Glossary - TheWeal

60 defined terms across six categories. Anchor jumps in the page header skip to each section. Internal links cross-reference related entries.

US regulation

CFTC (Commodity Futures Trading Commission): The federal agency that regulates US derivatives markets, including Bitcoin and Ether futures. The CFTC has classified Bitcoin and Ether as commodities under the Commodity Exchange Act and brings enforcement against unregistered futures exchanges, fraudulent token schemes, and market manipulation in spot crypto markets.
EDGAR: The SEC’s Electronic Data Gathering, Analysis, and Retrieval system, the public database of corporate filings. Spot Bitcoin and Ether ETF prospectuses (S-1, 19b-4) and ongoing 10-Q/10-K reports for crypto-exposed companies are filed and retrieved through EDGAR.
FinCEN (Financial Crimes Enforcement Network): The US Treasury bureau that administers the Bank Secrecy Act and enforces anti-money-laundering rules. FinCEN classifies most crypto exchanges and custodial wallet providers as money services businesses subject to registration, recordkeeping, and Suspicious Activity Report obligations. See also MSB license.
FinCEN Travel Rule: The Bank Secrecy Act requirement that financial institutions, including crypto exchanges, transmit originator and beneficiary information for transactions at or above the $3,000 threshold (proposed lower thresholds remain pending). Compliance for crypto-to-crypto transfers between Virtual Asset Service Providers is operationally enforced through protocols like TRUST and Sumsub.
FIT21 (Financial Innovation and Technology for the 21st Century Act): A market-structure bill passed by the US House in 2024 that would split crypto-asset jurisdiction between the SEC and CFTC based on whether an underlying blockchain is “decentralized.” It defines “digital commodity” and creates a registration path with the CFTC, but has not yet passed the Senate as of this writing.
GENIUS Act: The Guiding and Establishing National Innovation for US Stablecoins Act, federal stablecoin legislation passed in 2025 establishing a regulatory framework for payment stablecoin issuers. It permits issuance by federal- or state-chartered banks and qualified nonbank trust companies, and requires 1:1 reserves in cash and short-term Treasuries.
Howey test: The four-prong test from SEC v. W.J. Howey Co. (1946) used to determine whether a transaction is an “investment contract” and therefore a security: investment of money, in a common enterprise, with expectation of profit, derived from the efforts of others. Applied to most ICOs and token sales in SEC enforcement.
Investment Company Act 1940: The federal statute regulating mutual funds, closed-end funds, and other pooled investment vehicles. Spot Bitcoin and Ether ETFs are structured as grantor trusts under the Securities Act rather than 1940 Act funds, which affects taxation, redemption mechanics, and disclosure.
MSB license: The federal money services business registration with FinCEN, plus state-by-state money transmitter licenses, that most US crypto exchanges and custodial wallet operators must obtain. Required for exchanging, transmitting, or administering virtual currency for customers. Distinct from the stricter NYDFS BitLicense.
NYDFS BitLicense: A specific license required by the New York Department of Financial Services for businesses conducting virtual currency business activity with New York residents or in New York State. Holders include Coinbase, Gemini, Square (Cash App), and Robinhood Crypto. The license requires capital adequacy, cybersecurity, AML, and consumer protection standards beyond general MSB requirements.
OCC (Office of the Comptroller of the Currency): The federal regulator of national banks and federal savings associations. The OCC has issued interpretive letters permitting national banks to provide crypto custody, hold stablecoin reserves, and use independent node verification networks for payment activities under specified controls.
Reg A+: A Securities Act exemption under Regulation A that allows companies to raise up to $75 million in a 12-month period from both accredited and non-accredited investors with scaled-down SEC disclosure. Used historically by a small number of US token offerings as an alternative to full S-1 registration.
Reg D: A Securities Act exemption used in private placements, most commonly Rule 506(b) and 506(c), allowing unlimited capital raising primarily from accredited investors with limited disclosure requirements. Many US token sales structured as Simple Agreements for Future Tokens (SAFTs) relied on Reg D.
SEC (Securities and Exchange Commission): The federal agency overseeing US securities markets. The SEC asserts jurisdiction over crypto assets it deems securities under the Howey test, approves spot crypto ETFs, and brings enforcement against unregistered securities offerings, exchanges, and broker-dealers.
Securities Act 1933: The federal statute governing initial offers and sales of securities, requiring registration with the SEC or a valid exemption. Most SEC enforcement against token issuers alleges unregistered offerings under Section 5 of the Act. Spot Bitcoin ETFs are registered under this statute as grantor trusts.

