Crypto, AI and Web3 Glossary — 50 Terms Explained

Crypto, AI and Web3 Glossary

Plain-English definitions for 50 essential terms across crypto, DeFi, AI, and Web3. Updated for 2026.

Airdrop

A distribution of free cryptocurrency tokens sent directly to wallet addresses, typically used by projects to reward early adopters, increase token distribution, or promote a new protocol.

Altcoin

Any cryptocurrency other than Bitcoin. The term covers thousands of tokens including Ethereum, Solana, XRP, and smaller speculative assets.

AMM (Automated Market Maker)

A type of decentralised exchange protocol that uses mathematical formulas to price assets and provide liquidity, replacing the traditional order book model. Uniswap and Curve are the leading AMMs.

Bear Market

A sustained period of falling prices across the crypto market, typically defined as a decline of 20% or more from recent highs. Bear markets in crypto have historically lasted 12 to 24 months.

Beacon Chain

Ethereum’s proof of stake coordination layer, launched in December 2020. It manages validators, staking, and consensus while the execution layer handles transactions.

Bitcoin Halving

An event that occurs every 210,000 blocks (approximately every four years) where the reward for mining a new Bitcoin block is cut in half. The most recent halving was in April 2024, reducing the block reward to 3.125 BTC.

Blockchain

A distributed digital ledger that records transactions across a network of computers. Each block contains a set of transactions and is cryptographically linked to the previous block, making the chain tamper-resistant.

Bull Market

A sustained period of rising prices. In crypto, bull markets have historically followed Bitcoin halvings by 12 to 18 months and are characterised by increasing retail participation and speculative activity.

CEX (Centralised Exchange)

A cryptocurrency exchange operated by a company that holds customer funds in custody. Examples include Coinbase, Binance, and Kraken. CEXs require identity verification (KYC) and are regulated.

Cold Wallet

A cryptocurrency wallet that is not connected to the internet, making it far more secure against remote hacks. Hardware wallets like Ledger and Trezor are the most common form of cold storage.

DAO (Decentralised Autonomous Organisation)

An organisation governed by rules encoded in smart contracts and executed on a blockchain. Token holders vote on proposals affecting the protocol. Aave, Uniswap, and MakerDAO are governed as DAOs.

DeFi (Decentralised Finance)

A category of financial services built on public blockchains that operate without banks or intermediaries. DeFi protocols offer lending, borrowing, trading, and yield-generating services through smart contracts.

DEX (Decentralised Exchange)

A peer-to-peer cryptocurrency exchange that operates via smart contracts on a blockchain, without a central company holding funds. Uniswap, Curve, and dYdX are major DEXs.

EIP (Ethereum Improvement Proposal)

A formal proposal to change the Ethereum protocol. EIPs go through community review before being accepted or rejected. EIP-1559 introduced the fee-burn mechanism that makes ETH deflationary at high usage.

ERC-20

The most widely used token standard on Ethereum, defining the rules that all fungible tokens must follow. USDC, USDT, LINK, and thousands of other tokens are ERC-20 tokens.

EVM (Ethereum Virtual Machine)

The computing environment that executes smart contracts on Ethereum. Many other blockchains, including Polygon, BNB Chain, and Avalanche, are EVM-compatible, meaning they can run Ethereum smart contracts.

Fear and Greed Index

A daily sentiment indicator for the crypto market, measured on a scale of 0 (extreme fear) to 100 (extreme greed). It aggregates volatility, market momentum, social media sentiment, and other signals.

Flash Loan

An uncollateralised loan in DeFi that must be borrowed and repaid within a single blockchain transaction. Flash loans are used for arbitrage, collateral swaps, and liquidity provision.

Fork

A change to a blockchain’s protocol. A soft fork is backward-compatible. A hard fork creates a permanent divergence, resulting in two separate chains. Bitcoin Cash was created from a hard fork of Bitcoin in 2017.

Gas Fees

Transaction fees paid to validators on the Ethereum network for processing smart contract operations. Gas fees are denominated in Gwei (a small unit of ETH) and vary based on network congestion.

Hardware Wallet

A physical device that stores the private keys for a cryptocurrency wallet offline. Ledger and Trezor are the most widely used hardware wallets. Private keys never leave the device, making them highly resistant to hacks.

Hash Rate

A measure of the total computational power being used to mine and process transactions on a proof of work blockchain. Higher hash rate indicates a more secure and competitive network. Bitcoin’s hash rate is measured in exahashes per second (EH/s).

Hot Wallet

A cryptocurrency wallet connected to the internet, used for everyday transactions. MetaMask and Phantom are hot wallets. While convenient, hot wallets are more vulnerable to hacks than cold storage.

Impermanent Loss

A temporary loss of value experienced by liquidity providers in an AMM when the price ratio of the two tokens they deposited changes. The loss is realised only when liquidity is withdrawn.

L1 (Layer 1)

The base blockchain layer that handles consensus, transaction processing, and security. Ethereum, Bitcoin, Solana, and BNB Chain are Layer 1 blockchains.

L2 (Layer 2)

A secondary network built on top of a Layer 1 blockchain to increase transaction speed and reduce fees while inheriting the security of the base layer. Arbitrum, Optimism, Base, and zkSync are Ethereum Layer 2 networks.

