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Cryptocurrency Glossary

Feel confident speaking the language of your crypto clients.

A B C D E F G H I J L M N O P S T V W Z

51% Attack

A situation where a group of miners has control over more than 50% of the network’s mining hashrate or computational power. It’s also referred to as a Majority Attack.

Active Management

A strategy used by fund managers aimed at outperforming an index or market to generate profits.

Address

A combination of letters or characters that defines the location of a specific wallet on the blockchain.

Airdrop

Airdrops are crypto coins given to users from unknown sources. For example, there could be coins available in your account that you never bought, provided for free by the exchanges you use. You will have to file income tax on an airdrop reception, and file a gain or loss when you sell the asset. The cost basis for the airdrop will be based on the fair market price of the asset at the time when the airdrop was received. ZenLedger accepts airdrop reception entries through it’s manual entry interface.

All-Time High (ATH)

The highest price of a cryptocurrency in a specific​ currency, for example, BTC, ETH, or BNB

Allocation

An amount of tokens or equity, that can be earned, purchased, or assigned for a certain individual, group of people or organization.

Altcoin

A term used to describe any cryptocurrency that is not Bitcoin.

Application Programming Interface (API)

A set of functions and processes that allow users to interact with the data of an application, for example an exchange, to execute its features programmatically.

Arbitrage

A tactic consisting in buying and selling assets on different markets and used to take advantage of differing prices on the same asset during the same time.

ASIC-resistant

An ASIC-resistant cryptocurrency is a cryptocurrency that has a protocol and mining algorithm that don’t allow using ASIC machines to mine the coin, or makes it much less profitable than using traditional GPU mining.

Ask Price

A term referring to the lowest price a seller is ready to accept on their sell order when trading an asset on an exchange.

Atomic Swap

A technology that allows to exchange one cryptocurrency for another without using centralized intermediaries, such as exchanges.

Bear Market

A condition when a market experiences prolonged price declines (usually 20% or more).

BEP-2

A technical standard setting rules for the issuance and management of tokens in the Binance Chain ecosystem.

Beta Coefficient

An indicator used to define the volatility of an asset in comparison to the volatility of a specific portfolio or market index.

Bitcoin

The first cryptocurrency was created by the anonymous developer or a group of developers known under the pseudonym Satoshi Nakamoto.

Bitcoin Dominance

The share of Bitcoin’s market capitalization in the whole market capitalizations of all cryptocurrencies.

Block

A file where transaction data is stored. Blocks arranged in a linear sequence form a blockchain.

Block header

A part of a block that contains metadata and a summary of the block’s transactions.

Block Height

The number of blocks in the blockchain between the specific block and the first block on that blockchain.

Block Reward

Coins issued by the blockchain protocol to cryptocurrency miners for each successfully mined and validated block.

Blockchain

A decentralized digital ledger that records cryptocurrency transactions across many computers in a chronological order.

BNB

Cryptocurrency launched by Binance after an ICO that ended on July 3rd, 2017.

Bollinger Bands

A technical analysis indicator that is used to measure market volatility. It’s made of two sidelong bands and a moving average.

Bull Market

A condition when a market experiences growing prices.

Business or Investment

This refers to buying, selling, or trading of cryptocurrency where the user buys cryptocurrency using their US dollars, trades among various crypto, or converts crypto to US dollars. Trades and sales are taxable, whereas a purchase (buy) of cryptocurrency is not taxable.
An “investment” or “investment segment” refers to holding a token for a time duration that causes capital gains or losses, and has a definite start and end date.
One “investment segment” may convert into one or two other “investment segments”. There may or may not be a taxable event when that occurs.
Sending half of a block of your ETH from Exchange #1 to Exchange #2 causes a split of one into two. It does not create a taxable event.

Buy

Any incoming transactions are broadly classified as a buy if the user directly invests US dollars to acquire the cryptocurrency.

Candidate Block

A temporary block added to the blockchain in order to receive the block rewards.

Capitulation

A period characterized by a strong selling activity, when investors give up their positions and sell their assets as quickly as possible.