US tax & accounting

Capital gains, long-term: The favorable tax treatment for assets held more than one year before disposition. Federal long-term capital gains on crypto are taxed at 0%, 15%, or 20% depending on the taxpayer’s income bracket, plus the 3.8% Net Investment Income Tax for higher earners.
Capital gains, short-term: The tax treatment for crypto assets held one year or less before disposition. Short-term gains are taxed as ordinary income at the taxpayer’s marginal federal rate (up to 37%), plus state income tax where applicable.
FIFO accounting: First-In-First-Out cost-basis method: when disposing of crypto, the earliest acquired units are treated as sold first. FIFO is the IRS default if a taxpayer cannot specifically identify which units were sold. Often produces higher reported gains in a rising market than HIFO.
Form 1099-DA: The IRS information return introduced for digital asset broker reporting. Custodial brokers (exchanges) are required to issue 1099-DA reporting gross proceeds from crypto dispositions, with cost-basis reporting phasing in for transactions in subsequent tax years. Taxpayers still file Form 8949 regardless of receipt.
Form 8949: The IRS tax form used to report capital gains and losses from crypto transactions. Each disposition (sale, swap, spend) is reported with cost basis, proceeds, and dates acquired and sold. Required for any US taxpayer disposing of crypto in the tax year regardless of whether a 1099 was received.
HIFO accounting: Highest-In-First-Out cost-basis method: the units with the highest acquisition cost are treated as sold first, minimizing reported gains. HIFO is permitted only if the taxpayer can specifically identify the lots sold and maintains adequate records to support that identification.
IRS Notice 2014-21: The foundational IRS guidance treating virtual currency as property rather than currency for federal tax purposes. Establishes that every disposition is a taxable event, that mining income is ordinary income at fair market value on receipt, and that wages paid in crypto are subject to withholding.
IRS Notice 2019-24: The IRS guidance addressing hard forks and airdrops, clarifying that an airdrop following a hard fork generally results in ordinary income equal to the fair market value of the new cryptocurrency when the taxpayer obtains dominion and control over it.
Staking income taxation: Per IRS Revenue Ruling 2023-14, staking rewards received by cash-method taxpayers are includible in gross income at fair market value in the year the taxpayer gains dominion and control. A subsequent disposition triggers a separate capital gain or loss measured against that basis.
Wash sale rule: Section 1091 of the Internal Revenue Code disallows a loss on the sale of a “security” if substantially identical securities are reacquired within 30 days before or after. Because the IRS treats crypto as property rather than a security, the wash sale rule does not currently apply to crypto, though legislation to extend it has been repeatedly proposed.

