shared with others without compromising security. Think of it as your account number or email address for receiving funds.

Realized vs Unrealized Gains

A realized gain occurs when you sell or trade cryptocurrency for a profit, triggering a taxable event. An unrealized gain is an increase in value that you have not yet sold, so no tax is due until the asset is disposed of. Only realized gains are reported on your tax return.

Royalties

Royalties are ongoing payments that NFT creators receive each time their token is resold in a secondary market. Smart contracts automatically enforce these payments, typically a percentage (e.g., 5-10%) of the sale price. This allows artists to earn income from future sales of their work. Royalties are a key feature that distinguishes NFTs from traditional digital art sales.

Royalty

A royalty in NFTs is a percentage of future sales that is automatically paid to the original creator each time the NFT is resold. This is encoded in the smart contract, allowing artists to earn ongoing income from their work even after the initial sale.

Rug Pull

A rug pull is a scam where developers create a seemingly legitimate crypto project, attract investors, then suddenly drain all funds and disappear. Often seen with new tokens on decentralized exchanges. To avoid rug pulls, research the team, check for locked liquidity, and be wary of projects promising unrealistic returns.

Seed Phrase

A seed phrase is a set of 12 to 24 random words that can restore your entire crypto wallet. It is a human-readable backup of your private keys. If you lose access to your device, you can recover your funds using the seed phrase on any compatible wallet. Never share it online or store it digitally. Write it down and keep it in a safe place.

Self-Custody

Self-custody means holding your own private keys and having full control over your cryptocurrency. Instead of relying on an exchange or third party, you manage the security yourself. This eliminates counterparty risk but requires you to protect your keys from loss or theft. Many users prefer self-custody for peace of mind and true ownership.

SIM Swap Attack

A SIM swap attack occurs when a hacker tricks your mobile carrier into transferring your phone number to a SIM card they control. This allows them to intercept SMS-based two-factor authentication and reset passwords. To protect yourself, use an authenticator app instead of SMS, and set a PIN with your carrier.

Slashing

Slashing is a penalty mechanism in proof-of-stake networks. If a validator misbehaves (e.g., goes offline or double signs), a portion of their staked tokens is forfeited or 'slashed'. This protects the network's integrity. When you stake with a pool, slashing risks are shared, but you may still lose some funds.

Slippage

Slippage is the difference between the expected price of a trade and the actual price at which it executes. It occurs in volatile markets or when there is insufficient liquidity. High slippage can reduce trading profits or increase losses. Traders can set slippage tolerance limits to control execution risk.

Smart Contract

A smart contract is a self-executing program stored on a blockchain that automatically enforces the terms of an agreement. For NFTs, smart contracts define ownership, transfer rules, and royalty payments. They run without intermediaries, ensuring trust and transparency.

Software Wallet

A software wallet is an application or program that stores your private keys on an internet-connected device like a phone or computer. It offers convenience for everyday transactions but is vulnerable to malware and online threats. Examples include mobile wallets and desktop wallets.

Specific Identification

Specific identification is a tax lot accounting method that allows you to choose which specific units of cryptocurrency you are selling. This gives you control over the cost basis used, enabling tax optimization. You must identify the exact units at the time of sale and keep records.

Spread

The spread is the difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask) for a cryptocurrency. A narrow spread indicates high liquidity, while a wide spread suggests lower liquidity and higher trading costs.

Staking

Staking is the process of locking up cryptocurrency to support a proof-of-stake blockchain network. In return, participants earn rewards, similar to earning interest. It helps secure the network and validate transactions. Staking is available for coins like Ethereum, Cardano, and Solana.

Staking Pool

A staking pool is a group of cryptocurrency holders who combine their funds to increase their chances of validating blocks and earning rewards. Pool members share the rewards proportionally, minus any fees. This allows smaller holders to participate in staking and earn yield without running their own node.

Stop Loss

A stop loss is an order set to automatically sell a cryptocurrency when its price drops to a specified level. It helps traders limit potential losses by exiting a trade before the price falls further. For example, if you buy Bitcoin at $30,000 and set a stop loss at $28,000, your position will sell if the price hits that threshold.