Circulating Supply

An approximate number of cryptocurrency coins circulating in the market.

Confirmation Time

The time period between the moment when a transaction is submitted to the network and the moment when it’s recorded into a confirmed block.

Cryptocurrency

A digital currency that uses cryptographic functions to conduct financial transactions.

Decentralized Exchange (DEX)

An exchange that doesn’t require users to deposit funds in order to start trading, and doesn’t hold the user’s funds. Users trade directly from their own wallets.

Decentralized Finance (DeFi)

The ecosystem that consists of decentralized financial applications built on top of blockchain networks.

Decryption

The act of reverting an encryption process to transform the encrypted data into its original form.

Difficulty Bomb

The increase in mining difficulty in Ethereum because of its migration to Proof of Stake.

Dollar Cost Averaging (DCA)

Investment tactic that consists in investing fixed dollar amounts over regular periods of time in spite of the price of the asset.

Double Spending

A situation where a certain amount of coins is spent more than once, for example as a result of a race attack.

Encryption

Conversion of readable information into a secure code in order to prevent unauthorised access to this information.

ERC-721

A free standard describing how to build non-fungible tokens on the Ethereum blockchain.

Exchange

A marketplace for cryptocurrencies where users can buy and sell coins.

External transfer

An external transfer of cryptocurrency is a transfer made between two different parties with different accounts or wallets. There are multiple types of external transfers, such as a sale, donation, business expense, and more, and may be taxable depending on what type of transfer it is. For example, a sale is a taxable event, while a gift, donation, or business expense is not taxable but has tax implications.
Falling Knife
Purchasing an asset during its rapid decline in price, expecting that the price will increase.

Fiat

Legal tender, official national currency whose value is backed by the government.

FIFO

An accounting method that is used to calculate a tax base for a sale of multiple assets with different bases, when investors choose to sell the crypto they’ve held the longest first (first-in, first-out, or FIFO). Note that FIFO is almost always used with regards to cryptocurrency, because unless you can specifically identify the cryptocurrency you are selling (which is nearly impossible, given that Bitcoin is essentially an abstraction), it is the treatment that must be used. See Treas. Reg. 1.1012-1(c)(2)-(4) for more information.

Fill Or Kill Order (FOK)

A buy or sell order that has to be executed immediately, otherwise it will be cancelled.

Finality

The guarantee that completed cryptocurrency transactions can’t be changed or cancelled.

Flappening

The term describes the moment when Litecoin surpassed Bitcoin Cash in market capitalization.

Flippening

The term describing the moment when Ethereum surpasses Bitcoin in market capitalization.

Fork

Forks are the creation of a new cryptocurrency token from an existing one. In the case of forks, you could receive a new crypto if you hold the original that the new crypto is forked from. These are taxable events. You will have to file income tax on the currency fork you receive, and file a gain or loss when you sell the asset. Cost basis for the fork will be based on the Fair Market Price of the asset on the time the fork is received. ZenLedger accepts fork reception entries through its manual entry interface and selection from a list of probable forks in the app’s user flow.

Full Node

A computer that implements all the rules of an underlying blockchain network and validates transactions and blocks on a blockchain.

Fungibility

The characteristic of an asset whose individual units are not unique and are identical in terms of value and functionality.

Gas

The pricing mechanism used by the Ethereum blockchain to calculate the costs of smart contracts operations and transaction fees.

Gas Limit

The highest price a user is ready to pay as a fee when sending a cryptocurrency transaction.

Genesis Block

The very first block recorded on its blockchain network, also referred to as Block 0 or Block 1.

Gift​

A gift of cryptocurrency sent to somebody is nontaxable to a certain bar set by the IRS. You may be required to fill out a gift form by the IRS. ZenLedger considers a gift sent as a nontaxable event.

Gift Received

Cryptocurrency that a user receives as a gift. It is a taxable event. You will have to file income tax on the currency you receive as a gift, and file a gain or loss when you sell the asset. Cost basis for a gift will be based on the fair market price of the asset at the time the gift was received. ZenLedger accepts gift reception entries through its manual entry interface.

