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Blockchain

A decentralised digital ledger that records every cryptocurrency transaction across a network of computers. No single entity controls it, which is what makes crypto fundamentally different from traditional banking. Networks like Solana have pushed blockchain speed to thousands of transactions per second.

Cryptocurrency

A digital currency that uses cryptography for security and operates independently of a central bank. Bitcoin was the first, launched in 2009, but there are now thousands of alternatives. If you are new to crypto, our guide on how to buy cryptocurrency in the UK covers the basics.

Cryptocurrency Exchange

A platform where you can buy, sell, and trade cryptocurrencies using pounds or other currencies. UK investors typically use FCA-registered exchanges to convert GBP into crypto. We compare the leading options in our best crypto exchanges UK guide.

Altcoin

Any cryptocurrency other than Bitcoin. Ethereum, Solana, XRP, and Dogecoin are all altcoins. The term simply means "alternative coin." If you are looking to diversify beyond Bitcoin, our guide covers where to buy altcoins in the UK.

Token

A digital asset built on top of an existing blockchain rather than having its own. For example, many tokens run on Ethereum's network. Tokens can represent anything from utility access to governance rights within a project. Some of the most promising are covered in our best low cap crypto gems guide.

Fiat Currency

Government-issued money like GBP, USD, or EUR that is not backed by a physical commodity. When you deposit pounds into a crypto app to buy Bitcoin, you are converting fiat currency into cryptocurrency. Most UK exchanges accept GBP deposits via bank transfer or debit card.

Market Cap

The total value of a cryptocurrency, calculated by multiplying its current price by the total number of coins in circulation. Market cap helps you gauge the relative size and risk of a crypto asset. Bitcoin has the largest market cap, while smaller projects carry higher risk — see our best crypto to invest in guide for more.

Volatility

The degree to which a cryptocurrency's price fluctuates over time. Crypto is significantly more volatile than traditional assets like stocks or bonds, meaning prices can swing 10–20% in a single day. Understanding volatility is essential before deciding whether Bitcoin is a good investment for your situation.

Portfolio

Your total collection of cryptocurrency investments. A well-balanced crypto portfolio might include a mix of established coins like Bitcoin and Ethereum alongside smaller altcoins such as Dogecoin. Diversification across different market caps and use cases helps manage risk.

Hardware Wallet

A physical device, similar to a USB stick, that stores your cryptocurrency offline. This makes it virtually immune to online hacking. Ledger and Trezor are the two most popular brands — we compare them side by side in our Ledger vs Trezor review.

Software Wallet

An app or browser extension that stores your crypto keys on your phone or computer. Software wallets are free and convenient for everyday use, though less secure than hardware alternatives. See our best crypto wallets UK guide for recommended options.

Cold Storage

Any method of keeping your cryptocurrency completely offline and disconnected from the internet. Hardware wallets are the most common form. Cold storage is the gold standard for securing larger holdings that you don't plan to trade frequently. For XRP holders specifically, see our best XRP wallet guide.

Private Key

A secret alphanumeric code that gives you access to your cryptocurrency. Whoever holds the private key controls the funds — there is no password reset. This is why choosing the right wallet matters so much. Our best Solana wallets guide covers key management for SOL holders.

Seed Phrase

A series of 12 or 24 randomly generated words that act as a master backup for your wallet. If your device is lost or damaged, your seed phrase is the only way to recover your funds. Write it down on paper and store it securely — never save it digitally or in a screenshot.

Custodial vs Non-Custodial

Custodial wallets (like those on exchanges) hold your private keys for you — convenient but you are trusting a third party. Non-custodial wallets give you full control of your keys. The trade-off is responsibility: if you lose access to a non-custodial wallet, no one can help you recover it.

Two-Factor Authentication (2FA)

An extra layer of security that requires a second form of verification — usually a code from an authenticator app — when logging into your exchange or wallet. Always enable 2FA on any platform holding your crypto. It is one of the simplest ways to protect your account from unauthorised access.

Trading Fee

The charge an exchange takes each time you buy or sell crypto. Fees vary significantly between platforms and can eat into your returns, especially on smaller trades. We break down exactly what each platform charges in our crypto platforms with the lowest fees comparison.

Spread

The difference between the buy price and the sell price of a cryptocurrency on an exchange. Some platforms advertise zero trading fees but make their money through wider spreads instead. Always check both the fee and the spread — our best Coinbase alternatives guide compares the true cost across platforms.

Liquidity

How easily a cryptocurrency can be bought or sold without significantly affecting its price. Bitcoin and Ethereum have high liquidity because millions of people trade them daily. Smaller altcoins may have low liquidity, meaning large orders can cause noticeable price swings.

Limit Order

An instruction to buy or sell crypto at a specific price or better. Your order only executes if the market reaches your set price. Limit orders give you more control than market orders and can help you avoid buying at a peak. Most platforms in our best Binance alternatives guide support them.

Market Order

An instruction to buy or sell crypto immediately at the current market price. Market orders execute instantly but you have no control over the exact price you pay. On volatile days, the price you get may differ slightly from what you saw on screen — this is known as slippage.

KYC (Know Your Customer)

Identity verification that UK-regulated exchanges must perform before you can trade. You will typically need to provide a photo ID and proof of address. KYC exists to prevent money laundering and fraud. All FCA-registered platforms require it, so have your documents ready before signing up.

APY (Annual Percentage Yield)

The annualised rate of return you earn by staking or lending your crypto, including the effect of compounding. A 5% APY means you would earn roughly 5% on your holdings over a year. Be cautious of extremely high APY promises — they often carry significant risk.

