A working glossary

Where a term is routinely misused, the entry says so. That is more useful than a definition that quietly disagrees with everything you will read elsewhere.

Keys and custody

Term	What it means
Seed phrase	Twelve or twenty-four words encoding one large random number, from which all keys derive. Also called a recovery or mnemonic phrase. Whoever reads it has complete, irreversible control.
Private key	The secret that authorises a transaction. Derived from the seed; never shared, never entered anywhere.
Public key	Derived from the private key, one way only. Safe to share.
Address	Derived from a public key. What you give someone to receive funds.
Custodial	Someone else holds the keys. Your balance is a claim on that company.
Self-custody	You hold the keys. No recovery, no permission required, no counterparty.
Hardware wallet	A device holding keys in a chip that signs but will not export them. Protects against a compromised computer, not against a revealed seed.
Cold / hot	Cold means keys never touch an internet-connected device. Hot means they do. A hardware wallet plugged into an online computer is still cold, because the key does not leave the chip.

Transactions

Term	What it means
Confirmation	A block containing your transaction, plus each block after it. More confirmations means more expensive to reverse.
Gas / fee	Payment to have a transaction included. Varies with demand, not with the amount sent.
Mempool	Broadcast but not yet included. A transaction here can still be replaced on some networks.
Finality	The point after which reversal is considered infeasible. Probabilistic on some networks, explicit on others.
Approval / allowance	Standing permission for a contract to move your tokens. Persists until revoked. A frequent cause of loss with no key compromise involved.
Bridge	Moves value between networks, usually by locking on one side and issuing on the other. Historically the most attacked component in the ecosystem.

Assets and structures

Term	What it means
Token vs. coin	A coin is native to its own network; a token exists as a contract on someone else's. Used interchangeably in practice, but the distinction matters for how it can fail.
Stablecoin	A token intended to hold a fixed value. How it does so varies enormously — full reserves, partial reserves, or an algorithm — and that mechanism is the actual risk, not the label.
Market cap	Price multiplied by circulating supply. Routinely misread as money invested. It is not: a thin market can produce a very large figure from very little capital.
Liquidity	How much can be sold before the price moves against you. The gap between a quoted price and an achievable one.
Staking	Locking assets to support a network's operation, in return for issuance. Real, but often used loosely to describe arrangements that are simply lending with counterparty risk.
Yield	A return from somewhere. The only question that matters is where — if nobody can explain who pays it and why, the answer is usually new depositors.

Terms used loosely, and what they hide

"Decentralised" — describes a spectrum, not a property. Ask specifically: who can change the code, who holds the keys that can, and who runs the interface you actually use.
"Audited" — a firm reviewed some version of some code at some point. It is not a guarantee, and the audited version is frequently not the deployed one.
"Insured" — almost always covers a specific narrow scenario, often only the custodian's own hot-wallet breach, and never market losses.
"Community" — in the context of a token's promotion, usually means holders with a financial interest in more buyers arriving.

Last reviewed: 11 September 2026

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