Liquidity Pool

A collection of funds locked in a smart contract that provides liquidity for a DEX or lending protocol. Users who deposit tokens into a liquidity pool earn a share of trading fees as yield.

LLM (Large Language Model)

A type of AI system trained on massive datasets of text to understand and generate human language. GPT-4, Claude, Gemini, and Llama are leading LLMs. They power most modern AI assistants and coding tools.

Market Cap

The total market value of a cryptocurrency, calculated by multiplying the current price by the total circulating supply. It is the primary metric for ranking cryptocurrencies by size.

Mempool

The waiting area where unconfirmed transactions sit before being included in a block by miners or validators. During periods of high network congestion, mempools fill up and gas fees rise.

MiCA (Markets in Crypto Assets)

The European Union’s comprehensive regulatory framework for cryptocurrency, which took full effect in 2024. MiCA covers stablecoin issuance, crypto asset service providers, and market abuse rules across all EU member states.

Mining

The process of validating transactions and adding new blocks to a proof of work blockchain. Miners compete to solve cryptographic puzzles and are rewarded with newly minted cryptocurrency and transaction fees.

NFT (Non-Fungible Token)

A unique digital asset recorded on a blockchain that proves ownership of a specific item, such as digital art, collectibles, music, or in-game assets. Unlike fungible tokens, each NFT is unique and not interchangeable.

Oracle

A service that provides real-world data to smart contracts on a blockchain. Since blockchains cannot access external data directly, oracles like Chainlink bridge the gap, feeding price feeds, weather data, and other information to DeFi protocols.

Private Key

A secret cryptographic string that proves ownership of a cryptocurrency wallet and authorises transactions. Anyone with access to your private key controls your funds. It should never be shared or stored online.

Proof of Stake (PoS)

A consensus mechanism where validators are chosen to create new blocks based on the amount of cryptocurrency they stake as collateral. It uses far less energy than proof of work. Ethereum uses PoS.

Proof of Work (PoW)

The original blockchain consensus mechanism, used by Bitcoin, where miners compete to solve complex mathematical puzzles to add new blocks. The process requires significant computational energy.

Public Key

A cryptographic address derived from your private key that others can use to send cryptocurrency to your wallet. It is safe to share publicly. Think of it as your bank account number.

RAG (Retrieval-Augmented Generation)

An AI technique that enhances LLM responses by retrieving relevant documents from an external knowledge base before generating an answer. It reduces hallucinations and improves accuracy on specific domains.

Real World Assets (RWA)

Tokenised representations of physical or traditional financial assets on a blockchain. Examples include tokenised US Treasuries, real estate, corporate bonds, and commodities like gold. RWA tokenisation is one of the fastest-growing areas of DeFi in 2026.

Rollup

A Layer 2 scaling solution that processes transactions off-chain and posts compressed proof or data back to Ethereum. Optimistic rollups (Arbitrum, Optimism) assume transactions are valid by default. ZK rollups (zkSync, Starknet) use cryptographic proofs to verify validity.

Seed Phrase

A sequence of 12 or 24 random words that serves as the master backup for a cryptocurrency wallet. Anyone with your seed phrase can restore and control your wallet. Store it offline and never share it.

Slippage

The difference between the expected price of a trade and the price at which it is executed. Higher slippage occurs in low-liquidity markets or with large order sizes. Most DEX interfaces allow users to set a slippage tolerance before confirming a swap.

Smart Contract

A self-executing program stored on a blockchain that automatically enforces the terms of an agreement when predefined conditions are met. Smart contracts are the foundation of DeFi, NFTs, and DAOs.

Stablecoin

A cryptocurrency designed to maintain a stable value, typically pegged to the US dollar. USDT (Tether), USDC (Circle), and DAI are the largest stablecoins by market cap. They are widely used in DeFi and cross-border payments.

Staking

The process of locking cryptocurrency in a proof of stake network to help validate transactions and earn rewards. Ethereum staking currently yields approximately 3.2% annually. Liquid staking via Lido or EtherFi allows stakers to keep their assets liquid.

Token

A digital asset created and managed on an existing blockchain, as distinct from a coin (which is native to its own blockchain). USDC is a token on Ethereum. SOL is a coin native to Solana.

TVL (Total Value Locked)

The total amount of assets deposited in a DeFi protocol, measured in USD. TVL is the primary metric for comparing the scale and adoption of DeFi platforms. Aave, Lido, and MakerDAO consistently rank among the highest TVL protocols.

Wallet

Software or hardware that stores private keys and allows users to send, receive, and manage cryptocurrency. Examples include MetaMask (software), Ledger (hardware), and Coinbase Wallet (custodial).

Web3

The next iteration of the internet, characterised by decentralised protocols, user-owned data, and blockchain-based applications. Web3 represents the convergence of crypto, AI, and decentralised infrastructure.

Zero-Knowledge Proof (ZK Proof)

A cryptographic method that allows one party to prove to another that a statement is true without revealing any underlying information. ZK proofs are used by Layer 2 networks like zkSync and Starknet to verify transaction batches efficiently and privately.