Gas Fee

A fee paid to process transactions on the Ethereum network (and some other blockchains). Gas fees fluctuate based on network demand — during busy periods they can spike dramatically. This is why timing your transactions or using layer-2 solutions can save you money when interacting with DeFi protocols.

FCA (Financial Conduct Authority)

The UK's financial regulator. The FCA oversees crypto exchanges operating in Britain, requiring them to register and follow anti-money laundering rules. However, crypto itself is not regulated like stocks — there is no FSCS protection if an exchange collapses. Our guide on whether Bitcoin is legal in the UK explains the regulatory landscape.

HMRC (HM Revenue & Customs)

The UK tax authority responsible for collecting taxes on cryptocurrency gains. HMRC treats crypto as property, not currency, which means selling, swapping, or spending crypto can trigger a taxable event. Keep records of every transaction — you may need them when filing your self-assessment tax return.

Capital Gains Tax (CGT)

The tax you pay on profits when you sell or dispose of cryptocurrency in the UK. You only pay CGT on gains above your annual tax-free allowance. The rate depends on your income tax band. Using a crypto-friendly bank can make tracking deposits and withdrawals easier at tax time.

CGT Annual Exempt Amount

The amount of capital gains you can earn tax-free each year in the UK. This allowance applies across all your assets, not just crypto. Any gains above the threshold are taxed at either 10% or 20% depending on your income band. Check the latest HMRC guidance for the current year's allowance figure.

Block

A bundle of verified transactions that gets permanently added to the blockchain. Each block links to the previous one, forming an unbroken chain — hence the name. The size and frequency of blocks vary by network. Bitcoin produces a new block roughly every 10 minutes.

Staking

Locking up your cryptocurrency to help validate transactions on a proof-of-stake blockchain, earning rewards in return. Think of it as earning interest for supporting the network. Ethereum, Solana, and many other altcoins support staking. Our guide on how to buy XRP in the UK covers staking-like reward options for Ripple holders.

Mining

The process of using computing power to validate transactions and secure a proof-of-work blockchain like Bitcoin. Miners are rewarded with newly created coins. It is energy-intensive and increasingly competitive. Our guide on how to mine Bitcoin in the UK covers whether it is still worthwhile.

Smart Contract

Self-executing code stored on a blockchain that automatically carries out an agreement when predefined conditions are met. No middleman required. Smart contracts power DeFi, NFTs, and thousands of decentralised applications. Ethereum pioneered the concept, which is why buying ETH gives you access to this ecosystem.

Consensus Mechanism

The method a blockchain uses to agree on which transactions are valid. The two main types are proof-of-work (used by Bitcoin, which requires mining) and proof-of-stake (used by Ethereum and Solana, which requires staking). The consensus mechanism affects a network's speed, energy use, and security.

Halving

An event that cuts the reward Bitcoin miners receive in half, occurring roughly every four years. Halvings reduce the rate of new Bitcoin entering circulation, which historically has preceded significant price increases. The most recent halving took place in April 2024, reducing the block reward to 3.125 BTC.

DeFi (Decentralised Finance)

Financial services — lending, borrowing, trading, insurance — built on blockchain without traditional intermediaries like banks. DeFi protocols let you earn yield on your crypto or take out loans using it as collateral. It is a rapidly growing sector but carries smart contract risk. Our guide on whether XRP is a good investment explores how DeFi adoption affects token value.

DEX (Decentralised Exchange)

A crypto exchange that operates without a central authority, allowing users to trade directly with each other via smart contracts. Unlike centralised exchanges, a DEX does not hold your funds. Some altcoins like Kaspa are primarily available through DEXs before they reach major platforms.

NFT (Non-Fungible Token)

A unique digital token that represents ownership of a specific item — artwork, music, collectibles, or in-game items. Unlike Bitcoin, where each coin is identical, every NFT is one of a kind. The hype has cooled since 2021, but NFTs still have practical applications in digital ownership and gaming.

Stablecoin

A cryptocurrency designed to maintain a stable value, usually pegged 1:1 to a fiat currency like the US dollar. USDT (Tether) and USDC are the most widely used. Stablecoins are useful for moving money between exchanges quickly without converting back to GBP, and for parking funds during volatile periods.

HODL

Crypto slang for holding onto your investment rather than selling during a price drop. It originated from a misspelled forum post in 2013 and has since become a core philosophy for long-term investors. If you believe in a project's fundamentals, HODLing means riding out the volatility instead of panic selling.

DYOR (Do Your Own Research)

A common reminder in the crypto community to investigate a project thoroughly before investing. Never rely solely on social media hype or influencer tips. Check the team, the technology, the tokenomics, and the use case. Our crypto stats UK page provides data to support your research.

FOMO (Fear of Missing Out)

The anxiety that drives people to buy a cryptocurrency because its price is rising rapidly. FOMO often leads to buying at the top and locking in losses when the price corrects. Meme coins like Trump Coin are a textbook example of FOMO-driven buying. Disciplined investors set a plan and stick to it.

Whale

An individual or entity that holds a very large amount of cryptocurrency. When a whale buys or sells, it can move the market noticeably — especially for smaller coins with lower liquidity. Whale watching (tracking large wallet movements) is a common analysis technique among experienced traders.

Bull Market / Bear Market

A bull market is a period of sustained rising prices and optimism. A bear market is the opposite — falling prices and pessimism. Crypto cycles between the two, often dramatically. Understanding where you are in the cycle helps set realistic expectations for your Bitcoin investment.

Airdrop

Free tokens distributed to wallet holders, usually as a marketing strategy by new crypto projects. Some airdrops have turned out to be worth thousands of pounds. However, be cautious — scam airdrops exist to phish for your wallet details. Never connect your wallet to an unknown site to claim a suspicious airdrop.