Crypto glossary, in plain English

Basis trade: Buying an asset and shorting its future at the same time to capture the price gap. ETF flows from basis trades track funding rates, not conviction.
Bitcoin dominance: Bitcoin's share of the total value of all crypto assets, shown as a percentage. A measure of where capital and attention sit, not a buy or sell signal.
CEX: A centralised exchange, a company that holds customer funds and matches trades. Convenient, but a counterparty you must trust.
Cold storage: Keeping private keys on a device that is never connected to the internet, to reduce the risk of remote theft.
DeFi: Decentralised finance: financial services like lending and trading run by smart contracts instead of companies.
DEX: A decentralised exchange where trades settle on-chain through smart contracts, without a central operator holding funds.
Funding rate: A periodic payment between long and short traders in perpetual futures that keeps the contract price near the spot price.
Gas fee: The cost paid to have a transaction processed on a blockchain. Rises with network demand.
Halving: A scheduled event that cuts the rate of new Bitcoin issuance in half, roughly every four years, slowing new supply.
Layer 1 (L1): A base blockchain that provides its own security and final settlement, such as Bitcoin or Ethereum.
Layer 2 (L2): A faster, cheaper network built on top of a Layer 1 that batches transactions and settles them back down to the base chain.
Liquidity: How easily an asset can be bought or sold without moving its price. Thin liquidity means large orders cause big swings.
Market capitalisation: An asset's price multiplied by its circulating supply. A rough gauge of size, easily distorted by low-supply tokens.
Not your keys, not your coins: A reminder that if a third party holds your private keys, you are trusting them with your assets. Self-custody puts that risk on you instead.
On-chain: Activity recorded directly on a blockchain, such as transfers and contract calls. On-chain data is public and can be measured.
Proof of reserves: Proof of reserves is a way for a crypto exchange or custodian to show it actually holds the assets it says it's holding on behalf of customers. It matters to depositors because it offers some evidence against the risk of a platform lending out or losing customer funds without telling anyone. Typically an exchange publishes wallet addresses and a cryptographic snapshot of balances, sometimes paired with a Merkle tree so users can check their own account is included in the total. For example, after FTX collapsed in November 2022, several exchanges including Binance and Kraken published proof of reserves reports showing Bitcoin and Ethereum holdings matched or exceeded customer balances. It's not a full audit though: it usually skips liabilities, so it can't rule out hidden debts sitting alongside the reserves.
Rollup: The most common type of Layer 2. It rolls up many transactions into one batch and posts a compressed record to the main chain.
Seed phrase: A list of words that backs up a self-custody wallet. Anyone with it controls the funds, and losing it usually means losing access.
Self-custody: Holding your own private keys rather than trusting an exchange or fund. Removes counterparty risk and adds personal responsibility.
Slippage: The difference between the price you expected and the price you got, caused by the market moving as your order fills.
Spot Bitcoin ETF: A spot Bitcoin ETF is a fund traded on a regular stock exchange that holds actual Bitcoin and tracks its current market price. It lets investors gain exposure to Bitcoin through a normal brokerage account, without setting up a crypto wallet or managing private keys. This matters because it opens Bitcoin to retirement accounts, financial advisors, and everyday investors who'd never touch a crypto exchange. In January 2024, the SEC approved 11 spot Bitcoin ETFs at once, including BlackRock's IBIT and Fidelity's FBTC. Unlike a futures-based ETF, which holds contracts betting on Bitcoin's future price, a spot ETF must actually own the coins backing each share, so its price tracks Bitcoin more closely.
Spot ETF: An exchange-traded fund that holds the actual asset (such as Bitcoin) and trades on a regular stock exchange, giving regulated exposure without self-custody.
Stablecoin: A crypto token designed to hold a fixed value, almost always one US dollar. Used to move dollars on a blockchain without a bank.
Total value locked (TVL): The total value of assets deposited in a protocol or chain. A popularity gauge, inflated by token price and double-counting.

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