Crypto Glossary for Indian Investors

A distribution of free tokens to wallets, usually to bootstrap a user base or reward past activity.

Altcoin

Any cryptocurrency other than Bitcoin - including Ethereum, Solana, Cardano, and thousands of others.

AMM (Automated Market Maker)

A smart contract algorithm that automatically sets token prices and enables trading without needing a traditional order book.

APR (Annual Percentage Rate)

DeFi Beginner

The yearly interest rate you earn or pay on a crypto investment, not including compounding effects.

APY (Annual Percentage Yield)

DeFi Beginner

The yearly return on a crypto investment including the effect of compounding interest.

Bear Market

Trading Beginner

A prolonged period of falling crypto prices, typically defined as a 20% or more decline from a recent peak.

Blockchain

A shared digital ledger that records transactions in a chain of blocks that cannot be altered.

Bridge

Infrastructure that moves assets between blockchains, typically by locking on one chain and issuing a representation on another.

Bull Market

Trading Beginner

A period of sustained rising crypto prices, generally defined as a 20% or more increase from a recent low.

Cold Wallet

A crypto wallet that stores your private keys offline, disconnected from the internet, for maximum security.

Custodial Wallet

A wallet where a third party holds the private keys on your behalf — an exchange account being the most common example.

DAO (Decentralized Autonomous Organization)

An organization governed by smart contracts and community token holders instead of a traditional management hierarchy.

DCA (Dollar-Cost Averaging)

An investment strategy of buying a fixed amount of crypto at regular intervals regardless of the price.

DeFi

Decentralized Finance - financial services like lending, borrowing and trading run by code instead of banks.

FIU-IND

India's Financial Intelligence Unit, the agency with which crypto exchanges serving Indian users must register.

Fork

A change to the rules of a blockchain. A soft fork tightens rules compatibly; a hard fork can split the chain in two.

Funding Rate

A periodic payment between long and short holders of perpetual futures that keeps the contract price near spot.

Gas Fees

The fee you pay to blockchain validators to process your transaction on the Ethereum network.

Halving

Investing Intermediate

A programmed event in Bitcoin where the reward for mining a new block is cut in half, reducing the rate of new Bitcoin supply.

HODL

A long-term crypto holding strategy where investors keep their assets instead of selling during price drops.

KYC (Know Your Customer)

Identity verification that regulated platforms must perform before allowing you to trade.

Layer-2

A secondary network built on top of a main blockchain to make transactions faster and cheaper.

Leverage

Borrowing to control a larger position than your capital alone would allow, multiplying both gains and losses.

Liquidation

The forced closure of a leveraged position when losses consume the margin backing it.

Liquidity Pool

A pool of crypto tokens locked in a smart contract that enables instant trading on a decentralized exchange without needing buyers and sellers to match.

Market Cap

The total value of all coins in circulation for a cryptocurrency, calculated by multiplying price by total supply.

MEV (Maximal Extractable Value)

Infrastructure Advanced

Profit that block validators can extract by reordering, inserting, or censoring transactions within a block.

NFT (Non-Fungible Token)

A unique digital token on a blockchain that proves ownership of a specific digital item like art, music, or collectibles.

Oracle

A service that brings external data onto a blockchain, since smart contracts cannot access information outside their own chain.

P2P Trading

Trading Beginner

Buying and selling crypto directly with another person, with the platform providing escrow rather than acting as counterparty.

Perpetual Futures

A derivatives contract tracking an asset's price with no expiry date, kept near spot by a periodic funding payment.

Private Key

The secret number that authorises spending from a crypto address. Whoever holds it controls the funds.

Proof of Stake

A consensus mechanism where validators lock up crypto as collateral to earn the right to confirm transactions and earn rewards.

Proof of Work

A consensus mechanism where miners solve complex math puzzles using computer power to validate transactions and earn rewards.

Rug Pull

A scam where a token's creators withdraw the liquidity or dump their holdings, leaving buyers unable to sell.

RWA (Real World Assets)

Tokenization of physical assets like gold, real estate, or bonds on a blockchain.

Slippage

The difference between the price you expect to pay for a crypto trade and the actual price you receive.

Smart Contract

A self-executing program stored on a blockchain that automatically carries out an agreement when conditions are met.

Stablecoin

A cryptocurrency designed to maintain a stable value by being pegged to a fiat currency like the US dollar.

TDS on Crypto (Section 194S)

Tax Deducted at Source of 1% on the transfer of a virtual digital asset in India, in force since 1 July 2022.

Tokenomics

Investing Intermediate

The supply, distribution and incentive design of a token — who holds it, how much exists, and what creates demand.

TVL (Total Value Locked)

The total amount of crypto assets deposited into a DeFi protocol, used as a measure of its size and popularity.

Validator

A participant in a proof-of-stake network that proposes and verifies blocks, backed by staked capital that can be forfeited.

Virtual Digital Asset (VDA)

The statutory term Indian tax law uses for crypto assets, defined in Section 2(47A) of the Income-tax Act.

Crypto Wallet

Software or hardware that stores your private keys and lets you send, receive, and manage your cryptocurrency.

Web3

The next evolution of the internet built on blockchain technology, where users own their data and digital assets.

Whitepaper

An official document published by a crypto project that explains its technology, purpose, tokenomics, and roadmap.

Yield Farming

DeFi Advanced

A DeFi strategy where users move crypto between different protocols to maximize returns and token rewards.