ETF & market structure

Authorized Participant (AP): A registered broker-dealer contractually permitted to create and redeem Creation Units of an ETF directly with the issuer. For US spot Bitcoin ETFs, APs deliver cash to the trust, which the sponsor uses to acquire Bitcoin through its execution agent, keeping market price aligned with NAV.
CME basis: The price differential between CME Bitcoin futures and spot Bitcoin, typically expressed in annualized basis points. A persistent positive basis (“contango”) implies leveraged long demand in futures; cash-and-carry traders capture this by selling futures against spot or ETF inventory.
CME Bitcoin futures: Cash-settled Bitcoin futures listed on the Chicago Mercantile Exchange since December 2017, regulated by the CFTC. Standard contracts represent 5 BTC; micro contracts represent 0.1 BTC. CME volumes are referenced by the SEC as evidence of a regulated market for surveillance-sharing purposes.
Creation Unit: The minimum block of ETF shares (typically 10,000 or 25,000) in which an Authorized Participant can create or redeem with the trust. Creation/redemption is the arbitrage mechanism that keeps the ETF market price close to its underlying NAV.
FBTC: The Fidelity Wise Origin Bitcoin Fund, one of the spot Bitcoin ETFs approved by the SEC in January 2024. Fidelity self-custodies the underlying Bitcoin through Fidelity Digital Assets rather than using a third-party custodian.
GBTC: The Grayscale Bitcoin Trust, originally a closed-end private placement that converted to a spot Bitcoin ETF in January 2024 after a successful court challenge to the SEC’s prior denial. Historically traded at large premiums and discounts to NAV before conversion enabled creation/redemption.
IBIT: The iShares Bitcoin Trust, BlackRock’s spot Bitcoin ETF launched January 2024. Among the fastest-growing ETF launches in US market history by assets under management, and the most heavily traded spot Bitcoin ETF by daily volume.
NAV (Net Asset Value): The per-share value of an ETF’s underlying assets, calculated daily as the value of holdings minus liabilities divided by shares outstanding. For spot Bitcoin ETFs, NAV references a designated benchmark such as the CME CF Bitcoin Reference Rate.
Premium/Discount to NAV: The percentage difference between an ETF’s market trading price and its NAV. Active creation and redemption by Authorized Participants typically keeps spot Bitcoin ETF premiums and discounts within a few basis points; historic closed-end vehicles like pre-conversion GBTC showed double-digit dislocations.
Spot ETF: An exchange-traded fund that holds the underlying asset directly rather than derivatives. US spot Bitcoin ETFs received SEC approval in January 2024, followed by spot Ether ETFs in July 2024, providing brokerage-account exposure to the underlying coin without self-custody.

Bitcoin & mining

Difficulty: A parameter in the Bitcoin protocol that adjusts roughly every two weeks (every 2,016 blocks) to target an average ten-minute block time. Difficulty rises as aggregate hash rate grows and falls when miners disconnect, keeping issuance predictable.
Halving: The protocol-scheduled event every 210,000 blocks (approximately four years) that cuts the Bitcoin block subsidy in half. The April 2024 halving reduced the subsidy from 6.25 BTC to 3.125 BTC per block, with the next halving expected in 2028.
Hash rate: The aggregate computational power, measured in hashes per second, dedicated to Bitcoin mining. Network hash rate is a proxy for the cost of attacking the chain and tends to follow Bitcoin’s price with a lag as miner economics improve or deteriorate.
Lightning Network: A layer-2 payment protocol built on Bitcoin that uses bidirectional payment channels and hashed time-locked contracts to enable near-instant, low-fee off-chain transactions. Settlement to the Bitcoin base layer occurs only on channel open and close.
Mempool: The set of valid but unconfirmed Bitcoin transactions held by each node awaiting inclusion in a block. Each node maintains its own mempool; users pay higher fees to incentivize miners to select their transactions during periods of congestion.
Mining pool: A coordinator that aggregates the hash rate of multiple miners and distributes block rewards proportionally to contributed shares. Pools smooth payout variance for individual operators and concentrate effective control over block construction, raising centralization and censorship concerns.
OFAC compliance: Compliance with the US Treasury Office of Foreign Assets Control sanctions list. Relevant to mining when individual miners or pools choose to censor transactions associated with OFAC-sanctioned addresses (such as Tornado Cash) before including them in blocks.
UTXO: Unspent Transaction Output. Bitcoin’s accounting model: a wallet’s balance is the sum of UTXOs it controls rather than a single account balance. Each transaction consumes input UTXOs and produces new outputs, enabling parallelism but adding complexity to fee estimation and coin selection.