Gwei

A small denomination of Ether. It’s often referred to as nanoether, or just nano. It’s hardly possible to imagine the physical size of a gwei, because its size is essentially imperceptible.

Hard Cap

The highest amount of funds a project expects to raise during their ICO or alternative fundraising event.

HIFO

An accounting method that is used to calculate a tax base for a sale of multiple assets with different bases, when the inventory with the highest cost of purchase is the first to be used (highest-in, first-out, or HIFO).

High-Frequency Trading (HFT)

A type of automated trading that involves the execution of a large number of orders in fractions of a second.

HODL

A term referring to a long term investment, an acronym for “Hold on for Dear Life”.

Ignored Transactions

Ignored transactions are those that do not appear in your tax calculation. Ignoring some transactions (especially deposits or trades) may affect your capital gains, as it may also omit the cost basis for transactions that use the asset produced by these ignored transactions.

Incoming

Any incoming transaction where the user did not directly invest US dollars is considered incoming. Incoming transactions must be reported in income taxes.

Initial Coin Offering (ICO)

Cryptocurrencies bought when the cryptocurrency first became available for purchase. These transactions usually do not appear in your exchange history and should be provided to ZenLedger using manual entry. Your purchase price in US dollars an ICO is considered the cost-basis, as you have to file a gain or loss when you sell the asset.

Investment

An investment is a fraction of an asset bought or sold that results in a capital gain or loss. These are mapped one-to-one in the Grand Unified Accounting sheet, and used to populate IRS tax form 8949.

Jager

The smallest denomination of BNB.

Latency

The time period between the moment when a transaction was submitted to a network and the moment when the network confirmed the acceptance of this transaction.

Ledger

A physical book or a digital computer file where monetary and financial transactions are tracked and recorded.

LIFO

An accounting method that is used to calculate a tax base for a sale of multiple assets with different bases, when investors sell the newest ones first (last-in, first-out, or LIFO).

Lost Cryptocurrency

This is the cryptocurrency you lost in some reportable hazards. In this case, you may also have to fill out a lost/stolen IRS form. Reportable loss is based on the fair market price of the cryptocurrency at the time it was bought or received.

Mainnet

A fully developed blockchain protocol where transactions are being broadcasted, verified, and recorded.

Mainnet Swap

A situation where a coin migrates from a third party platform (for example Ethereum) or other token to a native on-chain token on their mainnet.

Maker

“Maker” is a crypto investor who places an order that does not trade immediately, so it stays in the order book till someone else fills it.

Margin Trading

A type of trading when borrowed funds are used. Considered as a high risk strategy that should only be used by experienced investors.

Market Order

When a taker (a person who places an order) picks the best available bid for a cryptocurrency, accepting the price and quantity available on the order book.

Masternode

Nodes on a network that often require a minimum amount of a given coin staked in order to access staking rewards.

Maximum Supply

The highest number of coins or tokens that will be ever created for a given cryptocurrency.

Merged Mining

A type of mining when two or more cryptocurrencies are being mined at the same time, without decreasing overall mining performance.

Metadata

A piece of data that includes information about another piece of data, for example information about a specific transaction.

Mined Cryptocurrency

Cryptocurrency obtained as a result of mining is a taxable event. You will have to file income tax on mined cryptocurrency, and file gain or loss when you sell the asset. The cost basis for mines will be based on the fair market price of the asset at the time when the crypto was mined. ZenLedger accepts mined entries through its manual entry interface.

Mining

The process of verification of transactions on a blockchain network, that includes adding transactions as entries into the blockchain ledger.

Mining Farm

A large group of miners, often inside of a warehouse or a large data center used for mining cryptocurrencies

Moon

A term used to describe a cryptocurrency or any other asset that is going through a strong upward market trend.

Multisignature

Wallet which requires another party to authorize a transaction before it is broadcasted to the network.

Non-fungible Token (NFT)

A unique cryptographic token that is not interchangeable.

Nonce

A one time use arbitrary verification code that is created to prevent replaying past transactions.

Off-chain

Transactions that occur off a given blockchain network, that can be later batched together and submitted to the main chain.