Stop-Loss Order

A stop-loss order is a conditional trade that automatically sells a cryptocurrency when its price falls to a specified level. It helps traders limit potential losses by exiting a position before further decline. The order becomes a market order once the stop price is triggered.

Tax Lot Accounting

Tax lot accounting is a method used to track the cost basis and holding period of each unit of cryptocurrency you own. It helps calculate capital gains or losses when you sell. Common methods include FIFO (First In, First Out), LIFO (Last In, First Out), and specific identification. Proper tax lot accounting can optimize your tax liability and is essential for accurate crypto tax reporting.

Tax Lot Method

The tax lot method is an accounting approach used to calculate capital gains or losses when selling crypto. It determines which units (lots) are sold first, such as First-In-First-Out (FIFO) or Specific Identification. Choosing a method can affect your tax liability. It is important for accurate tax reporting and minimizing taxes legally.

Tax-Loss Harvesting

Tax-loss harvesting is a strategy where you sell crypto at a loss to offset capital gains from profitable investments. This can lower your tax bill. Rules vary by country, so consult a tax professional. Wash sale rules may apply in some jurisdictions, restricting repurchasing the same asset quickly.

Taxable Event

A taxable event is any transaction that triggers a tax liability. Common taxable events in crypto include selling crypto for fiat, trading one cryptocurrency for another, using crypto to buy goods or services, and receiving crypto as income. Simply buying or holding crypto is not a taxable event.

Total Value Locked (TVL)

Total Value Locked, or TVL, is the total amount of assets deposited in a DeFi protocol. It measures the health and popularity of a platform. TVL includes all tokens locked in smart contracts for lending, staking, or liquidity pools. A higher TVL often indicates greater trust and usage, but it is not a guarantee of safety.

Trading Volume

Trading volume is the total amount of a cryptocurrency traded within a specific period, usually 24 hours. It reflects market activity and interest. High volume often indicates strong momentum and easier trade execution, while low volume can lead to price manipulation and slippage. Volume is a key metric for traders to confirm trends and assess liquidity.

Two-Factor Authentication (2FA)

Two-factor authentication (2FA) adds an extra layer of security to your crypto accounts. Besides your password, you need a second code from an app or text message. This makes it harder for hackers to access your funds even if they steal your password. Always enable 2FA on exchanges and wallets.

Validator

A validator is a participant in a Proof of Stake network who is responsible for verifying transactions and proposing new blocks. Validators are chosen based on the amount of cryptocurrency they stake as collateral. They earn rewards for honest behavior but can be penalized or lose their stake for malicious actions.

Wallet Address

A wallet address is a unique string of characters, like a bank account number, that you share to receive cryptocurrency. It is derived from your public key and typically starts with a specific prefix (e.g., 1 for Bitcoin). Addresses can be reused but doing so reduces privacy. Many wallets generate a new address for each transaction.

Wash Sale Rule

The wash sale rule prevents taxpayers from claiming a tax deduction on a loss if they repurchase the same or substantially identical asset within 30 days before or after the sale. Currently, the IRS does not apply this rule to cryptocurrencies, but some states may have different rules.

Watch-Only Wallet

A watch-only wallet imports a public address to monitor balances and transactions without holding the private key. It cannot sign transactions, so funds remain safe even if the watch-only device is compromised. Useful for tracking portfolio performance.

Web3 Wallet

A Web3 wallet is a non-custodial wallet that connects directly to decentralized applications (dApps) on blockchain networks. It allows you to interact with DeFi protocols, NFTs, and other Web3 services while maintaining control of your private keys. Examples include browser extensions like MetaMask. These wallets are essential for self-custody in the decentralized ecosystem.

Whitelist

A whitelist in the NFT space is a list of approved wallet addresses that are guaranteed early access to mint a new NFT collection before the general public. Being whitelisted often means lower minting fees or exclusive pricing, and it helps projects build community and manage demand.

Yield Farming

Yield farming involves lending or staking your cryptocurrency in DeFi protocols to earn high returns, often in the form of additional tokens. It typically requires active management to maximize yields across different platforms. While potentially lucrative, yield farming carries risks like impermanent loss and smart contract vulnerabilities.