DeFi & on-chain

AMM (Automated Market Maker): A decentralized exchange model in which prices are set algorithmically against on-chain liquidity pools rather than through an order book. The constant-product formula (x*y=k) popularized by Uniswap is the most widely used pricing curve.
Impermanent loss: The unrealized opportunity cost a liquidity provider incurs when the prices of pool assets diverge after deposit, compared to simply holding the assets. Becomes a realized loss only on withdrawal; can be offset or outweighed by trading fees and liquidity incentives.
Liquidity pool: A smart contract holding paired (or multi-asset) token reserves against which trades execute on an AMM. Liquidity providers deposit assets in exchange for LP tokens representing their pro-rata share of pool reserves and accrued fees.
MEV (Maximal Extractable Value): The value validators or block builders can extract by including, excluding, or reordering transactions in a block. Common forms include sandwich attacks against DEX traders, arbitrage between venues, and liquidation searcher races. MEV-aware infrastructure (MEV-Boost, Flashbots) attempts to surface this value transparently.
Restaking: The reuse of staked ETH (or liquid staking tokens) as economic security for additional protocols beyond Ethereum consensus, popularized by EigenLayer. Restakers earn additional rewards in exchange for accepting additional slashing conditions defined by each opted-in Active Validation Service.
Slashing: The protocol-level penalty by which a portion of a validator’s staked deposit is destroyed for provable misbehavior such as double-signing or surround-voting. Distinct from inactivity penalties, which are smaller and assessed for failing to attest.
Smart contract audit: An independent code review of a smart contract or protocol, typically by firms such as Trail of Bits, OpenZeppelin, or Spearbit, focused on security vulnerabilities, economic exploits, and specification mismatches. An audit is a snapshot in time and does not guarantee freedom from defects.
Staking: Locking native protocol tokens (such as ETH or SOL) to participate in proof-of-stake consensus or to delegate to a validator that does. Stakers earn issuance and a share of transaction fees in exchange for accepting slashing risk and lockup or unstaking delays.
TVL (Total Value Locked): The dollar value of crypto assets deposited in a DeFi protocol’s smart contracts. A widely cited but imperfect metric: it conflates organic deposits with double-counted assets across layered protocols, and can be inflated by self-referential token incentives.
Yield farming: The practice of deploying capital across DeFi protocols to maximize composite yield from interest, trading fees, and token incentive emissions. Composability and high incentive rates produce headline APYs that frequently mask token-emission dilution and rapidly decaying real yields.

Tokenomics & market

Algorithmic stablecoin: A stablecoin that maintains its peg through algorithmic supply adjustments and on-chain incentives rather than (or in addition to) fiat or crypto collateral. The May 2022 collapse of Terra USD (UST) is the prototypical failure mode, and these designs face heightened US regulatory skepticism under the GENIUS Act.
Circulating supply: The number of tokens currently issued and not subject to vesting or other transfer restrictions. Used as the denominator in market cap. Methodologies vary across data providers, particularly in how they treat foundation treasuries and locked allocations.
FDV (Fully Diluted Valuation): The market value of a token assuming all tokens specified in its maximum supply are issued and outstanding, calculated as current price multiplied by maximum supply. Often substantially higher than market cap for projects with significant unlocks ahead.
Market cap: The aggregate dollar value of a token’s circulating supply, calculated as current price multiplied by circulating supply. Headline ranking metric for crypto-asset data providers; reads differently from FDV for tokens with long emission schedules.
Stablecoin: A token designed to maintain a stable value relative to a reference asset, most commonly the US dollar. Major US-supplied issuers include Circle (USDC) and Paxos (USDP); the GENIUS Act establishes a federal regulatory framework distinguishing permitted payment stablecoin issuers from other models.
Token unlock cliff: A scheduled date on which a previously locked tranche of tokens becomes transferable. Cliffs typically coincide with team, investor, or foundation vesting milestones and are closely watched by traders for supply-side price pressure.
Vesting schedule: The contractual timetable governing when locked tokens become transferable to insiders, contributors, or investors. Common patterns include a one-year cliff followed by monthly or quarterly linear vesting over two to four additional years; aggressive front-loading is a recognized risk signal.

Definitions are written by TheWeal editorial team for general reference. They are not legal, accounting, or investment advice. Regulatory and tax citations reflect federal US rules as of publication; state law, IRS guidance, and pending legislation may modify positions over time.

Crypto glossary