One Cancels the Other Order (OCO)

Two orders that were created concurrently, so it’s only possible to execute one of them.

Order Book

A digital list of outstanding buy and sell orders for a specific asset on a crypto exchange.

Orphan Block

A block whose parent block is unknown, formed in older versions of Bitcoin Core, where ancestry data wasn’t required.

Outgoing

Any outgoing transaction where the owner did not directly receive US dollars for the outgoing cryptocurrency is called outgoing

Payment

Payment received in the form of cryptocurrency is a taxable event. You will have to file income tax on a crypto payment you receive, and file gain or loss when you sell the asset. Cost basis for payment received will be based on the Fair Market Price of the asset at the time payment is received. ZenLedger accepts payment reception entries through its manual entry interface.

Peer-to-Peer (P2P)

A system consisting of two or more computers that are connected and sharing workload or resources without relying on a centralized server.

Pegged Currency

A currency that has a price designed to always remain the same as a designated asset.

Private Key

A long string of symbols that allows users to sign transactions and to generate receiving addresses.

Proof of Stake (PoS)

A mechanism that rewards block validators depending on the amount of coins they have at stake.

Purchase

A purchase occurs when you buy personal items using cryptocurrency, and is a taxable event. Any loss incurred from a personal purchase will be reported as zero; profits from a personal purchase will be taxed.

Satoshi

The smallest unit of a BTC, as defined by the Bitcoin protocol, that equals 0.00000001 BTC.

Satoshi Nakamoto

The pseudonym of the developer or a group of developers who created the bitcoin protocol.

Securities and Exchange Commission (SEC)

A governmental agency responsible for regulating securities markets.

Security Audit

A detailed analysis of a system aimed at evaluating how safe this system is against attacks or technical failures.

Seed Phrase

A collection of words that can be used to access your crypto wallet.

Self transfer

A self transfer of cryptocurrency is a transfer between two of your own accounts or wallets, such as a transfer of funds from your Coinbase account to your Binance account, or from your Exodus wallet to your Kucoin account. Self transfers are nontaxable events.

Sell

An outgoing transaction where the user directly receives US dollars from the cryptocurrency transaction.

Sell Wall

A very large limit sell order or a combination of sell orders at the same price level on an order book for an asset.

Stablecoin

A cryptocurrency designed to maintain a stable value, rather than going through significant price changes.

Staking

The process of holding funds in a crypto wallet to support the operations of a blockchain network.

Stolen Cryptocurrency

Reportable theft is based on the fair market price of the cryptocurrency at the time it was bought or received. In this case, you may also have to fill out a lost/stolen IRS form.

Taker

A person who decides to place an order that is immediately matched with an existing order on the order book.

Ticker

The shortened name of a coin, usually in capital letters, for example, BTC or ETH.

Token

Digital units issued on a blockchain. It can hold value or can be redeemed for assets.

Token Lockup

Time period when tokens or coins are not allowed to be transferred or traded.

Token Sale

The issuance of tokens in exchange for another cryptocurrency. Also known as an ICO.

Total Supply

The number of coins or tokens that currently exist in the market.

Trade

Any transaction that involves conversion of an asset from one crypto to another is broadly classified as a trade.

Transaction ID (TXID)

A transaction identifier used to reference transactions on a blockchain.

Transactions Per Second (TPS)

The number of transactions that a blockchain can process each given second.

Volatility

An indicator showing how much the price of an asset changes over time. It is calculated in terms of standard deviations in the annual return of an asset over a certain time period.

Volume

A number of individual units of an asset that changed hands in a market during a given time period.

Wallet

Software program used for storing private and public keys and interacting with different blockchains, including sending and receiving digital currencies and tracking their balance.

Wei

The smallest denomination of Ethereum.

Whale

An individual or a fund that holds a large amount of cryptocurrencies allowing them to impact the market.

Zero-Knowledge Proofs

Proofs used to check if transactions are valid without identifying any information about the sender or receiver of these transactions. That guarantees privacy to the transaction while maintaining its legitimacy.